Corillian/qbt and OSI/COWW Mergers Affect CU Space
PORTLAND, Ore. and GLASTONBURY, Conn. - Last week saw two interesting tech consolidation deals come down. Software integration firm qbt was acquired by Corillian and Open Solutions Inc. acquired COWWW Software - all four of these vendors have a presence in the credit union industry.
qbt's stewardship of its new MemberBridge product line didn't last long. Just a few weeks ago New York-based qbt Systems was flying high over making its first acquisition since it was founded in 1996. It acquired the MemberBridge product line from U.S. Central's Corporate Network eCom.
This included MemberBridge's Internet banking, ACH, Bill Pay, e-alerts, and consumer lending solutions, as well as MemberBridge Server, a middleware product. Now qbt finds itself on the other end of an acquisition. Online banking and bill payment giant Corillian purchased qbt, a privately-held firm, effective Aug. 9.
Terms of the deal were not disclosed. Corillian has a long history of going after the very largest credit unions, and this deal gives it 15 new CU clients, including three of the top 10 in assets. It also gives Corillian a ready-made integration product in qbt's Multi-Point Integrator, which has been very popular in the credit union industry.
Corillian CEO Alex Hart told Credit Union Times that the qbt acquisition means Corillian can reach down to small and mid-size CUs as well as the community bank market, areas where Corillian has not really focused.
"We clearly recognize that the credit union market continues to grow and the community bank market is strong. This (deal) will reduce the costs of implementation of our solution," in those markets, said Hart. Costs will go down because of qbt's Multi-Point Integrator, which reduces integration time significantly. Unlike Digital Insight, which relies heavily on the ASP model and reaches down to all sizes of institutions, Corillian has been an in-house provider mainly of larger institutions, limiting its market. The ASP model does bring in more recurring revenue.
"Our stock has been held back. We've been very dependent on large deals. Other companies are enjoying a much higher multiple than we are primarily because there is more visibility and more predictability to their business model," said Hart.
Interestingly, the $5.3 billion BECU played an indirect role in getting qbt and Corillian together. BECU is a user of both qbt and Corillian and Corillian was exposed to integration with qbt at BECU. Hart said Corillian puts a lot of stock into what BECU Chief Information Officer Butch Leonardson thinks, and Leonardson sung the praises of qbt.
"He's someone we think very highly of. He's a very straight shooter, tells us what he really thinks. He's one of our big fans, but also could be one of our greatest critics if we don't perform," said Hart.
The qbt deal also has implications for Open Financial Solutions, an R&D CUSO made up of large CU owners including Bellco CU, GTE FCU, Patelco CU, Suncoast Schools FCU, Wescom CU, Orange County Teachers FCU, First Tech CU and U.S. Central. When OFS was first formed, its main task was to reduce implementation costs. It did this with its MemberBridge Server application, a middleware product.
Now with qbt's MultiPoint integrator part of Corillian's product line, it's expected that MemberBridge will fade away. Brian Bodell, former CEO of qbt and now a Corillian SVP running the company's community banking unit, it makes sense for those CUs to transition to Multi-Point. "We'll continue to support it as long as customers want to be on it. Traveling this week I've met with all the MemberBridge clients and they want to shift off MemberBridge to MultiPoint based on the added functionality," said Bodell.
Bodell said there's so much talk about "integration", but not enough about what it takes to keep disparate systems working together. "Too many people focus on the actual integration and don't focus on monitoring and maintaining the systems," he said. An interesting sidelight to this acquisition is the fact that qbt clients, such as Open Solutions and EPL, compete with Corillian on some fronts. Hart doesn't consider EPL and Open Solutions true competitors because their core competency is data processing.
He did acknowledge, however, that there are some CUs who want to get all their products from one "bucket" so to speak, and most processors do offer Internet banking. He said Corillian would have no problem licensing its product to processors such as EPL and OSI who have an established relationship with qbt. Some were surprised that qbt would agree to being merged away given its recent successes.
But Bodell said the company needed more scale. "What was clear to me was the bottom line is we have to take care of our customers. It's a very competitive market, and our customers are in a very competitive market. What we see getting joining forces with Corillian is a very technically sophisticated strong resource to draw on," said Bodell.
OSI Buys COWW Software
The day after the Corillian/qbt deal was announced, Open Solutions Inc. announced its acquisition of COWWW software, a Michigan-based provider of Web-based archiving, retrieval and document distribution solutions. OSI acquired COWWW for about $8 million in cash. COWWW will become part of OSI's Strategic Solutions Group and operate as a separate business unit with its current management team.
COWWW's name comes from Computer Output to the Worldwide Web. The company reported revenues of $4 million last year. It has been growing rapidly, moving to expanded headquarters recently in the Grand Rapids suburb of Belmont, Mich., and now serving about 450 financial services clients. Solutions from COWWW Software include report archiving, e-statements, multi-institution statements, imaging, receipt capture, electronic signatures and marketing.
The acquisition continues the string of purchases that OSI began after going public and declaring its intention to expand with the proceeds. That has included acquiring core processors and other technology providers alike.
"Our continuing strategy is to augment and round out our offerings through the acquisition of complementary businesses that we believe add value to our company, clients and to the marketplace. COWWW Software is truly such a company," said Louis Hernandez, chairman and CEO of OSI. OSI has been on an acquisition tear in recent years.
In March it acquired CGI's U.S. core credit union business. It's strategy with core application acquisitions has been to acquire the firms and work on converting those CUs over to the OSI platform, very different from Fiserv's approach, which keeps individual systems in place. With the COWWW deal however, OSI is filling a hole in its product line.
Bill Thomas, president of 10-year-old COWWW Software, says, "Open Solutions and COWWW Software share a common dedication and commitment to the industry we serve. We are pleased to be joining Open Solutions as a new strategic business unit and look forward to continually serving the needs of our resellers, clients and the financial services industry." -firstname.lastname@example.org (Credit Union Times Technology Correspondent Marc Rapport also contributed to this story.)