ATLANTA – Service bureau or in-house? It's a question credit unions are wrestling with and DP vendors want to answer by offering both options. That desire was behind Harland Financial Solutions' acquisition of Premier Systems Inc. Harland has acquired PSI, a data processing subsidiary of the Iowa Credit Union League, for $16 million in cash. PSI's current annual revenues are approximately $15 million. For about 10 years, PSI has been offering Harland's ULTRADATA core processing solution in a service bureau environment – and to some success with 229 credit union clients spread out over more than 30 states. Together PSI's 229 CU clients represent about $7.5 billion in assets and one million credit union members. Officially, PSI was a business partner of ULTRADATA. It has been running the exact same ULTRADATA in-house system, yet in a service bureau mode. Harland itself didn't offer ULTRADATA via service bureau, but that's now changing. The PSI system will become what Harland is calling its Enterprise Services Center. In a way this deal completes a circle. In the `90s ULTRADATA got out of service bureau processing by transferring its clients to PSI. "Harland Financial Solutions has been an in-house turnkey provider. We have the ULTRADATA core system and we have CuServ for small credit unions. We haven't been in the service bureau business, only through partners like PSI, but we now feel a strategic need to do it directly," said Raju Shivdasani, President, Core Systems Group of Harland Financial Solutions. Shivdasani estimated that between 30 to 40% of credit unions use service bureaus, but that number will grow as technology expands and becomes harder and more expensive to manage. "As technology moves forward, credit unions are having to put multiple servers in their computer rooms. You need more staff and expertise. This is becoming an issue for in-house credit unions," said Shivdasani. He believes the increased investment commitment is going to spur more CUs to go the service bureau route, especially credit unions in the $250 million asset and below range, which happens to be the sweet spot for PSI. Shivdasani said the big advantage Harland has over other processors trying to acquire their way into service bureau processing is PSI's service bureau system is exactly the same as the ULTRADATA core system. This has two benefits, said Shivdasani, one being it makes conversion from in-house to service bureau or service bureau to in-house very easy to do. "It's the same product, so credit unions can even go back and forth very easily," said Shivdasani. The other advantage is product integration, and Harland has quite a suite of offerings these days. Harland as a company has evolved dramatically in recent years. Acquisitions of companies like Interlink and SPARAK have diversified its offerings as well as its client base (see sidebar). Getting a handle on all that Harland does isn't easy. From checks and CRM to mortgage servicing (especially after the acquisition of Interlink) and MCIF, Shivdasani, said it can be a challenge for institutions to know all that Harland does, and he hopes to have the core systems become a showcase of these products. "We've wrappered 10 other solutions from Harland Financial Solutions and the Harland check company around ULTRADATA. We're offering a lot of these products in an integrated way," said Shivdasani. Dick Neri, former president of PSI who is now SVP/General Manager of Enterprise Services Center, said the timing was right for this deal. "We work very closely with them and have over the years. We looked at the synergies that lie between the two companies and wanted to be in a better position to take advantage of the new products and services. As a downstream provider, we didn't have the closeness of working on design (of products) and making sure they best suit our marketplace," said Neri. PSI operates out of the same building in West Des Moines, Iowa as the Iowa CU League, but it's not exactly a small shop. While the League has 12 employees, PSI has approximately 80. All 80 employees will become Harland employees, and they will operate out of the same West Des Moines facility. Interestingly, Neri said career development actually came into play in the decision to merge with Harland. "We felt that this was a major plus for our employees. Through this partnership we'll grow our technology and it will allow them to grow in their own careers. There are a lot of positions throughout the Harland company. It's a very stable company to work for," said Neri. Harland employs 6,000 people and has 14 offices spread around the country. Neri said PSI employees who have aspirations of working in different areas of the country or in different realms of IT could possibly do this through the Harland company. With this deal, there are now 480 credit unions on the ULTRADATA system, with another 250 small CUs on its CuServ System. "That's more than $50 billion in combined credit union assets that we serve. Think about that number. That says something in a $500 billion industry. We want to be number one or two in our space," said Shivdasani. For the League this brings in $16 million, but League President Tom Griffiths said the League isn't planning on just sitting on the money. "In today's environment, a passive investment of $16 million doesn't bring you very much. It is money that if it is invested in service opportunities for credit unions can hopefully return a dividend, we'll just have to see," said Grifffiths. He said the League doesn't have a product in mind just yet, but it hopes to invest in something that will make credit unions operate more efficiently. The Iowa League has certainly had success in the CUSO realm. PSI did well with over 229 CU clients, and the League's other CUSO, the Members Group, owned in conjunction with Iowa League Corporate Central CU, is the leading share draft processing provider in Iowa.