While Fiserv Inc.'s purchase of Open Solutions Inc. marked theend of an era, it also sparked conversation about how the financialservices technology giant will handle the addition of anotherhandful of core account processing platforms to its portfolio.

The Jan. 14 purchase, for $55 million in cash and another $960million in assumed debt, marks the end of a feisty Fiservcompetitor that at one time threatened its domination of the creditunion technology space. 

Open Solutions–founded in 1992 in rented space in a Connecticutshopping center–made headlines and money while Louis Hernandez Jr.,its aggressive CEO, engineered  acquisitions andbillion-dollar credit union signings to its new relational databaseplatform, which went through various iterations and names beforeending up as CUnify for smaller credit unions and its flagship DNAplatform for larger credit unions.

The Glastonbury, Conn., company had about 3,300 customersworldwide on all its solutions. Its revolutionary, at the time,idea of opening the core platform to third-party add-ons, continuedto the very end, with the success of its critically acclaimed andcopied App Store for developers.

Its precipitous climb helped Hernandez take the company publicand then later, take it private again with the help of capitalinvestors Carlyle Group and Providence Equity Partners to the tuneof a reported $1.3 billion, including debt, in 2007.

That debt apparently helped lead to its eventual sale, asfinancial pressures kept Open Solution from continuing what hadbeen its hallmark: continuous upgrading of its core platforms withintegrating technologies that could deliver the latest products andservices.

That fact had become widely known in the industry, and FiservPresident/CEO Jeff Yabuki acknowledged that in an interview withCredit Union Times the day after the purchase wasannounced. 

“We believe there were two big issues that faced OpenSolutions,” he said. “One was the amount of debt they had for acompany that size. It really burdened them to not be able to investthe capital necessary to take advantage of the opportunitiesembedded in DNA and its other platforms.”

“The second thing is that they didn't have the full suite ofadd-on solutions that credit unions and other financialinstitutions prefer to buy. We know they want to get as muchwell-integrated technology from their core provider as possible,and we believe we have eliminated both those problems by thisacquisition.”

That included eliminating the competition at the top.Wisconsin-based Fiserv rolled out Acumen in 2009, positioning it as the upper-endalternative to DNA and another fierce competitor, the Symitar corefrom Jack Henry & Associates.

After years of putting together a client roster of severalthousand credit unions through internal growth and acquisition ofcompeting core processors, Fiserv touted Acumen as an all-newplatform with 360-degree member-facing features and an emphasis onWeb services and other integrating technologies. Now it apparentlyis replacing that top position with DNA.

Open Solutions had about 800 credit unions, community banks andthrifts on its core platforms. About 30 of Fiserv's credit unionclients bought Acumen. Thousands more are on legacy platforms suchas XP2, CUSA, DataSafe and Portico, to name a few. 

Yabuki said support for those platforms will not change. “Thisdoes not represent any fundamental change,” Yabuki said of the OpenSolutions purchase, comparing it with the $4.4 billion acquisitionof payments provider CheckFree in 2007.

“CheckFree really brought transformational change to Fiserv interms of providing us with market- leading payment capabilities,”the Fiserv CEO said. “Open Solutions brings a number of innovativeproducts to bear on the market but at the same time does not bringtransformational change.”

But the Fiserv CEO said he does not see Acumen and DNAultimately co-existing in the Fiserv lineup. “Over the next 24months we want to take some of the unique capabilities we haveconstructed within the Acumen environment–such as customizableworkflows and member management capabilities–and export that overto DNA. We think that will make it ultimately the most innovativeand existing account processing platform available.”

That should sound good to credit unions committed to DNA, suchas the $2.3 billion, 133,500-member Affinity FCU in Basking Ridge,N.J.

“I think this can only be good,” said Affinity President/CEOJohn Fenton. “But their debt situation has been concerning us, andnow that concern should be off the table. I also think this is agood acquisition for Fiserv, but they'll have to unload some of theolder legacy systems or risk being spread too thin, resourcewise.” 

Meanwhile,  Scott Hodgins, research director atCornerstone Advisors in Scottsdale, Ariz., said he was aware ofconversion problems and delays at some credit unions making themove to Acumen, although  there was a mixed reaction tothe sale among his company's clients.

