Maybe, just maybe, William H. Gates and Microsoft Corp. aren't the predatory demons that many bankers make them out to be.

Maybe, if bankers just opened their minds, they would see that Microsoft's technology and attitude are more likely to help them survive and compete than drive them out of business.

And maybe these words should have been written for a more fanciful publication, like "Best Fiction of the Year."

Three years have passed since Mr. Gates, quoted in Newsweek, called banks "dinosaurs." Not only has an entire industry not put that putdown behind it, but on the whole its wariness has hardened.

Despite more recent words and actions emanating from Microsoft's Redmond, Wash., base that can only be interpreted as tactful and diplomatic, bankers who fully accept the "friendly Microsoft" proposition are fairly few and far between.

They are not ready to believe the words of a Microsoft insider who said recently, "I know people think we want to get into banking or become a bank, and to be honest, we would have no moral compunction about doing so. But there is one big reason why that won't happen: It wouldn't be good business."

Yet many bankers have wondered whether one of Microsoft's more statesmanlike gestures-its agreement with Checkfree Corp. and Intuit Inc. on the OFX standard for on-line financial transactions-was a thinly veiled tactic to get between them and their customers.

Microsoft has gone so far as to agree to try to make OFX compatible with an alternative, Gold, that is backed by IBM and the 16-bank Integrion consortium that includes Banc One, NationsBank, Norwest, and Royal Bank of Canada. Yet it can't shake the hostility.

"The 'O' in OFX stands for open, and when people hear that they say, 'Why not?,'" said William M. Randle, senior vice president of Huntington Bancshares, Columbus, Ohio.

"Well, maybe not," said this Microsoft antagonist. "We want to look at the outcome. We don't want to make it easy for the competition to beat us."

More outspokenly than most bankers, Mr. Randle views Microsoft as "the competition." He was active in formation of the Banking Industry Technology Secretariat, or Bits. It is a panel of mostly big-bank chief executive officers who want to keep a rein on technical standards like OFX and Gold, and hence on the entire technology community.

"A lot of us feel like we're in the information business too," Mr. Randle said.

Even those who became partners with Microsoft in that most contentious area, home banking, often did so gingerly, saying their motives included keeping a watchful eye on the dominant purveyor of personal computer software and its allegedly ulterior motives.

But some voices-a few within banking, more in the outside circle of technology experts and analysts-are being raised in Microsoft's favor. They may not yet have changed a lot of minds, but they may have begun to change the terms of the debate over whether Microsoft is, or can be, a useful and worthy ally.

"I disagree with those" who say banks hurt themselves by cooperating with Microsoft, said Richard Comandich, former senior vice president of U.S. Bancorp.

He and counterparts at First National Bank of Chicago and Michigan National Bank were the first to work with Microsoft in 1993 to link PC banking customers through the Microsoft Money program. Dozens of banks followed but more because customers want the service than out of any desire to embrace Microsoft.

"Microsoft is acting in its own interests, as it should," said Mr. Comandich, who left the Oregon-based bank when it merged 10 days ago with First Bank System of Minneapolis. "But there are plenty of ways the banks' and Microsoft's interests can align."

Dudley Nigg, executive vice president of Wells Fargo & Co., has characterized Microsoft as one of a new breed of companies capable of developing consumer financial relationships around technology rather than around traditional bank accounts.

But in preparing for new, higher-tech ways of dealing with customers, Wells has developed as close a relationship with Microsoft as any bank. (Mr. Nigg may help bridge some gaps as a member, alongside Mr. Randle, of the Bits advisory group.)

Especially keen on building its Internet business, Wells intends to use Marble, Microsoft software designed to make it easy for a bank to build and enhance its Web presence. Some bankers fear Marble because they see it opening the floodgates to competition-not necessarily from Microsoft but from institutions of all sizes. On that point the software leader does not apologize.

Enabling the use of such tools "is what we do," said Michael S. Dusche, a Microsoft financial industry manager. If Microsoft did not exist, "the market would have done that anyway."

