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IBM, Fidelity Ready For Banking Spending Spree

IBM has teamed up with Fidelity Information Services to provide an industry-specific WebSphere solution to bring outdated back-office software into the 21st century.

Big Blue tabbed Fidelity to provide J2EE-based banking components for its WebSphere platform, in what officials say brings together IBM's strength with infrastructure solutions and Fidelity's expertise in the financial industry.

The two picked a good time to come out with the service, due for general release in the first quarter of 2004. Many analysts expect IT spending to pick up in this arena over the next several years in order to replace outdated software and services.

According to Pablo Suarez, IBM banking industry global solution executive, some of the equipment running back-office applications dates back to the 1960s. What's more, accounts are broken down by account type, rather than being customer-centric. That means a customer could have a checking account and mortgage through one bank, but the database wouldn't know it unless a report was generated to cross-check both.

IDC recently published a report that finds IT spending at U.S banks will top $60 billion by 2007. Globally, finds research firm TowerGroup, IT spending will reach $337 billion in 2003. Key reasons for upgrades include: meeting regulatory requirements, managing the customer relationship, managing risk, reducing costs and attracting new customers

Suarez thinks IBM's and Fidelity's solution will be more compelling because it offers banks that already have the WebSphere technology running the infrastructure new critical components rather than a whole new whole package.

"Banks used to replace the whole thing at one time on a 'Big Bang' process," he said. "That will no longer be the case as banking has become a lot more complicated and has the need for much more control and resiliency because of the laws passed after 9/11."

IBM and Fidelity also plan to roll out an assessment service for banks, which starts in the first quarter of 2004. During the assessment IBM will recommend a J2EE-based solution, with a heavy emphasis on IBM hardware and software; because of Java's open source capabilities, however, it can come from other platforms.

Officials hope the assessment is enough to bring in new customers, whether they're serious about buying into a new program or not. Suarez said between 40 percent and 60 percent of financial institutions worldwide are looking at an infrastructure update.

"All banking companies, regardless of whether they're serious about buying or not, are looking at improving the infrastructure," he said. "Not only do you restructure from a technology point of view, it's the ability to relate that technology to business processes on a componentized manner. All of them want componentized solutions, so they can go to partial replacements and go to the critical parts of their financial institution."