An influential technology analysis firm has concluded that Microsoft Corp. poses a threat to the banking industry-but not in the ways that wary bankers have been expecting.
In a report titled "The Microsoft Threat," Forrester Research Inc. predicted that the Redmond, Wash., company's high-profile financial initiatives will falter when they stray too far from its software competencies.
The report by Forrester senior analyst Michael Gazala described MSFDC, Microsoft's joint electronic bill-processing venture with First Data Corp., as a likely stumble.
He also said a strong array of on-line offerings by banks and other technology suppliers will tend to hold in check any ambitions Microsoft may have had to become a direct purveyor of financial services and related content.
He said Microsoft is hampered by the fact that only 10% of its desktop finance division's 200-plus employees have financial institution experience.
People are unlikely to entrust life savings to a company whose software often warns "unrecoverable error," Mr. Gazala wrote.
But he warned financial institutions against complacency, saying Microsoft "will learn from its mistakes and make adjustments."
He said he expects that within two years Microsoft will pose a serious threat in financial product distribution through "matchmaking" sites, and in payment processing through high-powered joint ventures.
Mr. Gazala suggested that Microsoft could offer major banks stakes in an on-line payments venture that would give them incentives to sign up merchants and customers.
The Cambridge, Mass., research firm surveyed financial institution executives who expressed general concerns about Microsoft.
Responses from 50 companies, including banks, brokers, insurers, mutual fund groups, credit card issuers, and technology providers, showed considerable skepticism about Microsoft's claim that it is a "core technology" company without direct financial service ambitions.
"Microsoft's goal is to grab a larger share of banks' and brokerages' technology dollars as financial services migrate" to the Internet, the report said.
Despite Microsoft's position-Forrester also interviewed 11 of its officials-44% in the survey viewed it as a direct competitor. Threats they most frequently identified were MSFDC, which is planning a product launch next year, and the Microsoft Investor site, which has 20,000 subscribers paying $9.95 a month.
The respondents acknowledged a positive contribution by Microsoft. Its presence "means banking technology will develop faster," said a vice president at a bank in the Integrion home banking consortium. (Forrester did not disclose names.)
Four out of five respondents were still willing to buy Microsoft technology or participate in its on-line initiatives, even if competitive.
Only 10% expected Microsoft's financial strategies to fail. Superior technology, brand recognition, and financial resources were most often cited as Microsoft's strengths.
Its lack of financial expertise, diffused focus, and absence of customer relationships were the top weaknesses.
Lewis Levin, vice president of Microsoft's desktop finance division, said the report "spiced up" the threat notion.
"They say, 'There must be something going on, but we can't quite be sure what it is,'" he said. "It's safer for people to say Microsoft is the bad guy."
"I was a little disappointed that the report didn't concentrate on our real interests in the industry," said Michael Dusche, Microsoft's director of financial services.
"What we do and what our shareholders ask us to do wasn't covered in depth. We're not going to do something to violate our relationships with banks."
David Van L. Taylor, group executive vice president of the Bank Administration Institute in Chicago, said the threat is seen in the forthcoming battle over information.
"We all know that one force generates a force in another direction," he said. "That's what we're seeing, and there's nothing like a challenge to get people going."
He said he is pleased at how bankers have "mobilized."