25-Year Old R.C. Olmstead Taking its "Hybrid" Approach National

DUBLIN, Ohio – There are still a few stories left of small start-up data processors that are thriving on their own without the help of a major tech company’s backing – R.C. Olmstead is one of them. The company was founded 25 years ago by Bob Olmstead. “I was doing computer consulting and came across a credit union, Glassco, (now Lancaster FCU), whose processor was discontinuing credit union processing. I talked to the manager. I thought I could set something up in three months. Twenty-five years later, and here I am,” said Olmstead, a self-described extrovert who welcomes client calls at any time of day or night. “I’m probably one of the few CEOs who puts his home phone and cell phone on his business card,” he quipped. R.C. Olmstead now has about 143 credit unions, and any perception that they are all small credit unions isn’t accurate. While it serves many credit unions in the $20 million range, it has clients as large as $200 million, with four over $100 million. The company has what it calls a hybrid approach to processing. It’s not quite in-house and not quite service bureau. The hardware resides at the credit union, but its clients are also connected to R.C. Olmstead through a dedicated line. “There are lots of things we can do online through that dedicated line. It gives you the service bureau look and feel, but the in-house speed and reliability,” said Steve Mihalich, VP of Sales for the company. One of the things the company can do through the line is monitor the speed and storage capacity of their clients’ systems. This comes into play with the company’s hardware/software leasing strategy. It leases hardware and software to its clients in five-year chunks. Price adjustments are built in based on number of members, branches, etc. As part of the lease package credit unions get to have virtually unlimited data storage. “Customers find it useful to keep all reports. There’s no reason to purge data. Sure they’ve got checks that cleared 15 years ago, but when I ask, they say they just kind of like having it,” said Olmstead. Another aspect of the lease agreement is R.C. Olmstead will upgrade hardware based on storage needs and other factors without a charge to the clients. “If they need a bigger disc, we give them a bigger disc,” said Olmstead. Olmstead said the advantage of this leasing strategy is even though the company may have to replace growing clients’ boxes from time to time, they’re not really losing that equipment because the displaced equipment can be used for a smaller client or a new client. “Let’s say a current client merges with another client, and we need to upgrade some hardware. We can take what they had and put it into a smaller client,” said Bob Wessinger, COO for R.C. Olmstead. Olmstead said by continually upgrading hardware, you’re not forcing clients to make tough, high-priced decisions to completely overhaul their systems a few years out. “If you’re selling systems where you’re charging $300,000 for hardware and you want to put another system into that credit union three years later, you have to really get them unhappy with their first system. We think continuously keeping them up to date on hardware and software is a better business model,” said Olmstead. The processor has measurements built into contracts to guide when systems need to be updated. When queries start taking longer than a second, new hardware is coming. So how is the company financially? According to Olmstead it has always turned a profit and the company grows by an average of 20% a year. Last year’s revenue was approximately $8 million. Traditionally a processor for Ohio CUs and states contiguous with Ohio, it now has a sales team that is marketing to credit unions throughout the country. It already has clients in several Midwest states, as well as Maryland, Pennsylvania and Colorado, but most of that business outside of Ohio has come by word of mouth. The sales team is now actively pursuing business outside of Ohio. Two years ago R.C. Olmstead purchased 10 acres of land at a site next to the Ohio CU League’s headquarters. It employs about 40 people at its headquarters there, but Olmstead said the company may need more space very soon, and it plans to add on. “With 10 acres, in a very urban office park, we can do that,” said Olmstead. [email protected]