ON INTUIT ABANDONING ITS BACK-END : : ZD Internet Magazine: Why did you decide to sell your electronic transaction processing subsidiary to CheckFree? Is it because it's a slow-growing market and perhaps it would soon be taken over by the Internet?
Cook: Slow-growing wasn't part of anything. It's clear that the Internet has changed the world and we need to focus squarely on the Internet, not on back-end processing. The back-end billing processing is the business that we sold. We also had a private network that we used to connect Quicken to banks. We're saying that our focus from here on out is on the Internet, not on private networks. So the people at CheckFree are great at processing and we're great at consumer, small-business software apps.

ON ELECTRONIC COMMERCE: A BANKING OR SOFTWARE DILEMNA? : : ZDIM: Could you give us a run-down of your vision on electronic commerce? Are you well-positioned to exploit this or are the banks or Microsoft better equipped to do that?
Cook: I don't know what Microsoft is up to these days. Bill (Gates) and I don't talk the way we used to. We're focusing on one area, which is electronic delivery of financial services. We're not going to provide those financial services. We're not a bank, or an insurance company, or a mutual fund, or a brokerage. Instead we work with banks, brokers, mutual funds and insurance companies to do that. They're great at providing those services, but what they're not good at doing are software and small-business systems; software that customers need. So we build the software applications and systems that make the delivery of financial services real.

ZDIM: But many banks are doing that by either striking alliances with Visa or building their own Java applets. Where do you add your value?
Cook: Folks are trying to build software in-house. It will be increasingly difficult to build world-class stuff in-house for a financial institution. It is simple software economics. How many companies build their own word-processing software in-house, or their own spreadsheet in-house? There's reason for that. When we build something, a product like Quicken which does portfolio and checkbook management, we can spend $50 million on R&D and spread the huge amount of money over millions of users.
If one bank or brokerage firm builds that software in-house, they could only spread their cost over their customer base. So they can't spend as much as we're spending. We can spread the cost over many more customers. That's the same reason that people don't build their own word-processors.
A lot of people are trying to build Java applets in-house. If it's something unique to them, it makes sense. But if they're going to build software that manages a portfolio, it's not unique to any institution. Fundamental economics favors this be done by someone that can spread the cost of over a number of institutions. We're fine on what people try to do themselves. The financial institutions will find that it's not economically viable.

ZDIM: Are there areas that you believe Intuit won't get into? What are your core competencies?
Cook: We don't provide the actual financial products. Another area is we're not providing back-end processing of routine transactions. Another area is the private network. We use the Internet as our prime network now. Another area we're not into is payment systems.

ZDIM: So you're not involved in any smart-card technologies?
Cook: Smart-card technologies are different than the payment system. One of the uses of the smart card can be a stored value payment system. But smart cards have a lot of other uses. We're explicitly not doing payment systems. We think banks are pretty good at doing payment systems. So we're not trying to put together a new kind of money, or new ways of implementing payment systems.

ON THE JAVA WRENCH : : ZDIM: What's your position on Java?
Cook: It's funny. Do people ask us if we're fully committed to C? Java is a tool. You've got to use the right tool for the job, like C or C++. We do a lot of work on Java, but I don't think it's a religious issue.

ZDIM: So you don't think this is going to reshape the way applications will be built in the future?
Cook: It's a very useful tool. It will absolutely change the way applications are being built. But it's a tool. It's a great tool. How many consumers have run up to us or any banks and said I really want you to be using Java? People don't care. They want you to get the job done. The reason we've done well is that historically is we focus on understanding the customers cold. Technology-driven companies of course have technologies, but that's only half of the puzzle.

ON A SECURABLE QUICKEN ONLINE : : ZDIM: Are you concerned about securing the base of your Quicken customers?
Cook: We are. We've got neat stuff coming out. The next version of Quicken will help us grow our base of users. This is not for Web power users. The majority of people, we find, are frustrated with the Web. You go in and use a search engine and you get so many bad hits. There's so much sorting through for quality stuff. What's missing is the editorial function that a great publication provides. The Web doesn't have that editorial function.
For my own use, I find myself wading through stuff and would never find anything that's good. I was looking at stamp collecting because my son got interested in that. So I went to the Web and I thought this would be great - information at your fingertips. I never found anything useful, site after site. Nothing. So I went to a coin shop and bought a book. It was wonderful and useful. So what's frustrating people is to go out and fend for themselves. What they want is for the Web to be brought to them with editorial functions. There's a crying need for that. It's still unmet.

