Fears of year-2000 problems have stalled sales of core banking software built on client/server architecture.
Such software, primarily offered by three U.S. companies, is considered a cost-effective alternative to mainframe and midrange computer systems. Client/server systems rely heavily on personal computers and tend to be easier to customize and expand than those that run on "big iron."
Since 1995, the number of core banking client/server installations has grown to 180 from 12, according to Meridien Research in Newton, Mass. But "client/server sales have virtually stopped since March of 1999," said Bill Bradway, research director at Meridien.
Mr. Bradway expects the lull to end when the date-change crisis subsides. Already, he said, "activity has begun to pick up and decisions will start to be made in October and November for projected conversion in 2000."
Robert A. Hunt, senior research analyst at Tower Group in Needham, Mass., said, "The demands for maintaining the mainframe solutions and year-2000 readiness have left banks unable to fully develop a staff to support client/server."
Client/server core banking software has been a distinctly community bank technology; a solid majority of installations are at banks with less than $1 billion of assets.
This is changing slowly. Four years ago, the customer base of Open Solutions Inc., one of the major vendors in the field, had no customer with more than $300 million of assets. Now the Glastonbury, Conn.-based company has seven with at least $1 billion of assets.
Software vendors submit this as evidence that the banking industry is coming to recognize that client/server technology can handle larger volumes of transactions.
Many await proof.
"Client/server can't handle large banks, because it has just not reached a level that is able to support millions of transactions a day," said Steven Williams, managing director of M One Inc., a Phoenix-based consulting company.
Raju Shivdasani, president and chief executive officer of Phoenix International, a Heathrow, Fla.-based client/ server vendor, says his company's software can scale up as required. But he acknowledged a Catch-22: No major bank has converted to a client/server core system, and none will do so until the software has been shown to work at a large bank.
Vendors say they are convinced that client/server systems will prove themselves, gaining favor with bankers.
"It hasn't been done in large banks, but you can't say that it can't be done," said Michael Nicastro, vice president of marketing and sales at Open Solutions.
Larry Angeli, vice president of sales and marketing for M&I Eastpoint of Bedford, N.H., a client/server subsidiary of M&I Data Services, Inc., said, "We are riding a wave that will come piece by piece." ?