Yesterday, Temenos announced its acquisition of US vendor Kony. Both Kony and Temenos are Leaders in the recent “The Forrester Wave™: Digital Banking Engagement Platforms, Q3 2019.” This acquisition adds Kony Quantum, a low-code development platform, and Kony DBX to Temenos’ digital front-end product portfolio. Kony DBX is a digital banking engagement platform (DBEP), a solution some may call an omnichannel banking platform. It is still too early to make any concrete prediction about what this acquisition means for Kony and Temenos customers. However, there are some key aspects that will contribute to the success of the deal:
- Architecture and technology. Temenos announced its Infinity digital banking front-end platform earlier this year. The recent Forrester Wave evaluation showed that Infinity is as much a new digital front-end brand as a target state: Today, the Temenos DBEP consists of Infinity and a number of “old” products such as the Temenos user experience platform and the Temenos Connect Mobile Banking solution, plus ingredients coming from customer acquisition and onboarding vendor Avoka (acquired in 2018). Given time, Temenos could create a single homogeneous DBEP on its own, but it could accelerate this by using Kony’s products and technologies as a target state or product framework going forward. Right now, this seems to be Temenos’ intention.
According to Max Chuard, CEO of Temenos, and Thomas Hogan, soon-to-be-former CEO of Kony, Temenos will converge Kony Quantum with elements of Infinity to create a new platform. Chuard views Quantum as a more modern application foundation than Infinity.
- Kony’s product portfolio. Kony’s acquisition creates an interesting side effect. Temenos focuses on financial services. While Kony DBX serves the same industry, Quantum is a low-code platform serving a variety of industries — and Temenos promised “continuous investment.” This is certainly good news for existing Kony customers as well as Temenos itself — if it wants to get the most out of the acquired products and technologies. At the same time, we can only wait to see whether Temenos can work with clients in other industries as successfully as it has for decades with financial services clients.
At Kony’s Accelerate 2019 customer conference in September, Chuard and Hogan both pledged continued support and investment in Quantum. However, Chuard cautioned that the two firms must still finalize a product strategy. Temenos will not use Kony Quantum as the basis for applications in additional industries but rather continue its focus on banking. However, Temenos intends to continue offering Kony Quantum as a low-code development platform to customers both inside and outside of banking. The likely business model will be similar to Salesforce’s: (1) Temenos’ banking apps will eventually be founded on and extensible by Kony’s platform and tools, (2) Temenos will provide Kony Quantum to enterprises for a variety of use cases outside of banking.
- Brand and market. Temenos is one of the most successful banking software vendors globally. However, in spite of a series of US acquisitions including Trinovus in 2013 and Akcelerant in 2015, Temenos has not yet reached this lofty status in the US. After starting its banking software activities, Kony has quickly become a prominent DBEP vendor in the US and has recently started to establish an international footprint. If Temenos plays its cards well, then the acquisition can help Temenos to improve its market footprint and brand in the US and turn Kony DBX into a truly international digital banking front end.
- History of Temenos acquisitions. Temenos has carried out a series of acquisitions since its own inception, including core banking vendors such as French vendor Viveo in 2010, whose clients typically switched to banking applications from Temenos or third-party vendors. The four-year-old acquisition of Akcelerant is one of the examples that continues to be successful with its product portfolio. Data analytics startup hTRUNK and AI firm Logical Glue are just two of multiple examples of acquisitions in 2019. Overall, Temenos has a mixed history of acquisition outcomes — and Temenos still needs to fully digest the most recently acquired companies.
- People. Culture, trust, and execution are crucial to successful acquisitions. The future success of Kony’s product lines also depends on key technology experts and leaders. It may be good news that some Kony employees have already expressed their excitement about the acquisition in blog posts. Further, the appointment of Kony’s chairman and CEO to become the president of Temenos North America is an indication of how seriously Temenos takes Kony. But Kony’s experience focuses on the digital front end while Temenos is a front-to-back banking software company: The effective collaboration between the new president of Temenos North America and the new SVP of operations for North America (who was president of Temenos North America before the deal) will be a crucial ingredient for Temenos’ future success in North America.
The bottom line: Temenos is on the acquisition path in 2019. The Temenos acquisitions make sense when looking at the bigger picture of banking technology, applications, and architecture. However, we still need to see how Temenos can digest the many small and large acquisitions that have taken place in a comparably short time without reducing the success of these businesses. In addition, Temenos must make Kony’s application development platform for all industries an additional source of growth but not a distraction.
As always, let me know what you think.
The text in italics represents information and insights that Forrester analyst John Rymer brought along from Kony Accelerate 2019, about one week after the announcement.