Web Banking, The Acquisition, and the Start of the Great Decline

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My problem with writing the next post about my time at Edify is figuring out what is even worth mentioning.  I posted how I got hired there and then how I went on to avoid what I had been hired to do in order to dig into speech recognition.  From there I could write a whole series of posts about various technologies I worked on, from text to speech and controversies over what “US Spanish” really is, to automated response tech based on language models that have evolved into what we’re calling AI today (but which have just about zero “I” in them), to being involved in standards committees for things VXML and SIP, to a whole range of products attempting to serve call center agents that failed for a variety of reasons that were pretty obvious up front, to that time I spent as an ISO 9000-2000 site monitor, and a whole bunch of really stupid business decisions that absolutely screwed the company again and again.

And I may still cover some of that.  There are a few amusing stories in there.  But I am in a mood to lay the groundwork for what really screwed over the company, how it played out, and why it is just another in a long list of tales about why Wall Street won’t ever allow us to have nice things.  Everything must be burned to the ground in the name of shareholder value.

The catechism of Wall Street is that if you are not growing then you are dying, that the line must go up, and that if your company isn’t poised to be one of maybe three leaders in a market segment then you should just give up and go home.  Sell out to the leaders, consolidate the market, let efficiency benefit the consumers.

Mergers and acquisitions are always sold with the idea of efficiency and benefit to the consumers, and it is always, always, always a lie.  I mean maybe, if two small companies merge but they are not market leaders, the customer might benefit.  But usually not.  And what Wall Street seeks is monopoly control over market segments so they can raise prices.  The only efficiency involved how fast they can grab more cash and the other thought for the consumer is how hard they can screw them over before government regulation looms.

And they’ve bought so many politicians that regulation never looms.

Okay, with that out of my system for the moment, let’s talk about Edify again.  While I was toiling away over in the telephony subsystem, another group had used the extensive back end connectivity built into the product to create a web subsystem, which would deliver data to a web site as easily as we did to our IVR apps, and then built a state engine over that on which they built a web banking app.

This was pretty big stuff in the late 90s and, with the dotcom boom, put Edify on the map in a way that our steady, reliable, but boring IVR technology did not.  Sure, we had a PC in every Sears store in North America, but did you see we stood up a web banking front end for Scotia Bank or TNZ is no time at all?  [Edit: I am informed I might mean the ANZ Bank deal.]  Or maybe Scotia Bank was somebody else.  I don’t remember at this point in part because it was 25 years ago and in part because I never worked on any of that directly.

Anyway, it was announced at a company meeting that we would be merging as a company with two competitors, S1 Corporation, based in Atlanta, a web banking company that was a spin-off from the failed Security First Network Bank that was the first attempt to be a completely online, internet bank, and FICS Group, a European company doing web banking.

The S1 corporate logo of the time…

Edify had beaten out S1 on a couple of critical deals and now we had S1 president Chip Mahan showing up at our company meeting telling us how the united company would be “the dog catching the truck!” in this merger of equals.

This turned out to be an incredibly apt metaphor, because the joke always is that the dog won’t know what to do should it catch the truck and certainly Chip didn’t know what to do once the deal came to pass in late 1999.

To start with, the vaunted merger of equals became “we bought you and own you now and don’t you forget it!” on day one.  We were all treated with great disdain as HR acted like we were a batch of new hires and sent us forms to sign, including unenforceable non-compete agreements, and instructions for things such as how to answer the phone correctly as an S1 employee.

S1 then divided up the IVR team from the web apps team, put the web apps team in one building, us in the other, then laid off everybody on the web apps team in a series of waves.  We managed to shift a few over to our building… they knew the platform and we needed more staff… but a lot of the core than made the web apps we were selling were gone for good.

The plan all along was to buy Edify, kill our competing product, then force all the customers using it to migrate to S1’s platform.  This is the sort of market consolidation Wall Street loves.

The problem was that S1 had a crap platform, which was a major part of the reason they were losing deals to us, and over the next few years while they owned us they persistently and repeatedly failed to ship the promised new platform that would address all customer issues.

Big customers of ours like Banamex refused to consider what S1 was trying to force down their throats.  Also, we were such a small segment of the market that the three companies combined made no tangible change in the landscape of web banking.  It was all bullshit to make a few people more wealthy and to feed the self aggrandizement of Chip.

So the CEOs and boards of directors at Edify and FCIS Group were laughing all the way to the bank having gotten a big payout.  Our own CEO went off to work for the VCs who effectively destroyed the company, he now being a certified expert on such things.

FCIS had especially snookered dip shit Chip as they were primarily a professional services organization so there wasn’t even any source code S1 could pretend they would integrate, while FCIS had been greatly over valued by Chip’s team.  I think they ended up getting spun back out as their own company having succeeded in fleecing Chip.  Good on them.

Chip was not very good at the whole business thing.  He only excelled at talking a big game, which as we have all seen, is only enough to fool Wall Street for a while.  Chip was eventually replaced, then returned when things got even worse for the company.  S1, so far as I know, never shipped their new platform and was scooped up by ACI Worldwide in 2012 after foundering for over a decade.

But they left the IVR side of the house to its own devices… mostly.  We were put in one building, spun off as a wholly owned “special business unit” and were back in the telephony market which, while not as hot as all things web, was stable and reliable and where we were a trusted name.  (Also, we took some of the web banking customers with us because S1 had thrown away the organization that had built it, so couldn’t even provide support to justify the lucrative maintenance contracts.  We at least knew the core mechanics of the platform and had a couple people from the old team, so it was back on us.)

And then S1 put the worst possible person in charge of us, which nearly drove us out of business with a series of obviously dumb, even to the outside observer, decisions, starting with our building lease.  But that is another tale.

4 thoughts on “Web Banking, The Acquisition, and the Start of the Great Decline”

  1. PCRedbeard

    After three decades of experience in the world of work, I can confidently say that most people in c-suite positions aren’t any smarter or creative or anything else than the mass of people who report to them. A large portion of them were simply lucky to be where they were; whether you want to call it cunning or the ol’ boys/girls network –who they knew at college or when they started out– is up to you, but the people at the top of the ladder aren’t really superior to the rest of us. This isn’t a matter of jealousy or resentment, because I certainly don’t want even a middle manager position, let alone a c-suite one, but having had direct experience in seeing the curtain pulled away. (And no, I don’t mean regular “all hands” meetings either, where you hear c-suite people talk about how great things are and how we need to sell more.)

    The line from Men In Black that “a person may be smart, but people are stupid” is quite apt.

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  2. jennifer leo

    This post brilliantly captures the chaotic journey of corporate mergers and the harsh reality of Wall Street’s influence on technology and innovation.

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  3. Anonymous

    As an acquainted economist puts it… “efficiency is not the same as effectiveness”. Our financial system is very proficient at maximising money but this haves a regrettable side effect of destroying effectiveness: what gives more return per investment does not make anything work better, specially when the brown hits the spinning blades.

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