Intuit Inc., which boasts of being able to turn on a dime, proved it could with its decision to get out of the processing of home banking transactions.
An acquisition that looked so smart just two years ago turned into an albatross. When 40 top executives gathered at Mountain View, Calif., headquarters last month to determine the fate of Intuit Services Corp., the answer quickly became evident.
As was announced last week, Checkfree Corp. agreed to buy the unit for $228 million in stock.
"We have always anticipated this change, but we did not anticipate that it would come so fast," said Intuit executive vice president William H. Harris.
Intuit bought the Downers Grove, Ill., processor, then known as National Payment Clearinghouse Inc., for $6.8 million in 1994. Overnight, Intuit established itself as the leader in handling transactions emanating from PC-based financial management programs.
By this year, though, bankers have been complaining loudly about service quality and worrying aloud that Intuit wants to control their relationships with users of its popular Quicken software.
Complicating matters for Intuit, as it was dealing with rapid growth in transaction volume this year, was a flurry of new entrants - banks as well as software companies - into the home banking market.
The Intuit executives knew they had to take action. Should they add to the more than $30 million already spent on Intuit Services, or cut their losses and refocus on the core software business?
"We put up on a board a list of the highest priorities that we wanted to address," Mr. Harris said. "The list was overwhelming."
Besides home banking and bill payment, the company envisioned itself connecting customers to mutual funds, insurance, and tax preparation as well as facilitating bill presentment and electronic commerce.
It became obvious to the executives that ownership of Intuit Services was not helping them to meet those priorities.
"By the end of the process, there was close to complete unanimity," said Mr. Harris, who reports to chief executive William V. Campbell. "A number of people changed or modified their points of view. There were those who argued we could innovate faster by continuing to do every part of the chain."
Once they decided to sell Intuit Services, the software company's leaders moved on the issue of openness. "We needed many people to help us," Mr. Harris said, "and one of the ways to get other people to help us was to open up our system."
Along with the announcement of the sale, Intuit said it would decouple its financial software from the back-end processing network to be owned by Checkfree. No longer would banks be forced to use the facility for back-end processing and bill-paying work.
Under a new regime called OpenExchange, Intuit promised to release software specifications by the end of the year. Banks and other financial institutions will be able to offer customers on-line access to Intuit products regardless of their payment processor.
Mr. Harris said the decision "frees us up to concentrate on the front-end software and allows us to find appropriate partners" for back-end processing. But he added, "one of the disadvantages of an open approach is that you depend upon your partners."
"This decision underscores the trend toward open standards in on-line financial services," said Marc Singer, a consultant with McKinsey & Co. in San Francisco. "It also illustrates the importance of collaborating to compete. In an uncertain environment you have to stake out positions and continually revisit them."
Securities analysts also praised the evaluation of Intuit Services Corp. as "a drag on earnings. Intuit wants to hold on to the lead, and this will make Intuit more appealing to the large banks," said Steve Higgens of Bear Stearns & Co. in San Francisco.
Although Intuit's move toward open software came just a week after the bank-owned Integrion Financial Network emphasized its own "open standards," Intuit officials insisted that the timing was coincidental.
Quicken 6.0 for Windows is scheduled for release in October. The 1997 version will be the first to comply to the OpenExchange standard, Mr. Harris said. "We've done a lot in a hurry."
He expressed no regret about the company's two-year experiment in payment processing, saying Intuit technicians had learned much by establishing back-end connections to banks and bringing many customers into the home banking field.
"When we purchased National Payment Clearinghouse, the only viable way to connect securely with large numbers of consumers was through a private network and on a central hub," said Mr. Harris.
"That was true one year ago, and probably even six months ago," he added. "It was now time for us to adjust our connectivity strategy and embrace the open approach."
Intuit now hopes OpenExchange will be its gateway to the Internet. The company plans to implement Internet connections for on-line investment activities next spring and for on-line banking and bill payment next fall.
"Today," said Intuit chairman Scott Cook on the day the sale and OpenExchange were announced, "rapid advances in safety and reliability of the Internet make it the central focus of our overall connectivity and business strategy."
OpenExchange is akin to other protocols being developed by Intuit competitors. But unlike Microsoft Corp.'s Open Financial Connectivity and Visa Interactive's ADMS (Access Device Message Specification), OpenExchange will also transmit nonbanking financial information. Intuit hopes thereby to encourage sales of its investment, tax, payroll and accounting software.
