“’We needed to change to help our customers,’ says [Andy] Heyman. ‘This is an industry in transition.’”(1)

Newsflash, GonzoBankers – our industry is in transition. With the above say-nothing quote, NCR’s SVP and GM of Financial Services ushered in the NCR era for Digital Insight customers. This deal is not good for DI customers. To understand why, consider DI’s history.

It started with one million dollars. In 1995 Paul Fiore and Daniel Jacoby borrowed that paltry sum from XP Systems, their then-employer, to start an Internet banking company – Digital Insight. In 18 years, DI progressed quickly from an eager guitar tech to a rock star playing arenas, and then gradually descended to a still-talented but fading rock star facing the state fair circuit. Come to think of it, DI’s life has closely mirrored the career of Molly Hatchet.

The Glory Days
With solid delivery of the basics and an aggressive sales team, DI’s almost meteoric rise was consistently up-and-to-the-right through its acquisitions of RJE Internet Services (3Q1997,) nFront (1Q2000), 1View Network (2Q2000), Magnet (4Q2004) and Virtual Financial (1Q2004). DI was hotter than the brass hinges of hell.

The Intuit Years  
In the mid-2000s the DI product set was starting to show its age. New functionality was late and then just MIA. More importantly, DI was looking old and ragged, and there were serious complaints about its customizability and integration. DI was in need of a kick-start, and who better to fix functionality, look/feel and architecture than retail gods, Intuit? Intuit agreed and in late 2006 kicked in $1.35 billion to buy DI.

Clearly, Intuit would have the know-how and retail expertise to cure what was ailing DI, right? Plus, there were obvious (dare I say?) synergies between DI’s banking products and Intuit’s TurboTax, Quicken and QuickBooks offerings.

DI bottomed out under Intuit’s tutelage. On paper this should have been a home run, but it ended up more like a hustled-out infield single. Why? First, the newly combined DI and Intuit employees aggressively hated each other from the ground up. (I saw a DI/Intuit fight nearly break out when a fancy Intuit rep from Canada pronounced “process” with a hard “o”.) It was a Culture Clash Battle Royale, and the combined company never got past it.

Plus, Intuit’s arrogance made a mess of DI’s customer service. There is a huge difference in how to sell and support a market-stomping product like Quicken or TurboTax and how to do so with a product like DI that is in an exceptionally crowded market.

Intuit never adjusted its service and really only paid lip service to beefing- and prettying-up the DI product. Instead, Intuit seemingly concentrated on using DI as a lever to drive Mint PFM usage and otherwise collect DI end user data for cross-selling. In the end, Intuit gifted DI with a pissed off staff, marginally better look and feel/configurability, and highly frustrated clients.

Enter the Sharks – Wow, That Was Quick!  
With that damage done, Intuit sold DI to venture capital outfit Thoma Bravo (TB), this August for $1.025 billion – roughly $350 million less than Intuit paid for DI seven years ago.

Hardware Man to Save the Day?  
This week, Thoma Bravo announced plans to sell DI to NCR for $1.65 billion – a cool $600 million more than TB paid for DI just four months prior. Can’t blame Bravo for flipping DI; that’s what any God-fearin’ VC does.

(However, if I were an Intuit shareholder, I’d have some serious questions for the Intuit management team regarding the sales price they accepted from Thoma Bravo. I’d have an even bigger problem as an NCR shareholder unless, of course, you believe that Bravo really did add $5 million in value for every day it owned DI!(2)

Operating DI as a standalone at Thoma Bravo, DI could have regained its focus on Internet banking. If DI needed anything after the Intuit fiasco, it was focus on service and its core offerings. So, in walks the Brown-Ties at NCR to take over DI. The deal makes some sense for NCR given the reasons it and industry observers have listed for buying DI. 

• DI will definitely improve their depth and breadth of Internet banking offerings.
• NCR can cross-sell the roughly 700 or so net new DI customers.(3) (I get that DI is throwing off cash flow, but damn Chachi, NCR is going to have to cross-sell a metric ass-ton of ATMs to recoup $1.6 billion.)

That said, there is plenty of questionable spin in the NCR announcement for DI customers to notice:

• DI and NCR clients alike should recognize the potential for an “omnichannel” offering from NCR for the high grade BS that it is. We’ve been talking about omnichannel delivery since NCR was hawking Roosevelt-era cash registers for a living, and No One has ever delivered it with any modicum of success.
• NCR is also thumping its chest over mobile ATM receipts and the potential to allow customers to “pre-stage ATM transactions with their smartphones.” That’s the kind of what-if dreaming that makes research analysts and marketing execs get the Happy Sweats, but it’s not really based on anything demanded or even cared about by just about anyone else.
• Do you really believe the transparently far-fetched “It’s all over but the integration” message?

Waiting – The Hardest Part
Realistically, DI customers are looking down the barrel of even more delays in development, integration and customizability. Intuit is known as a nimble development shop, and it barely scratched the surface of what DI customers needed in the seven years it owned DI. NCR, which is almost never mentioned in the same sentence as “innovative” or “nimble” unless it’s in a punch line, will have to assimilate the DI employees, make org changes, assign leadership teams, talk with clients about their needs, and then settle on a new development direction. Then, it is going to actually do the development at a company not exactly commonly considered a software juggernaut.

That translates into massive delays every time. NCR is going to have to do better than mobile ATM receipts and smartphone ATM transactions to make the DI customer base happy. It has a lot of fixing to do, and the whiz-bang features it has been trumpeting are going to be more of a frustration point than a relief for DI customers. The other side of that coin is that DI customers are going to have to be loud and vocal in their insistence that NCR:

• Fix DI before going off on any high tech, big picture BS sessions.
• Keep development of DI separate from NCR in the short term. Keep the screwdriver pushers in Dayton out of the hipster development basements of DI.
• That said, get the guys from Dayton involved now in data center management. NCR manages a mean data center, a great asset for DI customers who need just that.
• Instill some NCR service discipline into the DI service organization. My gut says NCR should be able to help, but mega-companies have problems switching their tone and tactics to accommodate a new market.

C’mon, NCR! This was a decent acquisition on your part, but you’re going to have to solve the near term problems at DI before you start executing your tenuous, big picture, omnichannel strategy. 1,000 DI clients can turn into 600 in a heartbeat.

-Hodgins

(1) Mary Wisniewski, Bank Technology News, December 5, 2013
(2) David Gelles, New York Times, December 2, 2013,
(3) Ibid.

PS: RIP Nelson Mandela, a Gonzo Leader by every facet of the definition.

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