Hogan Systems, Inc., a big supplier of mainframe software to banks, plans to greatly expand its product line for personal computers, beginning withbranch automation software due out this summer.
Hogan hopes the products will quickly become a major part of its revenue stream, which comes primarily from mainframe software sales and professional services.
"Our mission is very important to Hogan," said Walter R. Tallent, director of the Dallas-based company's technology strategy and head of the branch software project.
"If you look Out two to three years from now, I would expect a good portion of our total license revenue to be coming from branch" automation software, he added.
Meeting Banks' Specifications
Mr. Tallent said that the branch automation software is being developed to the specifications of a committee of six banks that are based in the United States, Europe, and Hong Kong. He declined to name them.
Since Hogan was founded in 1977, its principal business has been the sale of mainframe software that large banks use to track retail loans and deposits. International Business Machines Corp. has had exclusive North American marketing rights to this software since 1986.
More than 100 large banks in the United States and abroad use the software, including BankAmerica Corp. and Citicorp.
Service Business Expanding
In recent years, Hogan has begun to diversify by greatly expanding its professional services business and introducing new mainframe software products, including one for tracking bank earnings.
Five years ago, only about one quarter of Hogan's $33.3 million in total revenues was derived from professional services, while the rest came principally from license fees, maintenance fees, and royalties from mainframe software.
By the 1993 fiscal year, which ended in March, two-thirds of Hogan's revenues of $64.5 million came from professional services, while nearly all of the rest was split between licensing and maintenance fees for mainframe software.
However, the professional services business took a blow in the first half -- ended in September -- of Hogan's 1994 fiscal year.
License Income Increasing
The termination of big consulting projects with IBM and First Financial Management Corp. caused the company's professional services revenues to decline by $6 million in the six months ending Sept. 30, compared to the year-earlier period.
Licensing fees have shown renewed vigor, increasing by $4 million in the first half due to some big sales of mainframe software to banks outside the United States.
Hogan's overall revenues were down $1.2 million for the period, to $30.4 million. Net income fell to $1.6 million from $4.5 million.
Hogan will be entering a crowded market with its branch automation software.
A number of popular branch software packages have been available for years, both from small software concerns and from large corporations such as IBM, Unisys Corp., and Olivetti North America.
A Better Mousetrap
But Mr. Tallent said that Hogan believes it can develop a better branch automation system than those currently on the market.
The company's branch automation software, he said, will be tightly integrated with its core banking software, so that Hogan's current customers should find the product attractive.
Most of the branch automation software now on the market lacks the features that Hogan believes are important for its customers, Mr. Tallent added.
These features include support for graphical user interfaces and international banking, as well the ability to run on different types of personal computers and operating systems.
Hogan plans to offer all of those features in its branch automation package.
The few branch automation systems that do have these features were built with what Mr. Tallent called "proprietary tool sets" used by programmers -- which are expensive for banks to acquire.
'Industry Standard' Tools
Mr. Tallent said that Hogan's new branch automation software will be developed with "industry standard" programming tools that are widely available, and less expensive.
"We're going to position the system as a high-value, high-priced system," Mr. Tallent said.
"We won't be the most expensive system on the market, but we won't be the cheapest."
Mr. Tallent said that Hogan will follow the introduction of its PC-based branch automation software with introductions of new PC software for home banking, bank telephone service centers, and data entry.