As Heritage Financial Services Inc. plans to bring its most recent acquisition into the fold, officials say they are pleased to have an outsourcer to help them with the task.
But while they are committed to outsourcing their data processing needs - Heritage is now involved in a five-year contract with Little Rock-based Systematics Information Services Inc. - bank officials are wondering if they are getting the best deal.
In June, the $950 million-asset bank based in Tinley Park, Ill., completed its acquisition of Midlothian (Ill.) State Bank, an institution that had handled its automation needs in-house.
Linda Duggan, director of management. information Systems at Heritage, said the bank's three previous conversions had been of 'institutions where data processing was, performed by a service bureau.
But the Midlothian merger, which is to be converted in October, was different. "It's just been a struggle. Not enough people there at [Midlothian] knew the system well enough," she said. "This, frankly, has almost confirmed our idea that we don't want to be in-house."
Since 1982, Heritage's data processing has been handled at the same c. enter by a succession of firms, most recently Systematics.
But while Heritage is committed to outsourcing, Ms. Duggan said the bank plans to take proposals from other servicers before the Systematics contract expires at the end of 1995.
"One of the reasons we are looking at other processors is because we-don't know if we have a real good deal, or a good deal, or maybe a not so good deal," she' said.
"We've had some ups and downs with Systematics. And we think we need to find out what is out there."
Matthew Finn, an analyst with Bums, Pauli & Co. in St. Louis, noted that it is not unusual for banks to wrestle with such decisions.
He said that smaller banks often don't have the same depth of computer experience as their larger rivals. And that can make deciding whether to outsource -- or even which outsourcer to choose - difficult.
Ms. Duggan said Heritage is satisfied with the basic data processing services supplied by Systematics.
But she said the company has sometimes been slow when it comes to adding new technologies.
She mentioned the recent implementation of an optical disk storage system. "Whenever we do that, we need help from our processor. They are supposed to be our partner in these things. Sometimes it's been a little difficult to get that response [from Systematics].
Scott Lahti, president of Systematics' operations division, said that it is not unusual for banks to "go out and test the waters" before renewing contracts.
He said Systematics reviews customer's data processing needs in advance of contract renewals to determine if there data processing needs have changed, and to suggest alternatives.
For example, he said, "We take a look at running them at a remote center. It doesn't have to be on-site - which can change over the reviews a bank's needs. He added that Systematics' renewal rate "continues to remain excellent."
As Heritage looks ahead, it sees some pressing technological needs Ms. Duggan noted that the bank wants to install an enhanced platform automation system. "It's part of the negotiation for this new deal." She said Heritage wants the system to be offered -- or at least supported - by the vendor.
While Ms. Duggan said that Heritage is not on the cutting edge of technology, she said the bank is very concerned about gaining efficiencies.
For example, she noted the bank has set up a wide area network connecting its 13 branch offices. And in 1991, Heritage converted its four affiliates into a single bank. Three of the four acquisitions made since then have been converted, and the bank has gone a long way toward standardizing products and services, she said.'
As Heritage looks ahead to its outsourcing future, Ms. Duggan said there are few companies it would' consider. "We want to go with a large processor, a good reputation, [with] resources to do some things."
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