If experience were a guarantee of success in the bank software business, Bahram Yusefzadeh's newest venture would be a lock.
Instead, the developer of one of the first integrated bank systems stands as living testimony to the speed at which technology evolves, as he tries to prove himself once again to bankers.
At the helm of a small, two-year-old software house called Phoenix International Ltd., Mr. Yusefzadeh - a man with more than a quarter century of experience in the business - is part of a small group of vendors that anticipated and acted upon the banking industry's developing need for core banking software based on client/server architecture.
But even as client/server becomes the newest buzz phrase in bank technology circles, questions remain as to whether banks are fully ready to embrace the products of Maitland, Fla.-based Phoenix or leading-edge companies like it.
"There is such a thing as being too far ahead of the curve in bank technology," noted M. Arthur Gillis, a bank technology consultant based in New Orleans.
Few would question that client/server computing, in which open-systems host computers share processing tasks with personal computer workstations, is the next wave of technology in banking.
Contrary to early reports on the technology, client/server systems do not tend to be much cheaper to run than mainframe-based systems, bankers said.
However, client/server systems are generally more flexible, user- friendly, and open to micro-level analytical tasks than more centralized systems.
Such benefits have a particular appeal to community banks, which are finding it increasingly difficult to match the technological innovations of the superregionals that dominate a consolidating banking industry.
Phoenix International is betting that such competition gives urgency to smaller institutions' drive to learn more about their customers in an effort to secure their hold on the more profitable relationships.
Phoenix's product, designed for banking companies with assets of $3 billion or less, aims to give smaller banks such power.
The company's software system offers a range of processing capabilities for core functions, such as loans, deposits, accounting, and customer management.
On top of these functions are layered more sophisticated tools that allow for product development, transaction processing, customer relationship management, and executive information reporting.
"The intent is to take all the transactions of a particular account or package of accounts and determine whether they are making a contribution to the profitability of the bank," said Mr. Yusefzadeh.
Though it has converted only a handful of banks so far, demand for the product is healthy. About 40 institutions have committed themselves to installing Phoenix software.
This bodes well for a company that is still small ($2.25 million of revenues in 1994) but is already showing a profit. Phoenix expects revenues to grow to between $7 million and $8 million by the end of this year.
One reason for this early success is that Phoenix is initially preaching to the choir: The company is about one-third-owned by many of the banks that are among the first customers for the software. It also got seed money from Hewlett-Packard Co. of Palo Alto, Calif., in exchange for agreeing to run its software exclusively on HP hardware until 1996.
First National Bank of Homestead, Fla., which is a small investor in Phoenix, came up on the system in March.
"The data conversion itself was the smoothest I've ever been through," said David Peyton, a senior vice president at the $140 million-asset bank.
Though the bank is in the early stages of using the system, he said, it already sees improvements from its old, host-based system, which had a myriad of DOS commands for each application. "I always felt stupid trying to work my own computer system," he said.
The back end of the system has also functioned well so far, handling a month-end and quarter-end cycle without incident.
Phoenix officials said that many of its backlogged orders are from noninvestors.
And with little competition in the market - experts said the only other provider of "pure" client/server core banking software is East Point Technology, based in Bedford, N.H. - the company is well positioned to capture more clients, experts said.
Observers noted that Phoenix's early entry into the client/server market is a curse as well as a blessing.
Banks have been historically reluctant to let go of proven technologies, and the fact that many host-based software products on the market boast a wider range of applications than Phoenix's will make it more difficult for many banks to break away from the established technology.
In addition, many larger software firms are attaching client/server front ends to their host-based systems. While these systems do not tend to be as integrated as "pure" client/server systems, such as those offered by Phoenix, they may satisfy demand for client/server products at many institutions.
The challenge for Phoenix, then, is to continue to improve its product - something Mr. Yusefzadeh has addressed by dedicating about half the company's 54 employees to research and development - and to promote aggressively the benefits of "pure" client/server systems.
"We clearly see ourselves having established a new paradigm in the marketplace," he said. "I really believe that some of the vendors are going to be left behind unless they re-look at what they're doing and how they're doing it."
