• by Joe Mandese  @mp_joemandese, October 29, 2010

In a move that dramatically alters the playing field for Madison Avenue's so-called "back office" systems - the technology and data processing systems agencies use to plan, buy, process and post their media buys, as well as pay suppliers and even employees - Interpublic is dumping industry giant Donovan Data Systems and moving to VC-backed MediaBank. The move is an important vote of confidence for MediaBank, which to date has snared only one of the major agency holding company units, Publicis' Starcom MediaVest Group, but which has plans to revolutionize the way agencies process media transactions.

The deal, which consolidates Interpublic's media buying technology at MediaBank, covers all of Interpublic's Mediabrands agencies, including Initiative, Universal McCann, Geomentum, etc., and extends agreements MediaBank already had in place to service full-service Interpublic units including Daily, Draftfcb, ID Media, Hill Holliday, McCann Erickson, and Orion Trading.

The deal comes a little more than a year after Interpublic got close to consolidating its media systems account with MediaBank, following an extensive review, but at which time it opted to say with Donovan as its status quo provider because it then felt the technological innovation promised by MediaBank wasn't sufficient relative to the disruption that might be involved by switching providers.

That disruptiveness has been a major asset in Donovan's ability to retain many of the major agency holding companies business, because even though many have complained that Donovan's legacy systems have been slow to evolve and adapt to a rapidly changing digital media marketplace, the dislocation involved in transitioning to a new provider might cause too much fallout.

In fact, Publicis' SMG unit is known to have suffered through a tremendous amount of disruption during the first few years of its initial service agreement with MediaBank, but is believed to have resolved many of those issues and insiders feel it has generally improved their ability to service their media accounts and actually puts them in a better position for dealing with digital media. Publicis does not comment publicly on that experience, because of a gag order stemming from a legal arbitration agreement with Donovan, but it is known to have renewed an agreement with MediaBank following the expiration of its initial three-year contract, and has actually expanded it to include other units whose contracts with Donovan have since expired.

MediaBank, meanwhile, has been undergoing continuous transformation as it pushes to develop and adopt more state-of-the-art systems and methods for handling media transactions in the digital age. While much of MediaBank's core processing systems have been bolted onto so-called legacy systems that it acquired in order to service current agency needs, it has accelerated the development of systems that are more capable of processing digital media buys, a move that has forced Donovan to accelerate its own digital media processing improvements in order to keep up.

More recently, MediaBank recruited digital media native, former Right Media and Yahoo technology star Bill Wise, as CEO in May, and Wise has made noise about pushing MediaBank's systems even more dramatically in the direction of the online media industry's open exchange models.

MediaBank is backed by successful venture capitalist group InnerWorkings, which has had a number of high profile success stories, most recently including GroupOn.

The moves come as other smaller, but spunky players also are pushing hard to innovate media buying processing, including Comcast-owned Strata, and Harris.

A spokesman for Donovan said the company had no comment, but in an internal memo circulated to its employees on Thursday, Donovan said, "As many of you know, we have been working on a new agreement with Mediabrands. We have learned today that we will be parting ways at the end of 2011.

"In March of this year, Mediabrands told us that they were pleased with our collaboration over the past few years, and offered us a long term renewal in three countries for traditional media and digital, with no review. However, we were not willing to agree to the rates proposed by Mediabrands as they were significantly below what is required to develop and support world class applications."

The memo noted that Donovan is upbeat about the global rollout of iDesk, its state-of-the-art digital media processing system.