“I have to think that they're not all going to be happy aboutit,” he said of the possibility of Acumen being supplanted by DNA.“But I also think a portion of Acumen signees in various stages ofimplementation are going to be glad they have an out now.”

He also said he expected the acquisition to have a short-termeffect on how Cornerstone Advisors works with conversionprojects.

Another credit union consultant had a similar view. “I know theywere having some troubles with Acumen, and now it sounds likethey're going forward with a new technology platform,” said RandallPearson of Pearrari Solutions Inc., a Tucson, Ariz.,consultancy. 

Pearson, who noted that his consultancy focuses on lending ande-banking technologies for community financial institutions ratherthan core platforms, also is board chairman for the $116 million,14,100-member Pyramid FCU in Tucson.

His credit union uses Open Solutions' CUnify platform and whilehe stressed that he was not speaking for Pyramid FCU but as aconsultant, he did note that the Fiserv purchase might make adifference there. 

The question there and elsewhere, observers said, will bewhether Fiserv makes upgrades to the CUnify platform to make itmore amenable to third-party add-ons or isolates it while urgingclients to upgrade to its coming iterations of DNA. 

“They weren't maintaining CUnify and it wasn't that current,”Pearson said of Open Solutions, “so now we'll see what Fiserv doesto incent credit unions to move up to DNA and get the goodstuff.”

He added, “Fiserv is very experienced at acquiring othercompanies but also has been criticized for not rationalizing itsassets, for letting so many competing cores and lending solutionsand online banking solutions out in the marketplace.”

“They've made progress on that in the recent past and thispresents another opportunity to do something about it. I mean, whybuy three cores when you already have so many? Which solution isgoing to be the winner? I think it's going to be DNA.”

He also sees the technology giant using its existing products tohelp make that happen, particularly in the payments arena.

“With iPay being owned by a major competitor [Jack Henry &Associates], they'll want to create interfaces and incent migrationto CheckFree for bill pay and CashEdge for A2A and P2P,” Pearsonsaid. “They may even put some of the e-banking solutions intomaintenance and encourage uptake of the next generation e-bankingsolutions that they intend to operate for the longrun.” 

Fiserv also strengthened its competitive position. “Thisacquisition reinforces Fiserv's leadership in credit union andcommunity bank core processing,” said Robert Hunt, senior researchdirector, Retail Banking, at CEB TowerGroup in Boston. “I would saythe price is high, especially because of all that debt they tookon, and I think the key is Fiserv's ability to sell products andservices into that new customer base. That's something Fiserv hasdone before very successfully with their acquisitions in thepast.”

Fiserv did eliminate one of its competitors with the OpenSolutions takeover, but another financial services technologyanalyst said that's not necessarily all bad.

“I think this will prove to be good news for the credit unionindustry,” said Christine Barry, a research director at Aite Groupin Boston. Also for Fiserv, as it takes advantage of theopportunity to cross sell to credit unions payment and otherproducts that Open Solutions lacked, Barry noted. 

She added, “Open Solutions had a lot of success offering DNA asa very modern product for credit unions and banks, and a lot ofthem were holding off on signing with Open because of its financialposition. And now Fiserv can invest in the DNA product in ways thatOpen Solutions could not afford to.”

As for sun setting its current platforms, Yabuki said that wasnot currently in the works. “We know that each financialinstitution is unique and no two are created equal,” the Fiserv CEOsaid. “Each institution has to make decisions that make sense forthem, depending on what their culture is, whether they want to runthe core accounting system in-house or outsourced, or want to be onplatform one, platform two or platform 12.” Yabuki saw hiscompany's workforce grow by about 1,400 to just more than 21,000and when asked if existing core platforms would be eliminated,including Open Solutions', and whether those former Open Solutionsemployees were in jeopardy of losing their jobs in the acquisition,replied flatly, “No.”

“We have a lot of respect for what Open has done with DNA andare very excited about having them in the Fiserv family,” hesaid.

Time will tell.

“Well, whenever these things happen, you hear the standardblather, 'nothing's going to change,' and so on,” said Pearson, theArizona-based consultant. “Well, we'll get past that part of it andbe in the reality part in a few months.”