Microsoft Corp.'s Money software for personal financial management has never enjoyed the same popularity as Intuit Inc.'s Quicken, but there are signs that Microsoft's growing entrenchment in banks' core processing systems is giving Money an incremental lift.
One simple reason is pricing: Intuit sells Quicken, while Microsoft often gives Money away or offers it at steep discounts - especially through the banks that buy its other products.
Furthermore, over the last decade, while Intuit has narrowed its financial services aspirations, Microsoft has broadened them. Intuit now views itself primarily as a vendor of shrink-wrapped software for the consumer market, but Microsoft is all over the map with its offerings for financial services firms.
It promotes its operating systems as the software of choice for back-office processing by financial institutions and its technology as the best option for hosting electronic banking. Many of the banks that use Microsoft to process transactions are also promoting Money as their preferred financial management software, and this has boosted its visibility.
Research from Gartner Inc. found that twice as many banks offer online support for Quicken as for Money - 54% versus 27% - but that Intuit's market share is stagnating while Microsoft's is growing.
Moreover, since Microsoft often gives the software away - preloaded on some personal computers - or sells it at a discount through institutions like Bank One Corp., "it's very difficult to really track who's using Money," said Avivah Litan, a vice president in Gartner's financial services group.
The success feeds on itself, Ms. Litan said. As Microsoft's software becomes standard in core banking applications, it boosts the use of Money, as well as vendors' reliance on Microsoft's technology platform, she said. "If the banks consider [Microsoft] their top supplier, then they will want to partner with vendors that work with Microsoft."
One of the best places to see this dynamic in action is at Bank One, which has a special relationship with Microsoft. About a year ago they teamed up in a research-and-development pact that was considered an unusual twist on the traditional relationship between bank and supplier.
Today, Bank One advertises Microsoft Money as its preferred personal financial management tool. In April it became the first banking company to offer Money Explorer, which combines Microsoft's browser software with its financial management offering.
Bank One has customized the product with some features that support its e-banking site. "We've made it easier for people to install and launch Money," said Mark Sheehan, its senior vice president for the corporate Internet group.
Though its customers can also use Quicken, "I think customers will see the value in the Money offering," he said. "I would hope to see an increase in the number of Money users because of that."
Bank One uses Microsoft technology in both its core processing and online operations, and it considers e-banking a major driver for future banking services.
"Our CEO [James Dimon] has been very vocal about our relationship with Microsoft," Mr. Sheehan said. "We believe that, if we can combine our expertise with their technical innovation, we can create the next generation of financial products."
After years of wary courtship, Microsoft has also forged extensive relationships with other major players in the financial services industry, including J.P. Morgan Chase & Co. and Wells Fargo & Co. Its wide-reaching strategy is to put its products on every step of the corporate technology ladder, from the huge mainframes that process billions of transactions to employees' desktop computers and to the servers that host electronic banking sites.
"The financial services industry is a massive opportunity," said Kenneth McBride, Microsoft's global industry manager for securities and capital markets. its main selling points are interoperability and easy communications, both within the institutions and between them, to allow information about transactions to quickly move throughout the network to be settled, he said.
These features have become especially important for banks that have gone through acquisitions and are trying to link systems from different companies into a single network, he said.
"Our skill is in making the plumbing" to move data, Mr. McBride said. "We take the copper pipes and make it available in a standard environment, then the vendors can build their own intellectual property and run it on our pipes."
Chris Jolley, the director of product management for Microsoft's financial products group, said the consumer is also an important channel. "We've been very, very aggressive in the consumer financial space."
Along with the basic Money software, the technology giant also runs the Microsoft Money Web site, which has been lauded for its financial information, including news and research. Late last year the site added an online version of Money, which allows users to track their financial positions through the Web.
All of these products compete directly with Intuit's Quicken software and Web site, which still dominate the personal financial software world. Microsoft's many efforts to unseat Quicken - including a failed bid in 1994 to acquire Intuit - speak to Quicken's staying power and the loyalty of its users.
"Seven out of ten users prefer Quicken," said Kevin Reeth, Intuit's group product manager for Quicken. Microsoft and Money "haven't materially impacted our sales at retail." One of Intuit's distinguishing features is its partnership with Muriel Siebert & Co. Inc., which provides online brokerage services to Quicken users.
Mr. Reeth says he is not concerned about Microsoft's growing might as a supplier of banks. He points out that Intuit focuses only on providing financial management software for consumers, while Microsoft considers banks to be its primary customers.
"We're not in the business of selling back-end software," he said. "We have no ulterior motive." Moreover, he said, "We've withstood Microsoft for 20 years."
According to figures from NPD Intelect, a Port Washington, N.Y.-based research firm, more than 67% of the consumers who bought financial tools last year bought one of Intuit's multiple versions of Quicken, while Money's share of that market was nearly 27%.
However, these figures may not tell the entire story, because of the inestimable copies of Money that are given away or sold at a discount, NPD Intelect notes.
Larry Tabb, a senior strategic adviser at TowerGroup Inc., a Needham, Mass., research firm and Reuters Group PLC affiliate, said that in other sections of the financial services industries' networks there has been "a tremendous increase in adoption [of Microsoft] in the last three years."
Core processing is still primarily the domain of legacy mainframe systems, but financial services firms are gradually shifting over to more efficient servers, including Microsoft's models, according to Mr. Tabb. Servers that link mainframes to other banking networks are also home turf to the software vendor, he said.
Mr. Tabb said he watches the securities industry as a bellwether of where the rest of the financial companies are likely to go in revamping their information technology systems. He estimates Microsoft's share last year of the server market in the securities field at 58%, up from 35% in 1998, and he expects that rate to grow by at least 6 percentage points a year through 2005.
In the past Microsoft took some knocks from critics, who said that its software was not yet up to the task of running mission-critical equipment, where a tiny blip could eliminate transactions potentially worth millions. But Bruce Nunn, the director of corporate marketing at Fincentric Corp., a Vancouver, British Columbia, vendor of core banking applications, said it has resolved many of those problems.
"Three years ago the Microsoft platform was a tough sell, but they have really had some success," in correcting the problems, Mr. Nunn said.
Several years ago Fincentric decided to support Microsoft applications exclusively, on the assumption that it would help them make sales in the banking market as potential clients began to shift towards Microsoft-based systems.
That turned out to be a good bet, according to Mr. Nunn. "Everybody sees Microsoft as the future, and everybody is moving to that platform."
Ms. Litan of Gartner agreed that Microsoft's efforts to push its products elsewhere is creating a pro-Microsoft momentum in financial services. "They are using a surround-and-conquer approach, coming from every angle until they squeeze Quicken out," she said.
Back-end software is becoming Microsoft's back door into the consumer application market, Ms. Litan said. She predicts that banks that use Microsoft's software in multiple areas of their networks will more likely steer new online banking customers to Microsoft's products than to Intuit's.
"Microsoft Money has never really dominated the market, and Intuit is still the clear winner," she said. "As banks become more closely connected with Microsoft, new financial features are going to work better with Money, and Quicken's share will go down."
Gaining market share from its longtime rival is a significant incentive for Microsoft, but it is just one part of its overall goal in financial services, Ms. Litan said. "Microsoft isn't going to kill Quicken, but they are in a better position to grab market share, and Quicken's share will go down."