Microsoft chairman Gates has been quiet lately about banking and financial matters, leaving the impression he has moved on to other matters on a different level of strategic importance. He jousts these days with intramural nemeses like Netscape Communications and Sun Microsystems, not the Banking Industry Technology Secretariat.

In a recent flurry of corporate dealmaking was only one transaction of direct banking interest-the formation in June of the MSFDC bill-processing venture with First Data Corp.-which bankers suspect is a competitive threat but are still trying to size up. Mr. Gates was much more visible in announcing Microsoft's $1 billion investment in the Comcast cable television company, and in last week's dramatic rescue of Apple Computer.

Mr. Gates' recent pronouncements have focused on Microsoft's "empowering" ambitions with multimedia-"enabling everybody to receive and interact with these next-generation broadcasts," he said last week-and on corporate computing through the Windows NT platform.

"Our business is core technology, and our strategy is to drive our core technologies into the retail delivery aspects of your business," Mr. Dusche said during a recent visit to the lion's den-a Financial Services Technology Consortium conference in Toronto.

He tried to satisfy skeptical bankers by pointing out that Microsoft gets roughly 2% of what their institutions spend on information technology projects and does not expect that ratio to change.

Of course, it expects to win more and more of those projects.

Bill Burnham, senior electronic commerce analyst at Piper Jaffray Inc., Minneapolis, contended in a just-published report that the real high-stakes technology battle is between Microsoft and International Business Machines Corp. for the core of bank data processing that IBM has long dominated. For Microsoft, OFX is a door-opener to the "glass house," Mr. Burnham said.

In the split over the OFX and Gold standards, the Integrion banks seem strongly wedded to the latter, a plus for their partner IBM.

"If people are saying there is a need for OFX and Gold to converge, why do we need OFX in the first place?" said Martin Stevens, senior manager of PC banking, Royal Bank of Canada. "Gold meets all banks' and customers' requirements. It takes a group of banks and IBM to make a good commercial standard."

Mr. Dusche said Microsoft is most concerned about the need for a standard: "OFX has to look the way you want it to look, but it has to stand still for us to build rich, powerful software. It is not our role to set standards. We do want to protect our interests and a lack of standards is brutal."

He also sheepishly noted that Microsoft Money, the personal financial management software that bankers have seen as a potential intrusion into customer relationships, has two million users compared to the 10 million on Intuit's Quicken.

If not for Microsoft's 1994 agreement to acquire Intuit-which caused howls of protest from bankers and others before being scuttled by Justice Department antitrust action-people like Mr. Dusche might not now be facing hostile audiences at banking conferences.

"They are core, but they are in the core of a lot of businesses," said Gary Arlen, an influential technology consultant and president of Arlen Communications, Bethesda, Md. "Over years, they can set standards and call shots for a lot of industries, including banking. They can become what AT&T and Bell Labs used to be."

"We don't do hardware, we don't do system integration," Mr. Dusche said. "We work with companies in those areas that can do a better job than we ever could. But to make the core technologies happen, we have to come up with new and better ways to evangelize."

Evangelism scares some people. It might take the form of the Internet payments "triad" of Microsoft, Verifone, and Hewlett-Packard, or the electronic commerce enterprise Microsoft unveiled last week with KPMG Peat Marwick and Cisco Systems. When Mr. Gates saw the need for an electronic encyclopedia to spur the CD-ROM market, Microsoft created Encarta and outsold all others.

Now newspaper executives fear Microsoft's entry into their "content" and advertising businesses, and bankers worry about a financial strategy that might grow out of the Investor site that Microsoft saw fit to incorporate in its MSN on-line network.

"As a consultant I told clients, 'Put these guys on a tight leash, know what you're getting, and spell it out tightly,' " said Mr. Burnham, who left Booz-Allen & Hamilton this year to join Piper Jaffray. "But I also believe the banks may be a little too obsessed about technology companies' invading their turf.

"The banks should be more worried about those who are closest to eating their lunch. They should focus on competing with brokerage firms-and each other."

"Microsoft challenges the banks with some of the things they say," said Doug Chisholm, a veteran executive in Hewlett-Packard Co.'s financial services unit who has worked in close partnership with Microsoft and observed other such alliances.

