And then there were four...Fiserv acquires Open Solutions

On January 14 Fiserv announced that it closed the acquisition of the equity of Open Solutions for $55 million. At this size the deal was not subject to regulatory review. The result: there are now only four major U.S. based Core Solutions providers: Fiserv, FIS, Jack Henry and Harland. Fiserv touted three key strategic benefits to the transaction:

1. An expanded base of account processing clients,
2. The “high quality and innovative technology” of Open Solutions’ DNA platform, and
3. The wise use of Fiserv’s capital.

Overall, Celent views this as a win-win transaction for the firms. Celent sees two key benefits for Open Solutions customers, existing and potential. First, questions about the company’s staying power are moot: under Fiserv’s umbrella, Open Solutions is now financially viable. Second, Open Solutions, at least theoretically, gains access to Fiserv’s proprietary complementary products such as Corillian and Mobiliti. If Fiserv executes to its historical standards, the implementation will go well. As for Fiserv, it gets access to a real-time relational database structured to be charter- and geography- agnostic, together with multi-currency capability. This gives the company technology to accelerate its international expansion, particularly with smaller community-based banks (Fiserv estimates there to be 40,000 such institutions globally). Questions that we’re interested in:

1. How much did defense factor into Fiserv’s strategic calculus – that is, did it pursue this acquisition to prevent a foreign entity from purchasing Open Solutions?
2. How well will Fiserv be able to integrate DNA into its current Acumen offering, and will it meet its 24-month target?
3. Fiserv spent a lot of time discussing the implications for Credit Unions; what should banks currently running on DNA expect to come out of this?
4. What will happen with DNA vis a vis Fiserv Premier, Precision and Cleartouch? Might DNA customers be encouraged to move to Premier or Precision? And might Cleartouch users be migrated to DNA?
5. What must Jack Henry and Harland be thinking?

Overall, this lifts a potential cloud for any potential Open Solutions customers worried about the firm’s long-term viability and creates new international opportunities for Fiserv.