A hundred community banks are scrambling to secure new outsourcing arrangements because their data processing supplier, a unit of the former Firstar Corp., is being closed down.
First Information Services Corp. of Milwaukee notified its customers in November that they would have until June 2000 to find a new provider.
This will just add to the demand in the market for outsourcing support, which is growing in part because banks need help with year-2000 conversions.
"This is a tough time for everybody because (vendors') pipelines are exhausted," said M. Arthur Gillis, president of Computer Based Solutions Inc. in Dallas.
"They are booked solid."
The Firstar unit is being closed in the wake of the parent company's 1998 merger with Star Banc Corp. Star took Firstar's name and moved its headquarters from Cincinnati to Milwaukee.
Only 36 outsourcers serve the banking industry, down from 42 a year ago, and 72 in 1988, according to Mr. Gillis' firm, which follows the bank computer services and outsourcing market.
Mr. Gillis said Firstar's company was "not a healthy business."
The customer base was about half of what it was in 1987, but the old Firstar kept the business running to preserve correspondent relationships and other dealings with customers, Mr. Gillis said.
A First Information customer, Mount Prospect (Ill.) National Bank, has chosen to shift its processing to M&I Data Services, Milwaukee. The subsidiary of Marshall & Ilsley Corp. does data processing for about 650 banks.
With year-2000 issues looming, the $97 million-asset bank wanted to act quickly, said John Eilering, president of Mount Prospect. "We did not want to be left behind while everyone else made their changes," he said.
The bank will be converted by May 17, said Owen Sullivan, president of M&I Data's outsourcing business group. Other terms of the seven-year contract were not disclosed.
Mount Prospect will use M&I's data warehouse, telephone banking, Internet banking, and corporate cash management services.
Mr. Eilering said he was interested in M&I's BankerInsight product, a branch and call center system that lets banks tailor banking products to the needs of individual customers.
Mr. Owens said he is comfortable with the 90-day conversion schedule.
M&I already is familiar with First Information's platform from past conversions, he said.