Misys CEO Mike Lawrie has a problem with his plan to turn the company around. Its name is Temenos, and the Geneva, Switzerland-based company has targeted customers of its banking software division as ripe for the taking. It has a ‘Misys replacement program’ aimed at providing users with a fast-track upgrade path to its own T24 platform.
According to its second-quarter report, it lured away one Misys customer in 2005, four in 2006, and its target for 2007 is eight. However, such claims are commonplace in the software industry, and Misys said it has beaten Temenos when a bank has evaluated the two offerings.
But financial reports show that Temenos has consistently performed better than Misys, from which it has been taking market share. Misys put out its full-year figures in the same week that Temenos announced its second-quarter numbers. These provided a base for Lawrie to judge how the turnaround is progressing.
Misys said that banking delivered reasonable growth with total revenue rising by 6% to 270m pounds ($556.9m). In the same 12-month period, Temenos managed more than reasonable growth, and expanded revenue by 36% to $257.3m.
More worrying for Misys is that its initial license fee order intake was 82m pounds ($169.1m), only marginally up on the prior year. But Temenos increased its software licensing figure by 32.5% to $110.1m.
With a larger user base, the 5% increase in Misys maintenance revenue to 123m pounds ($253.7m), dwarfs the $64.5m recorded by Temenos, but the smaller company enjoyed a 29.5% growth rate.
Similarly, while Misys described the 10% expansion in professional services revenue to 52m pounds ($107.2m) as good growth, a more generous description is required for the 47.7% expansion in Temenos’ services revenue, which reached $82.7m.
Lawrie cannot be blamed for Misys’ poor comparative performance because the company had languished for years under a complacent management. But the reward if he succeeds could be enormous.
Temenos believes that the majority of banks will replace their core banking systems in the next five years and vendor growth over the next three to five years will determine long-term leadership in the market. Accordingly, it plans acquisitions to strengthen its core business. In a highly fragmented market, it is targeting companies with revenues of between $20m to $50m.
It has raise its revenue target for 2007 from $290m to $300m, an increase of 39%. At this rate, Temenos will overtake Misys before long, unless Lawrie’s turnaround has spectacular results.