Chennai: It is payback time for Arun Jain. The Polaris Software Labs Ltd chairman and his company have been berated for three years for not having a focused strategy and mixing up services with products as offerings in a software company. But, when Polaris reported its 2006-07 results, Intellect, the software product it developed for banking and financial services customers, accounted for 18% of the company’s Rs1,032 crore revenues, helping boost annual sales by a fourth. Intellect is now seen as increasingly vying for mindshare among information managers at the world’s leading banks, going up against the likes of I-Flex Solutions Ltd’s ‘Flexcube’ and ‘Finacle’ of Infosys Technologies Ltd, both among the most successful software developed by Indian firms.
Polaris shares closed Friday at Rs174.30 on the Bombay Stock Exchange. While some ways off their 52-week highs of Rs237.45, they are sharply above their lows of Rs51.80. Mint talked with Jain on the rollercoaster ride in recent years. Edited excerpts:
Is your investment in intellectual property finally bearing fruit?
During the last three years, Polaris has faced a lot of flak. Unless you’re giving quarter-on-quarter growth, people say the business is failing, the business is dead.
This is one disadvantage of being a listed company: it prevents innovation and strategic thinking.
Three years ago, I could have kept the company’s cash reserves in the bank, or I could have invested in physical assets, but I chose to invest in intellectual assets. If you want the business to sustain for a long time, you need to build up intellectual property. Today, Polaris is experiencing 5-7% sequential growth, and as you say, IP-led services is a key driver, but I would rather track on an annual basis because there can be fluctuations from quarter to quarter.
The company has signed up 11 of the top 25 global banks…
Yes, and in addition to that, 22 out of the 25 are listening to our story. Each of these banks has more than $1 billion (Rs4,100 crore) information technology budget each, so the market size is $40 billion to $50 billion (including smaller banks). It is now a question of mining them.
Will Polaris continue to invest in Intellect?
The main investment is over. We had 700 people working in developing the Intellect suite of products over the last three years, and it is one of the largest products a company our size has. What I mean by largest is that the suite covers all the seven main platforms in banking: credit card platform, retail banking, consumer lending and finance, wealth management, risk and treasury management, cash flow management, and corporate banking and trading.
The ‘service-oriented architecture’ of the platform allows me to insert a floor in a 100-storeyed building without disturbing the foundation. It also allows for ‘legacy modernization’ (a process through which new software replaces the old part by part), by which we would modernize 20 floors on the 100-storeyed building instead of demolishing them and starting new.
Are you concerned that Citibank still accounts for a sizeable chunk of your sales (about 44%)?
Well, two years ago, it was 60%, that was a concern. Last year, there was a 70% growth in our non-Citibank revenues, which is a phenomenal success, while Citibank was flat. We expect this to grow even further.