FIN-SIG Blog

The OAUG Financial Services Industry Special Industry Group ( FIN-SIG) is affiliated to the Oracle Applications Users Group (OAUG) and is not part of Oracle Corporation. The FIN-SIG shall fill a gap for a common forum and support/ resource base for all new and existing Oracle Applications users who operate in the space commonly called Financial Services Industry and also users who have interest in the specific packaged application software provided by Oracle Corporation to meet specific business needs of the Financial Services Industry

Friday, January 20, 2006

Oracle Fusion Architecture - Architectural Roadmap and Enabling Technologies

Monday, January 16, 2006

Oracle's Outsourcing Play in India

At a two-day conference in Bombay on Jan. 10, Oracle announced that it will be hiring an additional 1,400 employees in India -- not only in tech hotbeds like Bangalore, but across nine cities and rural towns throughout the country.

Given recent announcements that Microsoft, Cisco Systems, and Intel would each pump at least $1 billion into the country, Oracle might look like a bandwagon jumper. But make no mistake: It was in India long before that was the cool thing to do.

And executives from Oracle, the world's second-largest software company, will be the first to tell you so. Oracle has been in India for 19 years, and the planned hirings will increase its local staff to 10,000, representing about 20% of its global workforce.

That's considerably more than Microsoft, which now has 3,000 employees in India and plans to add 3,000 more in the next five years. All told, Oracle has invested $2 billion in India in the past half-decade.

Oracle President Charles Phillips underscored the reasons for expansion in a statement: "The fast rate of development, high literacy rates, and availability of I.T. skills in each of these cities represent an untapped reservoir of future economic wealth for India."

Symbiotic Relationship

It's not so bad for Oracle either. Getting bigger in India could boost both top- and bottom-line growth. The company is increasingly dependent on software-maintenance fees from existing customers -- and less so on clients taking out new licenses. That makes it all the more important that Oracle reduce costs to boost profits.

Oracle has been one of the more aggressive U.S. companies in moving jobs offshore, and India is alluring because its labor expenses are lower. Oracle relies on Indian staff not just for fixing software bugs but also for conducting high-level research and development. In fact, Oracle's largest R&D center outside the U.S. is in India.

Working for Oracle in India is a pretty nice gig, too, says AMR Research analyst Bruce Richardson. When he visited Oracle's Indian facilities two years ago, he was struck by amenities that were equal to or better than those offered at the company's Redwood Shores [Calif.] headquarters, be it ping-pong tables for relaxation or fringe benefits like company-sponsored health care for the whole family.

Local Competition

Oracle has added reason to expand its India presence. It's positioning itself to take advantage of a growing business-software market that often excludes outsiders, according to experts. The domestic market for software and services was $22 billion last year, up 32% from 2004, according to Nasscom, an Indian I.T. Chamber of Commerce organization.

Oracle has been doing pretty well in India, with 6,000 database and middleware customers, and about 400 clients using its business applications, which run corporate departments such as human resources and accounting. India has become Oracle's fourth-largest Asian market, up from tenth a few years ago. The bulk of those sales, however, are actually won by local partners and resellers, who better understand the Indian market, according to analysts. Oracle has more than 200 of these reseller relationships, according to its Web site.

As the already high-tech country becomes even more skilled at software development and attracts more of the West's venture-capital dollars, local companies could arise to challenge the likes of Oracle and SAP. "In many ways, the biggest competitors for the Oracles, SAPs, Microsofts, and IBMs in developing nations are the small, local, independent software vendors," says Evan Quinn, an analyst at market research firm IDC. That's especially true with business applications, because local business customs, languages, and laws are crucial to crafting software that employees will find easy to use.

M&A Activity

Oracle clearly understands that it pays to be local: Look no further than its $900 million purchase of a controlling stake in India's i-flex Solutions last year. One of the country's largest and most celebrated software companies, i-flex makes applications for the financial-services industry -- an area of the market that neither Oracle nor SAP dominates. The deal allowed Oracle to obtain a controlling stake and keep i-flex's well-regarded Indian management team, instead of buying the company outright. Among IDC's top software predictions in 2006: more arrangements like that.

With Oracle's penchant for making deals -- and cash of about $5 billion, once the Siebel purchase closes -- it could again become a suitor. Indeed, as Oracle battles SAP for application supremacy and looks to keep its core database market growing, it can't afford to lose out on lucrative emerging markets like India. Judging from this announcement, it doesn't intend to.

http://business.newsfactor.com/story.xhtml?story_id=1000001PZ47S

INTERVIEW - i-flex to grow with outsourcing, bank demand

By Muralikumar Anantharaman

SINGAPORE (Reuters) - Indian banking software maker i-flex solutions ltd. expects growth in the next 5-6 years to be driven by booming offshoring activities and demand from banks for technology to tackle new capital adequacy rules, its chairman and managing director said on Monday.

i-flex, in which Oracle Corp. bought a 43 percent stake last year, said its employee headcount had risen about 13 percent from the end of September to more than 7,000 as it gears up to meet rising demand for offshoring.

The Mumbai-based firm, with a market value of close to $2 billion, was boosted last week when Citigroup, the world's biggest financial services company, chose its Reveleus solution aimed at helping banks meet capital adequacy norms under Basel II requirements.

