Mellon Pursues Outsourcing With Shaw, Hogan Alliances

Mellon Bank Corp. is beefing up its data processing services for larger institutions through alliances with a number of banking software companies.

As expected, Mellon announced last week that it will offer banks a service that uses a commercial loan system from Shaw Systems Associates Inc. The system is geared for managing large loan portfolios.

Also, Mellon is expected to sign an agreement with Hogan Systems Inc. in a few weeks that will let the banking company offer Hogan's integrated banking software through its service bureau.

Courting Big Institutions

With the software, Mellon will be in a better position to offer data processing services to big institutions that want an outside firm to run their technology units. This arrangement, called "outsourcing" in computer circles, can significantly reduce operating expenses and has become attractive to banks struggling to improve earnings.

The Pittsburgh-based company wants to compete with the likes of the EDS subsidiary of General Motors Corp. and with International Business Machines Corp. for outsourcing contracts at larger institutions.

Mellon has its own system for managing and tracking loan portfolios, but the Shaw system is more sophisticated and flexible, Mellon executives said.

More Functions

"It has a lot more feature functions, as far as rate processing and creating flexible fee structures for commitment fees," said Karen Lampman, vice president and manager of client relations.

Mellon will license the software from Shaw and charge banks fees to sign up for the service. Fees for the Shaw software will be higher than those for Mellon's existing loan system.

Ms. Lampman said several existing service bureau clients will convert to the Shaw system, although many will keep using Mellon's loan system.

The upcoming Hogan alliance will give Mellon a stronger offering of core banking software. The Dallas-based software company's integrated banking system includes a customer information file and a profitability analysis system that are more sophisticated than Mellon's current software.

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