Skeptics Question Value of Apple-IBM Deal for Banks

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A deal struck by IBM and Apple last week to create business apps for iPhones and iPads makes sense on paper, but some industry observers are having trouble seeing value in the deal for the banking industry.

Apple needs a new way to sell its smart phones and tablets as Google's competing Android devices continue to take market inroads, while IBM is seeking to grow its enterprise mobility business and can benefit from the ease of use and design aesthetic of Apple devices.

Yet critics have doubts about the fruits to come from this arrangement, particularly for the banking industry, one of its targets.

"I am pretty unimpressed with the IBM Apple deal," said Mike Gualtieri, principal analyst at Forrester Research. "Anyone can write mobile apps for employees with or without a special arrangement. I don't expect much for either company or customers from this announcement."

James Gordon, the chief information officer of Needham Bank in Massachusetts, said that "at first it looks like a match made in heaven, where Apple is totally consumer centric and IBM is totally business centric."

But upon closer inspection, he's not sure of the utility of the deal, which is designed to generate more business-friendly apps for Apple devices. 

"Tell me what's next," Gordon said. "It doesn't have to be game changing, but it's got to be something markedly different, something I didn't know about that's not in those one million apps already on the App Store." 

IBM has been focusing on mobile offerings for some time, including launching a MobileFirst line of apps in April. It also deepened a partnership with mobile banking vendor Monitise announced Monday.

"Over the past several years IBM, like other hardware companies, has been repositioning itself within the computer industry to be more service and solution oriented," said Philip Smith, director of information technology at Harvard State Bank in Harvard, Ill.

IBM's acquisitions of mobile technology companies like Fiberlink, Cloudant, and Xtify are a few examples of this, Smith said.

The two companies said they are going to build 100 mobile apps for businesses, the first set of which will be released in September. IBM has said at least one and possibly two or three of these apps will be specifically for banks. One will be a wealth management app that helps financial advisers collect customer data.

But Gordon doesn't see the need for more apps of this type, since Salesforce and other customer relationship management software providers already have similar apps and plugins in the Apple App Store. And there are numerous other business apps for sale there, including workflow and document management apps.

Even in the area of analytics, which IBM and Apple emphasized in their announcement of the deal (touting IBM's business intelligence and analytics expertise), IBM already offers Cognos analytics apps for Apple devices.

"With more than one million apps in the App Store, what is the app I'm missing?" Gordon said.

Another hurdle for the two tech companies in trying to target the banking industry is the fact that banks that use core banking software from one of the top-four providers (FIS, Fiserv, Jack Henry and D+H), have little use for IBM-Apple apps -- they need products created or blessed by their core provider.

And some banks, especially those embracing the Bring Your Own Device trend in which staff can use whatever device they like, wonder about Android support.

"Since Apple is involved in this venture, can we assume that there will be no MobileFirst development for the Android operating system?" Smith said. "Surveys from earlier this year report Android has a larger market share both for smartphones and tablets. Android holds a 10% to 11% share advantage over Apple when it comes to smartphones and holds approximately 62% of the tablet market."

That said, Smith acknowledged that Apple provides a more consistent implementation than Google Android devices, where the operating system is tweaked by each manufacturer.

To be sure, the deal could be a boon for large banks that use a lot of IBM technology, observers said.

It could help them mobilize and extend older, IBM mainframe-based technology out to new devices.

The deal also puts Apple in a stronger position to sell to companies, Gordon said. "You're not going to get fired for going to the Apple well, because you'll have the ability to [also] go to IBM," he says.

But that will ultimately depend on what new apps get released as part of the deal.

"I can't see the immediate win," said Gordon. "Maybe I'll change my tune when the apps come out."

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