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Day 15 - 2014 Provides Evidence of Year of Recovery

Here are the signals I'm seeing:

The big financial institutions (FIs) are beginning to take core system initiatives seriously, and not because of pundit criticisms.  CIOs now have regained their spending power because their banks are reporting solid earnings again.

A real switch from in-your-face to on-your-screen when people and companies do their banking.  Banking is becoming an IT world, like it or not.  The old people-based bank system costs too much and doesn't pay back enough.

Integration is more than just a peddler's hype.  It's the ancillaries, stupid.  (thanks James Carville, for letting me use your quip.)

Bank Tech vendor reorganization (M&A) is like certification vetting.  The good guys (82 companies in AiB-13) deliver the goods and back the goods.  Why would NCR (an outside the AiB-13 cash register and ATM company) pay $1.65 billion for Digital Insight (an inside AiB-13 company and leader in Internet/Mobile solutions)?  Because NCR needed to become a bank tech services company again.

Target and other retailers know technology is a double edge sword, but excluding technology from their game plan, it becomes a guillotine.  Security preservation is a constant battle, and yet, I side with the protectors.  This means companies have to spend more than 20% of their IT budget for data security.  Ask what the cost of pilferage is at the Neiman Marcus Beverly Hills store alone.  It's the cost of doing business.  Pay it or get out of the business.

Top IT vendors are not offended by mere 4% organic revenue gains when their top line is in the billions.  They will do well, just look at their stock price appreciation.  FISV, JKHY and FIS are up 35%, 34% and 31%.

Fiserv and Harland Financial Solutions (a D+H company) are selling core systems.  That's a good thing because as core goes so go the ancillary apps adding more revenue for vendors.  In these cases, both core products (DNA and PhoenixEFE) are of the new architecture variety.

The two-guy-garage startups are looking for OPM.  I don't have any to give, but the unsolicited e-mails I receive indicate there's mucho cash to be invested in fresh ideas.  My private equity clients have mucho cash because they invested wisely on previous startups.

Why are the giant generic companies (IBM, CSC, Accenture, Dell, SAIC, Xerox, CGI Group)  scrambling for revenue?  Because they are the jack of all trades, master of none.  They don't know a darn thing about banking.  But their war chests are bubbling over.  Look for their acquisitions of bank tech companies displayed in AiB-13.

And what more can anyone ask for but for a new Fed Gov with brains who I'll bet won't cop out at the end of her term with, "I made mistakes," like her predecessors did.

I'm convinced we're on our way to real recovery globally, and I'll follow up on this at Day 365, 2014.  It's in my tickler file.  When it boils down to what works, I'm always reminded of the value of history.  When in 1928, a presidential candidate promised all Americans a chicken in every pot (80 cents for a chicken), they believed it.  When modern day politicians promised home ownership for every citizen ($200k for an average home), they should have asked, "What are you smoking?"  But lenders bought the fairy tale and thus paid dearly for subprime lending. 

2014 is going to be the year of reasonableness, and that's why I am feeling so good.


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