Tandem Computers Inc., Cupertino, Calif., and Orlando, Fla.-based Kirchman Corp. announced an agreement that is expected to open up significant new banking markets for both companies.

The joint development pact calls for Kirchman's Dimension 3000 core banking software to be adapted for operation on Tandem's newest computer hardware, known as Himalaya servers.

Dimension software is designed mainly for institutions with $2 billion or less of assets -- a market segment in which Tandem hopes to greatly expand its sales.

|Big Deal for Both'

And Tandem, whose computers are used by many large banks in their automated teller machine operations, will be Kirchman's window to institutions in the $2 billion and over range.

The agreement "is a big deal for both companies," said William Bradway, a consultant with the Tower Group, based in Dover, Mass.

"It moves Tandem into a marketplace in which they previously have had limited penetration. For Kirchman, which has been delivering their Dimension software on IBM platforms, [the deal] has the twist of getting their solution on an alternative platform," Mr. Bradway said.

Kirchman's Dimension 3000 software handles a wide range of banking functions, including loan and deposit processing, customer and executive executive information processing, and compliance reporting.

The software is currently installed at about 1,800 institutions, according to the Tower Group. The Tandem hardware conversion project should be completed by the summer of 1994.

No financial institution has committed to testing the end result of the two companies' labors, but Tandem officials said several banks have expressed interest in doing so.

The development project undertaken by the two companies underscores the premise that retail banking is moving increasingly from batch processing to real-time operations.

These real-time requirements are coming from more than just the ATM arena, experts say. Home banking, phone banking, and a host of new core applications are making 24-hour system availability an absolute must for many institutions.

Bid for Bank Business

For this reason, Tandem believes it can garner new business at banks that have not historically had the need for its systems.

"Tandem has made a very conscious effort to expand out of our traditional niche in the mission critical on-line transaction processing arena," said C.E. Greenlee, a marketing manager at Tandem.

"This is not to say we're not focusing on that anymore, but our customers are demanding more and more from us."

Tandem systems, which are installed at over 650 financial institutions, are called "fault tolerant" because of built-in recovery mechanisms that do not allow the hardware to be easily knocked out of service.

"As banks increase the hours in which services are routinely available to customers, the issue of fault-tolerance becomes increasingly important," said the Tower Group's Mr. Bradway.

Tandem executives believe that its latest family of fault-tolerant computers, known as the Himalaya line, is ideal for community institutions because the servers are scalable.

The smallest model, the K100, has a base price of approximately $25,000. If an acquisition or other change in business conditions creates a need for a significant increase in processing power, the system can be easily upgraded by adding additional parallel processors.

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