MINNEAPOLIS -- Norwest Corp. said on Thursday that it has abandoned a high-profile technology development effort with Electronic Data Systems Corp. and Banc One Corp.
Norwest was a partner in the seven-year, $125 million computer and software project, called the Strategic Banking System, one of the most closely watched technology projects in banking. When completed, the system is expected to handle every aspect of retail bank operations in a thoroughly integrated fashion.
In a news release, Norwest said it would not install a component of SBS to process deposit accounts, explaining that it did not want to wait for the software to be completed. EDS has promised to finish the software in the second quarter of next year.
Manageable Loss
Norwest will lose the investment it has made in helping to develop the software module thus far. But observers said it would not be substantial because EDS is believed to have paid most development costs.
"We still believe the Strategic Banking System is an outstanding system, although we're disappointed that the timetable for rolling out the deposit system does not meet our requirements," said Brian Phillips, president of Norwest Technical Services Inc., the bank's automation
arm.
The defection of Norwest. which has $44.5 billion in assets, may hurt SBS, which EDS has begun to market to other banks.
Votes of Confidence
Still, SBS has its adherents. Early this year, U.S. Bancorp became the first nonpartner bank to license SBS for its customer information module.
And last month, Banc One -- the lead bank in the project - signed an agreement to install the deposit system when it is completed next spring, said EDS.
But Norwest said it did not want to wait that long.
The bank has agreed to install software developed by Hogan Systems for deposit software that is already commercially available and that is sold by International Business Machines Corp. as the Integrated Banking Applications.
Norwest said it would continue to use the portion of SBS that stores information about customers' account relationships with the bank. Norwest already has installed the customer software in nearly all of its 484 branches. The Hogan software can be used with the EDS system.
As early as last summer, Norwest officials voiced their dissatisfaction with the deposit portion of SBS, saying its performance was poorer than anticipated.
"This has been an ongoing big systems development," said Bobby Grisham, president of EDS Large Financial Institutions. "We have a plan in place to resolve those performance issues.
One observer said that the alliance may have fallen apart because of differences in strategy between the two banks.
Throughout the development process, Banc One did not want to install a system until it was nearly complete.
Norwest, on the other hand, has wanted to install a system as quickly as possible, even if it was not complete.
Personnel Changes
In addition, Norwest's management may have grown less committed to the SBS project in recent years as a result of some changes in personnel.
John Sikkink, who headed Norwest's technology division in the late '80s, subsequently was reassigned to head the credit card business, and Tim Meier has since gone to U.S. Bancorp.
