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 On the surface, banks and credit unions have a very simple business. To succeed, simply increase deposits, improve efficiency to lower costs, keep up with regulatory changes, and anticipate the customers’ or members’ needs. The reality is much more difficult. But Connecticut-based Open Solutions, Inc. may have just the solution financial institutions are looking for: modern technology.
In the 1990s, Open Solutions was a basement startup company, created to provide software to run community banks and credit unions to enhance the impact of personal interaction with their customers/members. Open Solutions created software using an Oracle relational data model based on open standards. The software was designed to give these financial institutions the ability to use the Open Solutions system on any hardware and operating system globally. The biggest difference between its platform and the competition is the focus on the person. Systems built 30 to 40 years ago centered on accounts and numbers, not people.
Part of the company’s growth this decade came through more than a dozen acquisitions in a four-year span. Open Solutions didn’t want to become a holding company, however, and wanted to focus its resources on R&D. In 2007, the company went private and organized the company into operational, sales, client care, product, and R&D areas.
“We’re operationally organized, which allows us to be efficient across our product lines, but more importantly, our clients get one experience,” said David Mitchell, chief marketing officer and senior VP.
Today, the company offers a strategic information management product platform that integrates core processing applications on its single centralized Oracle relational database. It includes everything from Internet banking, cash management, and CRM/business intelligence to financial accounting and management tools, imaging, digital documents, payments and loan origination solutions, and more. 
“We are the DNA of a community bank or credit union,” said Mitchell, adding that technology is the central reason for Open Solutions’ successful transition from the basement to the boardroom. “Our solutions revolutionized the way banks and credit unions do business. When they saw the benefits our technology had over their legacy systems, our success was inevitable.”
In fact, the aging systems still used by most financial institutions are one of the drivers behind Open Solutions’ growth. Mitchell said most community banks and credit unions are using legacy mainframe solutions that have been around for four decades. Considering the pace at which technology changes, that’s like choosing a horse and buggy over a flying car. Financial institutions also find themselves competing against non-traditional banking sources like ING, Yahoo, and Facebook. The reality is that the companies Open Solutions can serve need to upgrade their systems just to remain viable in the long term.
“Our clients need the most innovative products to compete with non-traditional competitors and large money-center banks,” said Mitchell. “There is heightened regulatory pressures with the recent bank failures and the recession, so financial institutions must now think differently about technology to better manage the fast pace of change to meet their strategic needs.”
Climbing the ladder
Open Solutions is constantly looking to enhance its technology to stay ahead in the market. Innovation has been central to the company’s ability to become a major player, and that will not change in the future. Mitchell said the company has enhancements and new products in the pipeline that are slated for release in the first quarter of 2010. This includes consolidating code lines, creating automated testing capabilities, and developing a core ERP system that will have an application similar to the iPhone’s App Store, allowing clients to customize their products. Mitchell estimates this product will put Open Solutions about five years ahead of the rest of the market.
Because technological superiority is such a big piece of Open Solutions’ strategy for the future, the company isn’t afraid of looking externally for additional resources. Mitchell said Open Solutions leverages the expertise of several professional service firms for some of the company’s IT functions. Managed by Open Solutions’ inhouse staff, this setup ensures the company can maintain lower cost of operations without leaving critical gaps in its infrastructure.
“For example, the internal costs of maintaining our database monitoring and support contract, and our ERP offshore support partner, are high. And if someone leaves the organization, we’ve got a substantial hole in our ability to provide support around a critical component of our infrastructure,” said Mitchell. “In complex areas such as ERP, the professional services firms have thousands of resources they can use for solutions to uncommon errors, as opposed to a trial-and-error approach when you limit your resources to only what you have inhouse.”
Successfully educating prospective clients about the power of its solutions is one reason Open Solutions has grown to become the fourth-largest core software provider to community banks and credit unions in the US. The company uses every kind of marketing tool to educate clients and prospects about the capabilities of its products and their value to the market.
These include using its Web site as an informational and educational tool as well as traditional marketing outlets like trade shows, print ads, and e-mail campaigns. However, Mitchell said Open Solutions is keenly aware of the changing dynamic of modern marketing and has moved into the digital world, using resources like social networking, Web 2.0, corporate blogs, Twitter, and video productions, illustrating that innovation in technology goes hand-in-hand with innovation in marketing.
Mitchell said new clients are coming to Open Solutions through many channels, including referrals, consultants, and brand recognition. There is a potential base of more than 16,000 financial institutions just in the US that could benefit from Open Solutions’ expertise. That means there is plenty of room for the company to grow. The company has managed to maintain a 98% client retention rate thanks in large part to its account managers, who serve as strategic advisors to clients, learning their needs and informing them about new products and services that could be of use to them.
Going forward, Open Solutions will look to expand outside North America as well, having already seen some initial successes in Asia, the Caribbean, and Mexico. Perhaps the biggest challenge for the company is actually its success. Having grown from $10 million in revenue and 80 employees in 2000 to $400 million and just under 2,000 employees worldwide, product innovation is the key to staying ahead.
“We are not hiding during this recession. We are continuing to spend millions on R&D to improve all of our product lines so our clients can succeed. We think these investments will help us become the number one core provider and a company that every financial institution will need to look at,” Mitchell concluded.
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