Past
The independent service bureaus and software companies of all sizes were acquired by two determined verticals. Bill Foley did it for FIS, zero to $5.8 billion in 9 years. The late George Dalton did a lot of it for Fiserv, $123 million to $4.5 billion in 26
years.
The verticals grew their "foster families" to higher levels by selling acquired ancillaries wrapped around core systems. They also added value to smaller core solutions with large company strength. Some people don't believe in "large company strength," with
some justification, thus as displayed in "Automation in Banking - 2013," many small companies continue to serve with value and dignity. For example, Computer Services, Inc. is the oldest independent core systems provider in the U.S. and at $198 million in
2012 revenue has had numerous suitors calling with no success. And not a single shot gun was brought to any altar in Paducah.
Present
The verticals now show signs of leveling off, or at least, modest revenue growth. Nothing wrong with the verticals, in fact, they are at peak performance. It's just that there's not much tech sizzle to sell any more, and to an audience that has reached a
somewhat comfortable level of maturity after 45 years of developing the better mouse trap. This leveling off that I describe has not been apparent to Wall Street analysts. FIS, FISV and JKHY stockholders have enjoyed healthy gains in the low 30% marks in
the past 12 months.
Next Step
I believe vertical companies will sell to the giant generics (IBM, Accenture, HP, CSC, Xerox, Cognizant). Or more to reality, the giant generics will go a-callin' to romance the verticals. And I'm saying nothing about the offshore providers who are doing
quite well in their own back yards, but they regard the U.S. as just a place to get an ivy league degree. There's a huge tech divide between America and 195 other countries in the world.
Don't take all this too seriously. It's just one man's opinion from 35k feet and 628 pages of research, with no axe to grind.
A bientot mes amis, adios amigos, auf wiedersehen, kalispera, arrivederci, shalom.