Fidelity Information Services Inc., which has become an important outsourcing provider to small and midsize banks, is now making a play for the nation's biggest banks through a partnership with Computer Sciences Corp.
Fidelity announced Wednesday that it had agreed to provide a hosted version of CSC's Hogan Integrated Deposit System. Hogan is used by 10 of the top 25 banking companies and 15 of the top 100, but is available only for in-house implementations, and executives of both companies said that CSC's customer banks had asked for an outsourced version.
Roger Leitner, the president of Fidelity Information Services' enterprise banking division, said he expects to close the first Hogan outsourcing deal within 90 days. He would not name the customer but said the partnership could get under way within six months.
"We already have one that we're talking to, and they're very interested," Mr. Leitner said during a conference call Wednesday.
The CSC deal gives Fidelity access to the top tier of the banking market. According to Robert Hunt, a senior analyst at TowerGroup, the Needham, Mass., market research unit of MasterCard International, Fidelity provides the core systems for 28 of the top 100 banks, but for only three of the top 25.
Fidelity, which is majority-owned by Fidelity National Financial Inc. of Jacksonville, Fla., says it sells software and services to 2,800 small and midsize U.S. financial services companies.
With its core-banking base concentrated in midsize and smaller companies, "Fidelity didn't have a lot of clients in that top group," Mr. Hunt said. "This gets them entree into that top level."
Hogan customers include Wells Fargo & Co., U.S. Bancorp, Washington Mutual Inc., Regions Financial Corp., KeyCorp, PNC Financial Services Group Inc., Comerica Inc., and M&T Bank Corp., according to TowerGroup. Spokespeople for those companies either did not respond to inquiries or had no comment on the deal.
For CSC, of El Segundo, Calif., the deal provides a way to increase its sales to banking customers rapidly and with little effort.
Jeffery Schwalk, a vice president of CSC and the managing director of its banking solutions group, said his company was interested in partnering because Fidelity could introduce the hosted service faster than CSC could develop it on its own. Fidelity has an outsourced banking model "to offer something today for our customers that have been asking for this," he said.
Mr. Leitner agreed. Fidelity knows how to offer hosted applications in the banking business, "and we think we can do that with Hogan as well," he said.
He said several Hogan customers have not upgraded their systems to the current version. By offering a hosted version, "we can keep them current," Mr. Leitner said.
Bill Bradway, the group vice president of retail financial services at Financial Insights Inc. of Framingham, Mass., a unit of the technology publisher International Data Group Inc. of Boston, said that selling core banking software is not CSC's strength. Though it provides technology infrastructure and business process outsourcing to some of the nation's largest companies, it does not focus specifically on banks or software, Mr. Bradway said.
"At the parent level it is a services company," like Accenture or Electronic Data Systems, he said.
Mr. Hunt said Fidelity's bank outsourcing expertise was important to CSC. "That's where Fidelity has real strength."
Hogan is known for having a relatively high cost of ownership, which is one of the reasons it has not been able to find a home in the broader market, Mr. Hunt said.
Mr. Schwalk said a hosted version would address this problem because it would "enable additional economies of scale" and allow CSC and Fidelity "to price it at a value level."
Mr. Leitner said Fidelity plans to integrate components of its other systems, including its customer relationship management products, with the Hogan software.
And he hopes to offer some of Hogan's technology, such as its "enterprise profitability" module for financial analysis, to Fidelity customers. Fidelity has licensed the module under the CSC deal, he said. Giving customers access to that "is big," he said.
