A year after buying the online banking vendor Digital Insight Corp., Intuit Inc. is behind schedule in the release of its updated online banking package and is expecting slower sales for its QuickBooks desktop business software, executives acknowledged.
"We are winning online, where we believe future growth will come from," Brad Smith, Intuit's president and chief executive, said late Thursday on an earnings call with analysts, his first since taking the company's top jobs last month.
Intuit has migrated its Quicken personal finance software to the Web with last month's introduction of a service that closely resembles the data-aggregation sites run by the start-ups Wesabe Inc., Geezeo Inc., and Mint Software Inc.
But the updated online banking software, FinanceWorks, is still in testing with three trial bank customers, Mr. Smith said. "Clearly we are not on the schedule that we had originally anticipated."
He would not say when Intuit expects the software to be ready for broad deployment.
When Intuit bought Digital Insight last February, the companies had been collaborating on FinanceWorks for close to nine months and were projecting a June release of the consumer version and a fall 2007 release of the small-business version.
In October, one of the banks testing FinanceWorks, Heritage Bank of Olympia, Wash., a unit of Heritage Financial Corp., said it expected the consumer version to launch early this year and the small-business version to launch in the second quarter. A Heritage executive did not respond to a request for comment by deadline on Friday.
R. Neil Williams, Intuit's chief financial officer, said on the earnings call that the Mountain View, Calif., company is doing everything it can to push forward with the deployment. "The implementations have been slower than we thought. … This has a lot to do with bank conversions," he said.
Mr. Smith said: "It's clear that we underestimated the complexity of taking DI's offering to the level where we want it to be. We recognize this fact." However, the prospective benefits of FinanceWorks remain strong, he said. "The strategic rationale for this acquisition is as compelling as ever."
Christine Barry, a research director at Aite Group LLC of Boston, said that despite the FinanceWorks delays FinanceWorks, Intuit is ahead of its rivals.
"Intuit is still ahead of the industry, because they already have a lot of this technology in place," she said. "I still think Intuit is in a good position."
The company is wise to take the time to deploy the software properly instead of rushing it to meet an unrealistic deadline, Ms. Barry said. "Everybody has such high expectations for it. … I really view this as a great thing for the market."
In her surveys, Ms. Barry has found that many banks want to offer features online that businesses can get through QuickBooks and through personal financial management software.
"A lot of them are planning on offering PFM-lite-type capabilities," at least for their small-business customers, she said.
And since business owners have said they would use these services from banks, "there's an opportunity for FinanceWorks to pick up the slack" from slackening sales of Intuit's QuickBooks products, she said.
Intuit is still ahead of the industry in developing this software but may lose that first-mover advantage if it keeps having delays, Ms. Barry said. "In this instance, every day counts, and the sooner Intuit gets this solution out, it will be to their advantage."
Patricia Hines, a senior analyst with the wholesale banking practice at TowerGroup Inc. of Needham, Mass., an independent research firm owned by MasterCard Inc., said the FinanceWorks holdup will not be hugely detrimental to Intuit.
"There may be some customers that are less than happy," she said, but the delay "really isn't hurting them."
The banks interested in FinanceWorks are not turning to Intuit rivals, since its rivals are not offering an alternative. Intuit is "still one of the few vendors in the online banking space that are adding net new functionality and doing something different," Ms. Hines said.
"Customers are still signing up for them because of that product road map," she said. Since Intuit hosts its online banking offering, it will be an easy upgrade once the product is made widely available.
Even though QuickBooks sales are slowing, FinanceWorks' reach would only be to customers that work with Digital Insight banks, so it may not have the reach to catch everyone who has passed on buying QuickBooks, she said.
Though she would not predict when the personal and small-business FinanceWorks products will come out of the test phase, she said that even if the personal version's launch were imminent, the small-business version would trail it by at least six months.
A major issue is the software's complexity. "They're writing it on service-oriented architecture," she said, "and it's just taking more time … than they anticipated." Most online banking offerings do not use SOA, mainly because they were developed before the technology became popular.
In the year since Intuit bought Digital Insight and announced FinanceWorks, Ms. Hines said, "I haven't seen anyone new do the PFM integration … particularly in the market that Digital Insight serves," which is small and midsize banks.
Mr. Smith, who was previously the general manager of Intuit's small-business division, said Intuit's future lies more in online tools than in desktop software.
He attributed weaker prospects for the QuickBooks line partly to the economic strain on small-business owners and partly to a general curtailment of small-business software marketing.
Intuit's net income for its fiscal second quarter, which ended Jan. 31, dropped almost 21%, to $115.2 million from a year earlier. Its revenue rose 11%, to $834.9 million. The revenue growth was largely because of Digital Insight — which has been adding users for its current online banking offering — and sales of consumer tax products.
