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IBM sees a mint in bank branch tech

The technology giant is leading a team of industry players that are looking to cash in on the banking industry's move to spend billions of dollars on revamping branch location technology.

IBM is leading a team of industry players that are looking to cash in on the banking industry's move to spend billions of dollars on revamping branch location technology.

On Tuesday, the technology giant launched the IBM Branch Transformation portfolio, a package of Linux-based software, server hardware and consulting services that are aimed at the bank branch segment. IBM announced that Cisco, Intel and Siebel Systems will be partners in the effort, contributing expertise in networking, microprocessors and customer relationship management (CRM) software, respectively.

IBM and its partners are interested in the market, because most banks have left their branches with outdated technology for decades. While banks have invested heavily in developing automated teller machines (ATMs), call centers and Internet banking systems during the past 20 years, the local branch has seen little information technology investing, according to Jerry Silva, an analyst at financial services industry researcher TowerGroup.

According to Silva's latest research, banks are ready to funnel $4.1 billion per year into IT upgrades for branch locations, starting in 2005. TowerGroup tracked $2.9 billion in similar investments branch locations made in 2001. Silva pointed to a $100 million deal to update branch infrastructure that Citizens Bank recently signed with technology providers WebTone Technologies (now a division of Fidelity Information Services' TouchPoint Solutions) and AT&T as proof that the business in booming.

Another major catalyst behind the spending surge is a growing realization on the part of financial services companies that consumers still depend heavily on branch locations to do their business, despite the introduction of new technology such as Internet banking, Silva said.

"There is tons of opportunity for IBM and others, and that's why you've seen so many companies hopping into the branch technology market over the last 18 months," Silva said. "You still have people out in the field working in green screen on decade-old PCs, but that's changing rapidly."

He pointed to companies such as Pegasystems and PeopleSoft as IT providers also pushing hard to find a larger role in the bank branch market. Specialty vendors such as Argo Data Resource, Getronics and WebTone Technologies remain the leaders in the market, according to Silva.

IBM maintains that current branch technology is largely outdated, with applications and infrastructure that are of patchwork design, fragmented and expensive to manage. Mark Greene, global general manager for banking at IBM, said the new technology should help banks improve customer service and increase flexibility in responding to market conditions.

"Branches have been the poor stepchild of the banking industry for some time, and that's a huge contributor to the perception that the banking industry has poor customer service," Greene said. "And the banking industry has realized that, even with ATMs and e-banking, the branch is still very important to the consumer."

Greene said IBM expects the Branch Transformation package of hardware and software products and professional services to drive an average 25 percent savings in overhead at every branch location. The strategy is built primarily around technology that's delivered through IBM's X-Series desktop units and an array of servers that run on Linux software.