GLASTONBURY, Conn., and MOUNDS VIEW, Minn. – In yet another credit union data processing merger, Open Solutions, Inc. is acquiring Liberty FiTECH in a deal that also creates a strategic alliance. Liberty FiTECH is the data processing unit of Liberty Enterprises. Based in Atlanta, it employs about 100 people. It has 200 credit union clients, split almost evenly between in-house and service bureau clients. Open Solutions, Inc.'s star has been on the rise in credit union land with the processor signing a number of billion-dollar plus CUs, including Boeing Employees CU and Bethpage FCU this year alone. Terms of the deal were not disclosed, but it is a principally cash deal and it calls for Liberty to gain a small equity stake in OSI once the acquisition is complete. Most of the 100 FiTECH employees will become OSI employees, but there will be some reductions where overlap exists. OSI plans to keep the Atlanta office open. FiTECH's core system is known as MANAGER GOLD. Those CUs on MANAGER GOLD will have the opportunity to migrate to OSI's The Complete Credit Union Solution core system, but they don't have to – OSI will continue to support MANAGER GOLD. Interestingly, OSI did do due diligence to see what the FiTECH CUs were looking for, and were convinced they wanted open systems. OSI CEO Louis Hernandez said even CUs that don't convert to OSI's system will see benefits as OSI's other products- such as cash management, loan origination, business application, CRM/business intelligence, and account aggregation – will be made available to MANAGER GOLD users. Liberty wasn't in the data processing business for long. It only acquired the FiTECH unit back in September of 2000. Liberty President/CEO Stan Hollen said the company made a commitment to FiTECH clients to bring them a state-of-the-art system. Liberty chose to do that by finding a leading edge partner, said Hollen. "We saw considerable consolidation in the data processing field, and frankly for us we looked at the need to grow the business dramatically, and that meant through acquisitions. We chose to combine our operations with another enterprise, and we're very, very happy," said Hollen. This wasn't a quick decision for Liberty. It evaluated 10 data processors. Hollen said even a few bank processors that weren't involved with credit unions were evaluated. Hollen said while it's clear Liberty isn't going to be in the data processing business any more, this doesn't mean the company is giving up on its other high tech businesses, which include Web development/hosting and Internet banking. "We are a technology company," he said. Hollen is excited about the partnership aspect of the deal. The two companies will co-market each other's products and services and integrate systems where synergies exist. "We do a number of things that fit well with OSI. We're a major supplier of plastic cards to credit unions. We're planning an integration to make it fairly easy for an OSI institution to order cards through us. We also do a lot of marketing services, fulfillment, creative design and printing," said Hollen. Online check reordering will also be tightly integrated. Hollen said Liberty didn't want to just sell the DP business and walk away like so many other deals. "We see some value in working together. It's good for the customer base and good for us." A Perfect Fit Hernandez said this might be a one in a million deal for OSI in terms of how well it fits the company. "The model of just buying up cores and rolling them up isn't what we're interested in. Liberty was an ideal fit because it is well known in the industry and they have made the commitment to open base platforms. We have the only true open system in this market," said Hernandez. Since day one of entering the credit union space, OSI has been making that claim. Hernandez said while some core vendors have middleware or a Web-based front end to try and open up to other solutions, OSI is open at the core level. Hernandez believes a multitude of legacy systems in the CU space are holding credit unions back. "The nagging problem of these older systems is they force you into a proprietary choice. They force you into specific hardware. Force you into special ancillary services," said Hernandez. Some credit unions are developing their strategic plans around what their technology can't do instead of what it can, he said. This also brings OSI down the asset ladder. Right now the company has a lot of success with large CUs with its average CU client having $1.3 billion in assets (though it does have CUs as small as $25 million). The average Liberty FiTECH client is about $80 million. OSI is on quite a run. It grew from $27 million in revenue in 2001 to $44 million in 2002, a 63% growth rate. Hernandez said results will be even better this year. The processor has even picked up some large corporate credit unions this year (see story page 18). Hernandez believes OSI's success is being fueled by the competitive landscape credit unions are now playing in. "That's driving a need to have more flexibility in launching new products quickly, and knowing more about your customers immediately, while serving all channels consistently. These legacy systems have all pieces bolted down around a legacy core. They say you have many choices, but they're all the same," said Hernandez. Despite having what he believes is the best technology in the industry, Hernandez said there are things Liberty can bring to the table that OSI doesn't have. He believes OSI's cView, which is an MCIF/relationship management-like product that unlike other CRM like products is tied directly to the core system, can work well with Liberty's marketing and fulfillment services. cView helps CUs get a snapshot of members and lets marketing department target products, while showing the finance department the profitability of the member, said Hernadez. Once a CU makes a decision via cView it can fulfill it through Liberty's fulfillment products, said Hernandez. Hollen said credit unions may even be seeing Liberty and OSI's names together on some efforts, and that there could be even more partnership possibilities the companies have yet to discover. [email protected]