IT companies make inroads into global financial services sector

IT companies make inroads into global financial services sector
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First Published: Wed, Jun 06 2007. 12 20 AM IST
Updated: Wed, Jun 06 2007. 12 20 AM IST
Indian software product firms I-Flex Solutions Ltd, Nucleus Software Exports Ltd, Infrasoft Technologies Ltd, Polaris Software Labs Ltd, the product arms of top software services houses Infosys Technologies Ltd and Tata Consultancy Services Ltd, and a growing number of small Indian players are beginning to dominate the banking and financial services industry.
The domestic software services industry has carved such a niche in the global corporate world that CEOs of such firms say a large corporation’s business strategy is incomplete without an India dimension to it. But, shift the focus to software products and Indian firms find no mention in a list led by the likes of Microsoft Corp., SAP AG and Oracle Corp.
Kent, UK-based trade journal International Banking Systems (IBS), which tracks deals bagged by leading banking software product vendors, said that India-based firms are increasingly getting chosen in global deals beating peers, such as Temenos, Fidelity, AllShare, Misys and Tietoenator. “As banks seek vendors with adequate skills in system integration and application development expertise”, the services components in such contracts increase, said Martin Whybrow, founder of IBS. “TCS’ recent wins at Bank of China and Bank of Maharashtra reflect the fact that banks are finding it more attractive to go with players with end-to-end expertise.”
Flexcube, the flagship product of I-flex Solutions—an Oracle unit since late 2005—is the largest selling universal banking software product with around 43 of the total 179 deals in 2006. TCS’ Financial Network Services (FNS), a software product that automates retail banking, became the biggest supplier with 12 of the total 64 deals (for retail banking products) announced during the year. In 2005, Infosys’ Finacle was the largest selling retail banking product signing on 13 customers.
In all, Indian vendors such as Infosys, I-Flex, Polaris, Nucleus Software and Infrasoft bagged around 73 deals in 2006, accounting for almost 30% of the market for core banking, retail banking and lending software. Experts predict this share will go up as lenders in the US, Europe and Asia spend around $70 billion (Rs287,000 crore) on software solutions, as they seek to upgrade infrastructure and bring down costs per transaction.
Global banking product veterans Switzerland-based Temenos and London’s Misys Plc., that are yet to establish a significant presence, are finding it tough as Indian vendors bundle competitively-priced services such as maintenance, customization and customer support, all delivered overseas.
I-Flex has been able to leverage a pedigree honed as a former unit of Citigroup Inc., and ‘cross-selling’ benefits of selling to the top banking customers of Oracle, the world’s largest-used software database. Flexcube has been the largest selling banking product for the last four years now, with Temenos displaced to a close second.
In these years, TCS has also emerged as a strong contender in the banking software market after buying Sydney-based banking product company FNS in October 2005 for around $26 million. Today, FNS accounts for nearly 2% of TCS revenues. In 2006, FNS bagged around 12 deals and became the largest selling retail banking software in the world, ahead of traditional rivals such as Fiserv and American vendor Sungard.
Another emerging player is Finacle, a retail-banking product from India’s second ranked software service vendor Infosys. Finacle, which was developed jointly by the company and Bangalore-based Canara Bank in the 1990s, now automates ABN Amro Bank’s branches in China, Taiwan, Hong Kong and Singapore. In 2004, the State Bank of India also awarded the contract to automate its international operations in 20 countries to Finacle. Australia and New Zealand Banking Group Ltd recently selected Finacle as part of a $50 million project.
Finacle revenues have been growing at around 58% every year, said Merwin Fernandes, head of the banking business unit at Infosys. The Bangalore-based firm has been integrating new features from business process management and ‘service-oriented architecture’ (SOA) into Finacle, promising an edge over competition.
SOA allows customers to pick and choose features they need in a software, making it faster and cheaper.
Buoyed by the success of larger peers, smaller banking product firms such as Nucleus Software and Infrasoft Technologies have started becoming aggressive in the global arena. Omni enterprise, a universal banking product from Delhi-based Infrasoft was the third-largest selling software, after Flexcube and Temenos in 2006. The company bagged 12 of the 179 deals that were announced during the year.
The emergence of FinnOne Retail software from Nucleus Software, which bagged around 17 of 53 deals going, and became the largest-selling lending solution of the year, also had the industry sitting up and taking note. Nucleus touts an independent positioning “as it developed the product all by itself, unlike Finacle and Flexcube, which came from co-development with Canara Bank and Citibank, respectively,” according to Vishnu R. Dusad, managing director of the company.
Despite the aggression of Indian banking software product companies and their success in capturing the market for retail and universal banking software, they need to expand into other segments of the banking and financial services space to consolidate their presence, an analyst predicted. “They need to work on several newer areas such as insurance and asset management space,” said Debdas Sen, associate director at research and consulting firm Pricewaterhouse Coopers.
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First Published: Wed, Jun 06 2007. 12 20 AM IST
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