Pioneers like GE, IBM and Microsoft built and maintained theirown communications infrastructure for connecting directly to SWIFT.But now most companies that join SWIFT outsource the complexnoncore activity of running an electronic post office and arechoosing a service bureau to do it for them.

Roughly 70% of corporate SWIFT joiners choose a service bureauto avoid the high upfront investment and ongoing operations costsof maintaining their own SWIFT connectivity infrastructure, claimsMary Ellen Putnam, vice president of the international businessunit at one prominent service bureau, Las Vegas-based BankServ.“About 80% of the SWIFT costs are associated with having todedicate resources to implementation, disaster recovery andupgrading the system,” Putnam says. “A service bureau can helpeliminate 50% to 60% of this cost.”

Brian Wedge, executive director and global SWIFT product managerfor J.P.Morgan Treasury Services, agrees that most companiesjoining SWIFT today are choosing to use service bureaus and notesthat so do the majority of banks. Many treasury staffs don'trealize that many of their banks have been depending on servicebureaus for SWIFT connectivity for years, Wedge says.

Undaunted by cost and complexity, service bureaus haveproliferated since SWIFT allowed companies to become members.Treasuries looking for a service bureau confront dozens of choices,all with the same core proposition: “Rent our infrastructure andwe'll plug you into SWIFT so you can use all those messages.” Howcan a treasury manager sort through the options and make the bestchoice for his or her company?

At first glance, the differences among service bureaus may seemslight. Basic connectivity is pretty much a commodity serviceavailable from any service bureau. Differences in pricing usuallyare small; most charge a set-up fee and an annual subscription fee,and pass along the transaction-based charges they pay to SWIFT,explains Tom Nelson, cash management specialist at Wall StreetSystems. Some service bureaus mark up the SWIFT fees and others donot.

To find a compatible service bureau, start with SWIFT's list ofthe 140 or so that it certifies, Putnam advises, then look for onethat is strong in the services you expect to need. Consider theirSWIFT expertise, compliance and disaster recovery support, sheadds.

When it certifies service bureaus SWIFT requires annualvalidation of technical and functional capabilities, says BryanKirkpatrick, Bank of New York Mellon's vice president, seniorproduct manager and SWIFT expert. “With a good service bureau, youget expertise, reliability 24 by 7 and data back-up,” he says.“There's a lot you don't have to do yourself.”

Treasury managers should be careful if they consider bureausthat aren't on SWIFT's certified list. “Those certified have beencarefully examined for their organization, their knowledge,expertise, and approach to the market,” explains Eileen Dignen,SWIFT's managing director of banking accounts and initiatives forthe Americas. “We can't control the small outfits that are outthere scanning the market for individual projects.” SWIFT nowoffers a consulting service that helps companies select a servicebureau.

While SWIFT is global, geography still plays a part in someselections. Latin American companies, for example, seem to favorLatin American service bureaus, Dignen notes.

While connectivity is the prime reason for opting to use aservice bureau, the bureaus don't provide a high-tech switchboardthat companies can simply plug into. Treasury staffs may expectthat once they connect to SWIFT, they can move their bankcommunication into that single channel using standardized messagesthat work instantly with all banks, cautions C.J. Wimley, executivevice president for corporate solutions at SunGard AvantGard, butthe fact is that there is great disparity in what banks can do overSWIFT. It takes work, much of it bank by bank, to truly automatethe communication. That's why it's important to pick a servicebureau that can manage the bank interfaces if the company choosesto outsource that task, Wimley says. SunGard owns a certified SWIFTservice bureau.

The focus for most treasury shoppers will be finding a servicebureau that offers the value-added services they want. Expectstandard connectivity from any SWIFT-certified service bureau andshop for value-added services and maybe price, advises J.P.Morgan's Wedge. Value-added services include consulting, formattranslation and some degree of business functionality such asreconcilement, he notes. Service bureaus may also offer translationto get data into and out of XML, he says.

Many service bureaus are independent, but others are adjuncts toa core business like consulting or treasury software. SunGard, forexample, packages its service bureau with its treasuryworkstations. Most of its service bureau clients also use SunGardsoftware, Wimley reports, although SunGard can and does sell theservice to a few companies that use other treasuryworkstations.

For some, being a SWIFT service bureau is their primarybusiness. For others, it's a small piece that complements theirprimary business, Dignen explains. “There are pros and cons foreach.”

Wall Street Systems does not own a service bureau, but thatdoesn't mean that its clients are out of luck. For WallstreetTreasury clients, primarily mainstream treasuries, the companypartners with Fides, a SWIFT service bureau owned by Credit Suisse,which already has a heavy-duty SWIFT infrastructure as a globalbank. The combination of Wallstreet Treasury and Fides is offeredas a software-as-a-service package that most clients that want aSWIFT service bureau take, says Glen Solimine, head of sales forWallstreet Treasury. But companies can buy Wallstreet Treasury anduse a different service bureau, he says.

Clients of Wall Street Systems' high-end Wallstreet Suiteproduct generally prefer direct SWIFT connections to servicebureaus, but that doesn't mean they can't outsource some of theheavy IT lifting. The common perception that joining SWIFT directlyrequires a big investment in building and maintaining communicationinfrastructure is not entirely true, Wall Street Systems' Nelsonpoints out. “Several of our direct clients use us to host the SWIFTgateway and infrastructure,” Nelson explains. “We don't have aservice bureau as a commercial offering. Our direct clients havetheir own SWIFT addresses, but we can still host the hardware andmanage the software for them.” So there is a semi-direct option, amiddle ground between direct and service bureau, at least with WallStreet Systems.

Companies that choose a direct connection today are usuallydriven by senior management that sees counterparty risk in relyingon a service bureau. “Many of the service bureaus are small,” notesElaine Filus, a principal at Treasury Strategies in Chicago, “andsome people just don't want their sensitive data to be touched byany third party.”

While many service bureaus are small and thinly capitalized,they have attracted large clients, which gives comfort to othercompanies that they have staying power. And if a company picks aservice bureau that doesn't deliver as promised or goes out ofbusiness, it's not that hard to change, Solimine says. “It's aplug-and-play application. Changing service bureaus is prettysimple, like changing an address. You just pull the plug and pluginto a new provider.”

SunGard's Wimley disagrees, calling corporate/service bureauarrangements “pretty sticky.

“It's your lifeblood for banking information and paymentsprocessing,” he says. “You use it every day. Once you get itworking, it's not something you want to mess with.”

Some consultancies have opened service bureaus and many servicebureaus employ or contract with consultancies, Nelson notes, astrong indication that SWIFT joiners are shopping for bothinfrastructure and advice. To choose a service bureau, get the listof those certified from SWIFT and then use peer recommendations,consultants or your own staff legwork to investigate the mostpromising candidates, he says.