IT Investments Pay Off For Financial Companies

U.S. financial institutions hoping to turn a profit from their IT investments now have a partner. Dublin, Ireland, application developer Orygen LLC last week said it will offer an unusual service to stateside businesses: If a client agrees, the vendor will resell to other financial firms the customized application it helps that company build, and give the original customer a cut of the royalties.

The concept has already taken off overseas. The Bank of Ireland collaborated with Orygen to develop customer-retention software applications, which the vendor has sold to 30 businesses, including Allied Irish Bank. Last week, Orygen began selling the Bank of Ireland software in the United States. The Bank of Ireland has so far made $300,000 from sales to European competitors. It expects additional returns as enhancements to the software are offered to the market.

Analysts question whether U.S. financial companies will be as eager to share their custom applications with competitors. "What they're going to have to balance out is how much of a competitive advantage is there in keeping [customized apps] to themselves vs. how much money they can get from letting it be resold," says Karen O'Brien, International Data Corp. research manager for online financial services. They may want to keep their most highly customized applications private but be willing to share some software to speed progress toward developing standards for an overall market, such as payment processing.

The Bank of Ireland doesn't believe it's giving away its crown jewels, because it expects most competitors to have similar software soon anyway. So it gets to reap the benefits of having a first-mover advantage and make money off its competitors at the same time. "The business side of the bank is paying us to deliver software, but now we can go back to them with value added--an extra revenue stream," says Denis O'Leary, head of IT investment for retail banking at Bank of Ireland.

And it's a good deal for buyers of the software, because they get tested applications for a much lower price and more quickly than if they had to develop them, Orygen CEO John Colgan says.

Orygen has a similar development program for the telecom industry, which it also plans to bring to the United States.