Over the past two years Politzer & Haney Inc., which began as a developer of cash management software, has diversified, adding outsourcing services for banks and forging ties with other companies to provide additional services.
Today the Newton, Mass., company adopts a new name - P&H Solutions Inc. - as it looks forward to an initial public offering of stock sometime in the next couple of years.
P&H expects to post 2004 revenue of about $30 million, 40% more than last year's, and its profits have tripled this year.
It plans to announce today that the Federal Home Loan Bank of Atlanta has licensed its flagship product, Web Cash Manager Suite, to provide Internet-based wire origination services to its member banks. First Hawaiian Corp. in Honolulu also has licensed Web Cash Manager, which it will use to offer online business banking services.
Asked about the possibility of an IPO, Ralph Dangelmaier, the president of P&H, said it could be 18 to 24 months before the company is ready. "That is the plan here, but I don't think you can be public before you are $50 million in size," he said, referring to annual revenue. "We might even do an acquisition before then to get there quicker."
The cash management business has been consolidating recently. This month Fundtech Ltd. announced plans to buy the Indian payment software firm CashTech Solutions India Pvt. Ltd. In January the online banking outsourcer Digital Insight Corp. bought Magnet Communications Inc. In May of last year Fidelity National Financial Inc. bought Hamilton & Sullivan Ltd.
Maggie Scarborough, a senior analyst at the research firm Financial Insights Inc. of Framingham, Mass., said diversification will be increasingly necessary for cash management firms to remain independent. Financial Insights predicts an annual 1.5% decline in U.S. sales through 2009.
Mr. Dangelmaier said P&H has survived by diversifying. It now offers more than 70 products, most of them focused on business banking.
P&H also tried to attract attention by offering a guarantee to banks and other customers that Web Cash Manager will work as promised once implemented on their computer systems.
Mr. Dangelmaier said the software not only must operate reliably on the bank's hardware but must be integrated with the software running the deposit accounting system, security, alerts, wire transfers, reporting systems, and innumerable other components.
P&H has agreements with other firms to provide certain features of the software it does not develop on its own. Through a program it calls its "storefront," P&H has lined up a number of vendors - including CheckFree Corp. of Atlanta, which provides account reconciliation software, and NCR Corp. of Dayton, Ohio, which operates an outsourcing data center for P&H in Baltimore.
Delivering on the integration guarantee could attract more business from banks that want to focus on other issues, he said.
Ms. Scarborough said banks are concentrating on issues such as the Check Clearing for the 21st Century Act, which took effect in October.
"They're cleaning up after Check 21. They're working on other compliance issues. They're working on performance management," she said. "There are bigger fish to fry."
"Smart vendors are going to become part of their customers' infrastructure," Ms. Scarborough said. She noted that S1 Corp. of Atlanta, for example, started out as a developer of online banking software but now offers products for different banking channels and an "enterprise" strategy for packaging them.
Ms. Scarborough said banks will probably move away from stand-alone software for such functions as cash management.
