IBM Said to Lose an Imaging Deal

At least one large bank planning to install an imaging system from International Business Machines Corp. has decided to switch suppliers, and several others may follow, industry sources said.

The defection, by First Chicago Corp., indicates that some banks are losing confidence in IBM's ability to deliver the image processing systems that banks have been awaiting to streamline their production of checking-account statements.

The computer giant has suffered repeated delays in check-imaging development, leaving purchasers in a holding pattern. Some banks are apparently losing patience.

IBM Expresses Confidence

Executives at IBM, based in Armonk, N.Y., said they do not expect to lose many customers.

First Chicago officials "may be considering other options; that's their business," said Louise D. Nielsen, director of IBM's document and check image systems project. "But from what they're telling us, they intend to stay with us."

First Chicago had been working closely with IBM to test a system that captures check images and produces abbreviated monthly statements. However, it will install a system from Cincinnati Bell Information Systems Inc., Maitland, Fla., and BancTec Inc., Dallas, sources familiar with the bank's plans said this week.

Competitive Advantage Sought

The sources said the bank found the IBM system not yet able to handle high volumes of checks efficiently. First Chicago is seen as eager to be the first bank in its market to offer customers image statements.

Bankers believe that abbreviated statements - which show copies of check images instead of the actual checks - will provide a competitive advantage, reduce mailing costs, and generate fee income.

"We have had a long and satisfying relationship with IBM," a spokeswoman for First Chicago said, adding that technology executives declined to comment on the image system.

Several other institutions that had been involved in the IBM imaging program are also considering moving to another supplier, according to executives at CBIS and BancTec. They declined to name the institutions.

"People who have been firmly entrenched with IBM are reevaluating," said R.E. Connelly, Jr. director of financial industry marketing for BancTec.

Defections Expected

"We expect four to six institutions to install our software over the next 60 to 90 days, and a couple are switching gears from an IBM system," said Jennings M. Edwards, marketing operations manager at CBIS.

Both officials said that switching to BancTec/CBIS would still allow the banks to install IBM's full-blown image system for proof-of-deposit applications when it becomes available. Both companies plan to make their systems compatible with IBM's.

In another indication that banks working with IBM in the imaging area are looking at alternatives, Bank of Montreal, Toronto, recently turned to BancTec for an image system for credit card sales receipts.

Technology executives said non-IBM systems are attractive because IBM does not yet have an image product for credit card applications. But other sources at the bank said it went with BancTec, which is developing an image system for checks, to hedge its bet on IBM.

Other customers said they are sticking with IBM despite problems with the technology.

Capabilities Limited

"The current [image statement] software is incapable of high volumes," said Lawrence Ivins, regional manager at EDS Corp. The data-processing company plans to offer an image statement service to banks on the West Coast early next year.

"So there's a little bit of a restriction as to what we can do now," he said. "But we're not getting a great deal of demand from our customer base."

Industry sources said the defection of First Chicago is a serious blow to IBM, which has experienced long delays in developing a full-blown image system for back-office check processing operations.

"It really puts them in a position of having to go back to the drawing board," said a systems manager at a processing firm that is installing a check image system from NCR Corp. "Banks will be real hesitant to do anything with IBM right now."

Dr. Neilsen said IBM will release an image statement system in the near future, and it is being tested at several institutions that she declined to name. Sources said those institutions include the banking units of Fleet/Norstar Financial Group, Hibernia Corp., Valley National Corp., Norwest Corp., Wells Fargo & Co., BankAmerica Corp., First Tennessee Corp., and First Michigan Corp.

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