Banking and healthcare software group Misys was busy in the run-up to and during Sibos itself this year, writes Justin Pugsley. The company is in the early stages of a ‘turnaround programme’ which could later position it a lot differently than today.
UK-based banking and healthcare software group, Misys, by the look of its recent announcements, enjoyed a busy Sibos in Boston in October. New clients were signed up, partnerships consummated and new products were launched at the annual gathering organised by Swift.
In the run-up to the conference, Misys announced a deal with enterprise resource planning giant SAP, it signed up KBC Bank, launched a multi-bank trade portals, and said it is developing tools to manage exceptions and investigations: two items which cost banks a lot of time and money to correct.
“It was very busy; one meeting after another,” confirmed Olivier Berthier, head of product management trade services, core banking, with Misys Banking Systems.
Turning the corner
Hopefully, the flurry of announcements are reflective of the “Misys turnaround” announced by Mike Lawrie, the group’s chief executive back in March 2007.
The programme was dubbed by Lawrie as a “private equity-style turnaround strategy”. He is a veteran of the IT industry having worked for IBM and Siebel and later went on to work for San Francisco-based private equity firm, ValueAct Capital Partners.
The group is currently executing a three-to-five-year turnaround programme. Part of that involved disposing of its troubled IT financial adviser unit, Sesame. Some 60% of the company was sold to its management for £90mn payable over eight to 10 years. Misys will leave £105mn invested in the business. There is also an ambitious cost programme in place in a bid to fatten profit margins.
With the financial advisory unit effectively out of the way, Misys can better concentrate on its two core businesses of banking and healthcare. In banking the company is certainly well represented with 1,200 financial institutions using its products. It also holds the top three market positions in its chosen banking and healthcare markets.
By all appearances the banking side appears to be holding up. For some time banks trimmed their IT budgets after the millennium-induced spending splurge had run its course. This made life quite difficult for software vendors. However, a new worry for banking vendors is the sub-prime crisis, which has resulted in a lot of banks, particularly in the US, making losses.
It’s possible those banks may trim IT budgets as a result. However, doing so may leave them at a competitive disadvantage to other banks, which continue to upgrade their systems, particularly in areas such as trade services.
Nonetheless, Misys among others has sensed that the overall market has been turning. IT automation can have a positive impact on costs and some of the latest applications are able to support new products and services. Areas such as treasury and capital markets are seeing upgrades to their systems.
Supply chain finance, in particular, is IT-intensive. Banks that want to continue to run a viable business in the trade services business need to be thinking about investing. They have various options, which include getting tooled up by the likes of Misys or outsourcing to another bank that has the infrastructure or to an IT vendor. Indeed, Misys and some other technology vendors can insource certain aspects of the IT.
One aspect of the Lawrie plan was to focus more on partnerships and maybe less on acquisitions – although that approach isn’t completely ruled out.
And around September Misys announced that it will deliver integrated solutions to the banking industry. This is where SAP comes in.
“The deal is a great endorsement of our products and brings us another channel to market,” explains Edward Taylor, global head of public relationships, with Misys Banking Systems.
The aim is to help banks reduce complexity, costs, grow revenue and to increase flexibility and all from one source. This reflects the fact that banks are seeking fewer more strategic relationships with their IT vendors. They basically want a handful of vendors to provide solutions and deal directly with the other smaller vendors.
According to Berthier, SAP and Misys will create an integrated universal banking solution based around BankFusion, which will run on SAP’s NetWeaver platform.
The two will look to integrate some of SAP’s components such as its general ledger into BankFusion. Both companies will then market the solution to their client bases.
Meanwhile, SAP will endorse Misys’s Trade Portal and TI Plus 2.0 to work with its existing banking solutions. It is designed to be a solution, which offers banks a complete end-to-end solution, to enable advanced trade services.
Listening to the Oracle
No doubt the link-up with Misys is a response to deadly rival Oracle’s gradual moves into trade services. The former tends to prefer organic growth and partnerships. That may change after the £3.4bn purchase of business intelligence group, Business Objects. Oracle, meanwhile, has spent US$25bn over the last three years buying strategically placed companies to consolidate and gain entry into different markets.
Another important development for Misys was the launch of a trade services portal aimed at corporate treasurers. It will enable them to manage their trade finance relationships with multiple banks.
The product is called Misys Trade Portal for Multi-Bank and is available as a hosted service.
From a single window interface, treasurers can process, review and manage all their transactions, whether they be letters of credit, collections, guarantees or open account activities.
According to Berthier the product was rolled out due to popular demand. He says discussions with both banks and corporates showed that current solutions in the market were failing to satisfy their demands in terms of functionality.
However, he is keen to emphasise that Misys Trade Portal for Multi-Bank is not about disintermediating banks. “This is not some sort of marketplace where banks bid down to the lowest price to get business from the corporates,” says Berthier. “It’s more about managing relationships conveniently from one interface. Different banks have different strengths.”
Other news for Misys involved Belgium-based financial services group, KBC, adopting Misys Trade Services for its TSU initiatives. Ultimately, it will enhance the services KBC provides to its corporate customers.
“The Misys TSU module is available either within the internet-based trade finance solution, Misys Trade Portal, or as a standalone solution,” says Herwig Huysmans, general manager, trade finance, at KBC Bank. He adds that he saw the opportunity that the solution and the expert teams from Misys gave the bank.
Indeed, it will be interesting to see how Misys evolves over the next three to five years. City analysts think it could end up being a banking solutions-focused company. This would involve disposing of the healthcare division and possibly reinvesting the proceeds in building up the banking side. That is certainly what a private equity group would do.
However, Misys confirms that no such moves are on the cards, at least not any time soon.