"We believe that if this catches on and if we are able to deliver well, then Basel II is like a mini Y2K. There are still a large number of banks who have to start thinking about it, so for the next 5-6 years it's a huge growth market," i-flex chief Rajesh Hukku told Reuters in an interview.

Hukku said that besides Basel II, demand will also be spurred by banks adopting more anti-money laundering and compliance norms.

He declined to say how much the Citigroup contract was worth but said it was a "large, multi-million-dollar deal."

He said South Korea's Woori Bank, an arm of Woori Financial Group (053000.KS: Quote), was already a customer for Reveleus and i-flex was in the process of signing with Japanese and Singaporean banks.

i-flex, a trailblazer among Indian software firms with its flagship Flexcube banking product, has in recent years also built its services business of low-cost software development to cater to booming demand, especially from U.S. financial firms.

It hired more than 1,000 staff in the September quarter and Hukku says the group is currently setting up buildings and computers in India for 17,000 people.

The products and services businesses are split roughly equally in the firm's half-year revenue of 6.3 billion rupees ($143 million).

Flexcube, which now accounts for about 45 percent of i-flex revenue and is sold in 100 countries, was also poised to grow as 80 percent of banks worldwide were operating with old software which would need replacing, Hukku said.

It competes in the segment with Swiss Temenos, British Misys and local rival Infosys Technologies Ltd.

Hukku said i-flex had also recently made a "huge sale" in Asia of a variant of Flexcube for the asset management industry.

He also said the association with Oracle was already beginning to pay.

"Clearly the amount of references they are bringing us is far beyond the reach we had. We have already signed one or two deals, where they brought a customer and we convinced the customer and signed the deal," he said.

The i-flex chairman, while declining to comment on earnings for the December quarter, said costs of hedging a volatile rupee would have a minor impact on the bottom line.

"If we had done no hedging then it would have been very nice but because we were hedged there's actually a negative impact. But it's insignificant," he said.

A Reuters poll earlier this month forecast i-flex would double its net profit to 730 million rupees on a 33.4 percent rise in net sales to 4.07 billion for the October-December quarter. The results are due later this month.

i-flex shares closed up 0.6 percent on Monday after earlier hitting their highest level in more than two years. The stock rose 69 percent in 2005.

http://in.today.reuters.com/news/newsArticle.aspx?type=businessNews&storyID=2006-01-16T173251Z_01_NOOTR_RTRJONC_0_India-232179-1.xml

Has Oracle inked the biggest deal in Indian M&A space?

Raj Nambisan/Satish John
Monday, January 16, 2006 22:03 IST

MUMBAI: There’s again a whiff of a mega-deal brewing in the technology space, perhaps one of the biggest deals in the M&A space in India.

Oracle Corporation, the world’s second-largest software company, is said to have put in place a two-billion dollar deal to buyout, lock, stock and barrel an unnamed Indian technology company.

The deal, said to be anchored by Citibank, was signed on Thursday, sources said.

Charles Phillips, president of Oracle, who was in Mumbai last week, said he saw the financial services IT segment to be a bigger bet than even enterprise resource planning.

So who are the domestic financial services players? Patni Computer Systems (where promoters hold 45% stake), Satyam Computer Services, i-flex, Infosys, TCS, Polaris Software and Nucleus Software, among others.

Could the deal be about the rump of shareholding in i-flex solutions held by minority shareholders after Citibank sold its holding for $593 million, and Oracle unsuccessfully made an offer to buy the rest at Rs 882, or another deal as Larry Ellison, the ninth richest man on earth, wriggles into the happening world of Indian technology companies?

Sources said as many as two dozen Citibank officials were holed up in a five-star hotel in Bandra last week, sewing up the deal. Neither Oracle nor Citibank could be contacted for comment.

Who’s selling is the multi-billion dollar question, and it will be clear in the coming days. A lot of names did the rounds initially.

Initial speculation veered around the Sekhsaria and Neotia families selling Gujarat Ambuja Cement stake to Holcim. This was later struck off, as the deal is still a year away from crytallisation, said informed sources — if at all it has to happen.

Oracle’s appetite for Indian technocrats and technologies is well known. In August last year, it struck the biggest deal right under the nose of TCS and Infosys when it made an all-cash deal to buy i-flex Solutions for $593 million (Rs 2,582 crore).

Oracle paid Rs 800 per share to buy Citigroup’s 41% stake in i-flex, an Indian banking software product and services company.

Including the mandatory 20% open offer that Oracle has to make according to Sebi rules, the total size of the deal could go up to about $909 million (Rs 3,958 crore).

The deal heralded the first-ever buyout of an Indian company by a multinational behemoth and is viewed by analysts as a watershed event and the coming to age of India’s software industry.

Addressing an analysts’ conference then, Oracle president Charles Phillips who later took a seat on the board of i-flex, said that from a strategic perspective, the timing of the acquisition was just perfect.

i-flex is still retained as a separate entity by Oracle. According to merchant banking circles the deal could not be for the rump of i-flex shareholding amounting to 57%. This is because i-flex share was trading today at Rs 1142.75, which throws up a value of a little less than Rs 5000 crore for the balance shareholding in i-flex. Again it could also be construed that Oracle is making an offer i-flex shareholders cannot refuse? Or is it something else? Coming days will tell.

http://dnaindia.com/report.asp?NewsID=1007896