The North Canton, Ohio, company said that every ATM requires numerous support services to keep it operating properly, and that delivering those services will strengthen its relationships with customers and generate revenue long after the machine is sold.
"The ATM world as we know it today and the business we're in today, we are going to change over the next five years, and we are beginning that shift today," Thomas Swidarski, Diebold's president and chief executive, said in an interview last week. "Where we're investing, really, is on the services side of things."
The main opportunity for Diebold lies with midsize banks, Mr. Swidarski said.
"These are folks that maybe don't have quite the IT infrastructure, don't have all the capabilities," he said. "When you're talking about the ATM, you're probably talking about five or six different vendors" to handle cash, maintenance, transaction processing, and other services. "We can do all those pieces for them. We can handle that complexity and take that out of your hair and manage that for you. And so we're finding a great appetite for that."
Last month Diebold announced that OnPoint Community Credit Union of Portland, Ore., had agreed to replace many of its Diebold ATMs with new machines and would use the vendor to service them.
Kelly Schrader, OnPoint's senior vice president of member services, said the new arrangement "allowed us to basically go from six or seven different vendors for the entire process" to just Diebold.
For any issues that arise with its ATMs, OnPoint now has a single point of contact and can make one phone call instead of seven, she said. "We see" the difference "on a weekly basis."
Mr. Swidarski said that two years ago Diebold got 51% of its revenue from hardware sales, but last year 52% came from services. So far this year 55% has come from services.
"Hopefully, that will grow to 60% and hopefully 70% of our total over the next five to seven years," he said.
To that end, Diebold is offering services that go beyond ATM network management, Mr. Swidarski said. "We're doing the same thing on the security side" by selling monitoring systems for branches. "A robbery's occurring? We're the ones that call the police."
Nicole Sturgill, the research director for delivery channels at TowerGroup Inc., a Needham, Mass., independent research firm owned by MasterCard Inc., said Diebold's strategy for financial services "is a logical one in today's environment, where all the banks are looking closely at how to reduce costs."
Mr. Swidarski said his company is focusing on the financial industry because it knows its core strength is its deep understanding of the banking market.
Diebold, which got its start selling vaults to banks in 1859, has long been one of the dominant ATM providers. However, it has also learned the hard way that it can be difficult to take that expertise to other markets.
Several years ago it developed a machine to automate the dispensing of medication at hospitals. Mr. Swidarski said the machine was better than the ones hospitals were using at the time, but Diebold had missed a critical reason those machines were so widely used: Pharmaceutical companies offered them to hospitals for free, while Diebold was trying to sell its version.
