Finacle scores major win

Finacle, the banking software solutions suite of Infosys Technologies, has scored a major hit internationally by bagging DBS Bank of Singapore as a customer for its core banking solution, according to trade sources. Infosys, which is bound by customer confidentiality, declined comment.

DBS Bank, the largest bank in Singapore and 11th in Asia (by assets), wishes to replace its legacy system which was developed in house.

It has active regional expansion plans and the solution, which will be implemented by Accenture, should enable the bank to upscale without infrastructure bottlenecks. India, with which Singapore has just signed a broad based cooperation agreement, is one of the geographies where the bank seeks to expand.

Both last year and the first quarter of the current financial year have been rather good for Finacle, the sole product business of Infosys which is a predominantly software services company.

In the first quarter of 2005-06, Finacle registered a turnover of Rs 96 crore. This works out to 4.7 per cent of total turnover, up from 3.4 per cent in the sequential previous quarter (ended March) and 2.4 per cent in the corresponding quarter of the previous year (ended June 2004). In 2004-05, the product business of Infosys accounted for 3 per cent of turnover.

It is a long hard slog for emerging players in banking software as banking enterprises do not instal ERP like systems where an overarching solution encompasses a single enterprise.

Banking solutions are acquired in bits and pieces. Plus, clients are paranoid about the possible disruption that a change of vendor can cause as a bank's customers cannot do without its services even for a minute, as opposed to the case of a car or steel maker.

Hence newcomers face a stiff hurdle in entering established markets. Finacle and its main Indian competition Flexcube from i-flex have been winning deals either in emerging markets or the periphery of major markets.

Finacle has set out for itself the goal of getting its banking solutions into as many tier one banks as possible, says Girish Vaidya, business head of Finacle.

The latest score is 27 and includes ABN Amro for its focused markets (India and China), Egypt?s Bank of Alexandria, and Greece?s Aspis Bank, all of which have installed the flagship core banking solution. Japan?s Mizuho Bank has installed the treasury solution.

After making an entry into a bank, the next step for Infosys is consolidation by installing as many modules as possible of the overall suite. Simultaneously, the banking product business is seeking to expand its offering "inorganically", says Vaidya, by acquiring products for modules in which there is a gap, as has been done with the acquisition of the treasury product.

In the banking vertical, Vaidya sees considerable opportunity springing from four fronts: risk management, regulatory compliance, reduction in the cost of ownership and flexibility.

The last is related to the changing face of banking which is increasingly becoming customer focused. Until not so long ago, banks segmented their work in terms of their own work categories rather than focusing on customer segments. Greater flexibility enables refocusing.

The global opportunity over the next five to ten years in transiting from legacy systems to respond to the above imperatives is $ 34 billion, including hardware, networking and services.

Typically, software, which includes licence fee, implementation, maintenance and sale of third party products, accounts for 20-25 per cent the total IT spending.