Most big banks buy or build new software applications when they need them.
But ABN Amro Holding NV’s ABN Amro Services Co. Inc. in Chicago has just renewed an arrangement under which Digital Insight Corp. acts as an on-call custom development consulting shop.
Observers say that usually only smaller tech vendors are willing to work on custom orders. Digital Insight expects its revenue this year to top $200 million.
Digital inherited the ABN Amro relationship by buying Magnet Communications Inc. of Atlanta for $62 million in November 2003. ABN Amro had contracted with Magnet in 1998 to develop and support its CashPro Web portal for corporate customers. The contract is renegotiated annually; the latest renewal, through the end of this year, was announced Thursday.
“What we’ve seen is a lot of positive changes, as Magnet has been absorbed into Digital Insight,” said Milton Santiago, the Dutch banking company’s senior vice president and department head of electronic banking in the United States. There was a noticeable improvement in modifications to CashPro Web, he said.
Digital Insight chief executive Jeff Stiefler said the Calabasas, Calif., company has no other deals like the one with ABN Amro.
“Our typical relationship would be one in which we sell a license to a financial institution” to use Digital Insight’s software or to host it for a bank. In either scenario a bank is using software that his company has already developed.
“In the case of ABN, we do neither of those things,” said Mr. Stiefler, who is also Digital’s president and chairman. “They contract with us to provide consulting services to their own in-house developers” for building new software and supplementing software already in use.
Digital Insight’s other customers will often ask the company to tweak its own software to their exact needs and their technology infrastructure, but Mr. Stiefler said he does not offer them in-house consulting and software development services.
ABN Amro owns CashPro. Mr. Stiefler’s development team gains from the work because “we can take that body of knowledge and use it to benefit everybody,” he said.
Mr. Santiago said Amro has other consulting relationships, but only the one with Digital Insight generates a customer-facing application.
“This is a very sensitive product to our customers,” he said.
The bank relies exclusively on Digital Insight for updating the CashPro software, because it wants to avoid working with multiple design teams and ending up with what Mr. Santiago called a “Frankenstein’s monster” online banking experience.
During the current contract, he expects Digital Insight to focus on tailoring CashPro to end-users’ work-flow patterns.
“Work flow isn’t, ‘How many clicks does it take to get to the Tootsie Roll center of a Tootsie Pop?’ ” Mr. Santiago said. “It’s basically, ‘How does the application get used inside of our customers’ day-to-day operations?’ and ‘How can we modify the product to meet the requirements of that?’ ”
Alenka Grealish, who manages the banking group at the Boston market research firm Celent Communications LLC, said Digital Insight’s main business is developing software to license to small and midsize banks. It has “really the opposite model of Magnet,” which was more amenable to doing custom work.
She called Digital’s acquisition of Magnet “a classic case of what do we do now, where do we grow. It definitely broke conventional wisdom.”