"It's perceived as 'Microsoft is getting into the banking business,' but I'm not sure that's the case," Mr. Chisholm said. "What they are doing is challenging the banks to use technology to be better than they are today.

"In this environment, which requires using technology as a competitive weapon, banks are going to have to be a lot closer to suppliers and vendors in what I would term strategic solution partnerships," Mr. Chisholm added. "That means getting into bed with vendors. These things can't be done in a vacuum."

Mr. Burnham asked, "What does Microsoft gain by making the banks angry? It wants to sell them billions of dollars of back-end software."

In bankers' reactions may be an element of resignation: Whatever they do or think, they may just have to face the fact that Microsoft is here to stay and won't be pushed around.

But could Microsoft, too, be in a different space, as the West Coast geeks might say? Could the company and its people be less insular and arrogant, more mature and tolerant than in the early dinosaur era?

Wasn't there enough truth in the rest of Mr. Gates' infamous remark-"we can bypass (banks by buying) our own check processing company and make a profit on every transaction"-for it to be seen as an instructive vision rather than a shot across a bow?

This confrontation does not fit the pattern of historical battles of business titans-U.S. Steel vs. Bethlehem, GM vs. Ford, Coke vs. Pepsi, Hertz vs. Avis.

Microsoft's advent and implications may have more in common with the banking industry's current struggles against nonbank competitors and the prospect that old services will be delivered to customers in new ways.

Meanwhile, on the emerging PC-Internet battleground, the rules of engagement have become highly technical and political, as was the case when the VHS videocassette standard squashed Sony Corp.'s Betamax (and maybe, too, how Microsoft's Windows overtook Apple's Macintosh).

Microsoft plays on countless levels, also being a supplier of internal systems to banks of all sizes and financial competitors of all stripes. The technological and cross-industry dynamics are without precedent. Microsoft, embodying all that, makes for a convenient and symbolic lightning rod.

Bankers, most of all the traditionally collegial bunch who tend to occupy the top executive levels, have never had to deal with anything quite like this.

William Zuendt, the recently retired president of Wells Fargo, expressed frustration at banking's general unfamiliarity with, and suspicions toward, the freewheeling spirit of Silicon Valley. Wells' proximity to and appreciation of those values may explain its comfort level with Microsoft: The culture frowns upon or disregards boundaries like those that historically separated one industry from another, or that made rigid distinctions between competition and cooperation.

"It is not uncommon in today's world to partner over breakfast and lunch and compete over dinner and late-night coffee," said Mr. Chisholm at Hewlett-Packard. "You have to be able to deal with that."

It follows that the constant shifting of business plans, assumptions, and relationships must be accepted as a norm of the Internet age.

Mr. Burnham of Piper Jaffray said the potentially competitive on-line financial consolidators-on America Online, Quicken Financial Network, and Microsoft Network-arose because "banks refused or failed to provide" such a service.

"Some of the banks see MSFDC as a threat, but remember it was the banks that outsourced (credit card processing) to FDC in the first place because they couldn't do that on their own," said Mr. Burnham. "Specialization is a fact of life. People will have to get used to it."

"Communications technology is going to have a fantastic impact on the evolution of this industry," said Jerome Svigals, a one-time IBM industry consultant and head of his own firm in Redwood City, Calif. "Microsoft is positioning itself to be an important player in the delivery of services via all these channels-the Internet, TVs, PCs.

"Banks have to recognize the change is taking place and master the new forces."

Could Microsoft help them?

"Absolutely," Mr. Svigals said, "if the banks are smart enough to wake up and seek the help. And if it's not Microsoft, there will be 10 other companies ready to step in."

That competitive reality is what keeps Microsoft pushing forward at such a clip that bankers are constantly left to wonder whether the software giant might be trying to bulldoze them or drag them along, kicking and screaming.

Assuming Microsoft's power continues to expand, bankers must at least find a way to understand its workings. Otherwise they will be in an impossible jam: unable to reconcile with the rulemakers, but unable to escape from their web of influence.

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