ZDIM: So we can expect to see an expanded Intuit network as a content provider?
Cook: For so many people Quicken is their financial dashboard, for all kinds of financial stuff - their checking account, credit card, portfolio. Another area is to bring together the information tools for customers to simply make smart financial decisions. For example, there are hundreds and hundreds of mutual funds. How do you decide which one is right for you? How do you find information that's unbiased?
We pour everything into a Website called Networth. It's by far the leading mutual fund Website. It allows you to get current asset value, see stock prices and it's all free. It has information on 72 mutual fund companies. That's a neat set of capabilities.
Morningstar will continue to be the content provider. We are not exactly that. Our goal is to make us the place on the Web which is the best place to go to make financial decisions. In insurance, we just started with Insuredmarket.com. We will have many more capabilities in October. The goal is also to make it the best place to go for information about life insurance, then auto and home insurance.

ON NET SECURITY PANIC & 'SET' OVERKILL : : ZDIM: Is security still the stumbling block for any company trying to exploit electronic commerce?
Cook: There's a perception that (people) are not familiar with the Internet and they never use it for financial use. I use my credit card to buy stuff on the Net all the time. It's great. You will see these security concerns going away slowly and many people are going to use it.

ZDIM: What's your position on Secured Electronic Transactions (SET)?
Cook: We don't really do purchases. You don't use Quicken to make purchases. You use a credit card. But I think SET is an overkill. It's good to have SET there. But whether you actually need it, I'm not sure. You just use your credit card without SET, over the Net using SSL (Secured Socket Layer). And it's more secured than a phone line. I think credit usage may work just fine the way it is today. On the other hand, if there's a problem, I'm glad that there's SET and the world will switch to SET. But it could well be that you don't need SET and the existing SSL is enough. So that's why I said security is not a big issue. It will be solved.

ZDIM: Does the existing encryption technology address your needs?
Cook: Encryption is tremendous in the United States. We use that for Quicken. When Quicken is connected to a financial institution, it's in full 24-bit RSA. Not even the NSA can break that. The security we use in electronic banking is really bullet-proof. It's as good as anything on the planet.

ON ACCELERATING THE SMALL-BUSINESS MARKET : : ZDIM: What are your plans in penetrating the small-business market?
Cook: We are far and away the leader in the small-business market. We have over three million small-business customers. We have the No. 1 and No. 2 best-selling business bookkeeping software products. Electronic banking uses will be in the next version of QuickBooks. I think you will see an accelerated use of the Internet among business customers. They are going to do more financial work (electronically). So they want to use the Internet and specifications like Open Exchange to automate and to remove the burden and hassle of so much clerical work businesses have to do. It's an avalanche.

ZDIM: Who else is going to support Open Exchange?
Cook: A bunch of banks, brokerage companies, financial institutions. Open Exchange is a language for our applications to speak with financial institutions. Those are the key people that we want to support Open Exchange. Also, we will be publishing it, licensing it freely to anyone who wants to use it.

ON SOUL-SEARCHING THE INTERNET MARKETPLACE : : ZDIM: Did you have to do some soul-searching when deciding what to do with the Internet marketplace?
Cook: We had realized the potential of the Internet all along. A year ago we were the first company to offer a Web browser in one of our major software products. We gave away free Internet access. Free, meaning that you don't even need an ISP. We now have three Internet Websites. The soul-searching wasn't around the Internet. It was clear. The Net is the future. The soul-searching was on do we want to be in the back-end, bill-payment process business. We decided no. That's the business not essential for our future on the Internet.

ZDIM: Where will most of your revenues be coming from 12 to 18 months from now?
Cook: Just like now. Software. Electronic financial services accounted for 4 percent of our business. That's clearly a rapidly growing part of our business. Our software business is growing too. We have well over 12 million customers. That's an engine for our growth in the electronic financial services.