Microsoft is pushing into core processing, bringing one of the biggest names in technology deeper into financial services.

In mid-December Microsoft announced a collaboration with Temenos, the Swiss core banking vendor that has a small presence in the United States but is one of the top names abroad. Executives say the agreement will make Microsoft's products more appealing to large international banks, where advanced core systems are in demand.

"We are extremely committed to the financial services industry," says Joe Pagano, Microsoft's worldwide managing director for banking and capital markets. The deal with Temenos "opens up a lot of opportunity" to deliver Microsoft's business analytics and collaboration technology to financial companies, but analysts say it's not an immediate threat to the domestic core banking market dominated by Fiserv and Fidelity.

Under the agreement, Microsoft and Temenos are jointly selling a version of Temenos' popular T24 core banking application that has been integrated into Microsoft's SQL Server database-a combination that both technology providers say prospective financial clients are demanding.

Marcelo Marquez, the industry solutions manager for Microsoft's worldwide financial services group, says that SQL Server provides better access to the data that banks use, and that the T24 software makes that data more useful. By combining them, "we are providing the capability to unlock that data and transform it into knowledge," Marquez says.

This is not Temenos' first attempt to gain a foothold in the United States. In 2007, Metavante agreed to modify a Temenos core processing product and market it to big U.S. banks. The relationship fell apart after Metavante agreed in April 2009 to sell itself to Fidelity National Information Services, which has an extensive suite of core banking applications.

Mike Head, Temenos' global alliances director, says the Microsoft deal is not meant to replace the Metavante partnership. The Microsoft deal is more global in scope and centers on the T24 system; in contrast, the Metavante deal centered on a different core product, TCB, which it had wanted to position for large U.S banks.

Robert Hunt, a senior research director at TowerGroup, says T24 is designed to work with Windows or Unix systems, and though it has found only a small audience in the U.S., it is a runaway success worldwide. The combined product may not have much effect on Temenos' U.S. appeal. However, Temenos is likely focused on how the technology can help in strong T24 territories. It's also a big bank IT step for Microsoft. "Microsoft has gotten more and more serious about getting into the core banking space," and its work with Temenos is a major step toward that end, Hunt says.


Daniel Wolfe is a writer for American Banker.

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