New Leadership at Shazam

Northwestern Financial Review, May 1-May 14, 2004 by Bengtson, Tom

Dale Dooley successor Mike Hollinger's roots with the EFT network give him clear vision for the future

Time stands still for no banker, but perhaps it repeats itself. Shazam, the Johnston, Iowa-based electronic funds transfer network, will circle back to its 1976 origins when it completes the first phase of its software rewrite project this summer. A quarter of a century ago, Dale Dooley, Mike Hollinger and others worked together to create the software for the fledgling Iowa Transfer System. Dooley worked at Dial Financial and Hollinger worked for Brenton Banks as one of several community bankers interested in starting their own network of automated teller machines. Owned by financial institutions, the Iowa Transfer System morphed A into ITS, Inc., and today, Shazam.

Early on, it hired Dooley away from Dial, which eventually was purchased by Norwest Corporation (now Wells Fargo). Hollinger went to Banks of Iowa, and left banking when Iowa's largest holding company was purchased by Firstar (now U.S. Bank). Now Hollinger's back; he was hired to replace Dooley who ended his 27-year career with the network on March 1. Hollinger's first major assignment is to complete the effort begun a year and a half ago to completely rewrite the software that he and Dooley created in the late 1970s.

Like most of the software driving EPT networks all over the country, the software behind Shazam is still in its first generation. A series of patches makes the system compatible with some of the latest features available at ATMs and point-of-sale terminals. "Rather than continue to patch and change existing platforms we wanted to start from scratch and develop a state-of-theart software and hardware system," said Hollinger, who became Shazam's second-ever president and CEO earlier this year. The new software "will allow us to compete at a different level, in that we gain very significant operating efficiencies under our new platform."

Competition among EFT networks is growing more intense, particularly as networks expand through consolidation. Shazam has traditionally been one of the industry's low-cost providers but larger networks are encroaching on that advantage by offering volume discounts in areas where they directly compete with Shazam. The Shazam network, which includes 1,600 financial institutions, spreads across 29 states. Its greatest concentration of business is in the states through the central part of the country, from Minnesota to Texas.

Hollinger explained that the new software is being written in a modular fashion designed to accommodate rapid updates. That means if a new product becomes available, the Shazam terminal will be able to adapt to it within two months, rather than the two years it needs now. Hollinger said the project to "rewrite the switch" - scheduled for completion by mid-2005 - will give the network a big edge over competitors.

"It is like we are reinventing ourselves," commented Hollinger. "We are going to be running a whole new hardware platform and virtually our entire software." The network's card authorization application will be the first to see an update. Scheduled to be in place by this summer, that's the software that reconciles account balances, and authorizes and posts transactions. Switching software constitutes the second phase of the release and terminal driving software will conclude the project.

"The rewrite the switch project will allow Shazam to go forward with a great deal of confidence," commented Shazam Chairman Larry Snyder, Hamilton Bank, Hamilton, Mo. "We will be the only switch with modern programming and architecture. This will allow us to respond quickly to changes in the market place."

At the same time, Shazam is completely rewriting the software that runs its back offices. Billing, reporting and data entry will all be possible over the Internet once the new systems are in place. Although end users won't notice much difference, the new software should make it easier for banks to utilize the Shazam network, and it will allow Shazam to be more efficient. Since Shazam is owned by its customers, any financial benefit derived from increased efficiency should flow back to them.

Shazam's board of directors considered its decision to rewrite its software for nearly a year before committing capital to the project 18 months ago. In the late 1970s, the organization's leadership made a similar decision to migrate away from leased equipment operated by a third party toward its own system made up of its own hardware and software. Independence, to these independent bankers, was the goal.

Humble beginnings

Shazam's forerunner, the Iowa Transfer System, was born out of a dialogue initiated by Neil Milner, head of the Iowa Bankers Association in the mid-1970s. In response to ATM networks which were being launched by regional holding companies, Milner and others promoted the idea of working out an arrangement where community banks could share in those networks. The largest on-line processing network in the country at the time was run by Dial Financial. Dooley, representing Dial, made a pitch to run the new switching service and won the business. "Each of the holding companies had their own software and what we tried to do was meld the best of all those systems and design a new system," Hollinger said. "I worked with Dooley on that design."