Banking software players run the gamut from those providing core and Net banking to those who offer middleware or work with central banks. Akhtar Pasha and Prashant L Rao find banking software players forming alliances in their pursuit of customers—both at home and abroad

There’s no doubt that it’s big business. A report by the TowerGroup states that banks will allocate over one-fourth of their technology budgets, approximately $37.5 billion on a global basis, on core banking software, hardware and services.

A recent Nasscom-McKinsey study on the global software business revealed that the Banking, Financial Services and Insurance (BFSI) segment would continue to be the largest vertical and drive software revenues. According to this study, the BFSI segment contributed $68.3 billion out of a total market size of $326.8 billion in the year 1997, a 21 percent contribution. By the year 2008, the BFSI segment contribution is expected to grow to $261.7 billion out of a total market size of $1010.4 billion, a 26 percent contribution. These figures highlight the importance of BFSI to the software industry.

A Gartner report says that banking software will grow at a CAGR of 13.5 percent from 2000 to 2005. The total revenue from packaged software was $22 billion in 2002 and is expected to grow at 8 percent to reach $38 billion in 2005.

Industry pundits estimate that Indian banks spend Rs 150 crore and above on software and hardware for core and Internet banking on an average.

The players i-flex
In mid-1995 when i-flex started offering its banking product Flexcube, it was not concentrating much on the domestic market. In 1999-2000 the company started focusing on the Indian market and it has carved a niche for itself selling software solutions to private and public sector banks. Syndicate Bank is i-flex’s largest customer. So far 30 branches of Syndicate Bank have gone live with Flexcube, and the bank plans to ultimately roll out the product to 200 branches. Union Bank is another customer. Deepak Ghaisas, CEO for India operations at i-flex solutions says, “The first part of our strategy is to have a direct presence in important overseas markets like the US, Netherlands and Singapore. We have our own subsidiaries in these countries. We are also planning to have two more subsidiaries in Europe and Asia-Pacific. Our second strategy is to have global alliances with partners like IBM.” i-flex is also optimising Flexcube on the Intel platform. The company also has alliances with Oracle, Microsoft (.NET) and Hewlett-Packard.

The third part of i-flex’s strategy is to form alliances. It has 32 such alliances with country-specific partners for pre-sales and first-level support. i-flex also has 12 support centres across India.

Flexcube supports corporate, retail, investment, Internet and mobile banking as well as brokerage and derivatives. Ghaisas says, “Customers can buy these solutions independently or as a package.”

Internationally, its customers include Citibank, which uses Flexcube in a hundred countries, and the Developmental Bank of Singapore, which uses the software at 13 locations. Its international list of clients includes Rabo (Dutch), Shinsei Bank (Japan) and the State Bank of Mauritius.

Revenue split by geographies: 32 percent US, 21 percent APAC, 21 percent Europe, 25 percent Middle East, Africa and India with the balance from Latin America and Cambodia.

There is a big opportunity in services such as assets liability management and trading risk management, says Girish vaidya

Infosys Banking Business Unit
Senior vice president Girish G Vaidya who heads the Banking Business Unit (BBU) at Infosys Technologies says, “In order to provide an end-to-end solution for banks, banking product vendors should have three products—core banking, vertical-specific CRM and risk management software.” Though banks, telcos, and software houses use traditional CRM products, the basic CRM model has problems like not satisfying the vertical requirement, which comes up in the second phase. The vertical CRM provides a 360-degree view of the customer. The Infosys Finacle CRM product is being used by the National Commercial Bank of Jamaica. The bank is using all of Infy’s products, including the recently introduced CRM product. Infy has been successful in India too, bagging Unit Trust of India (UTI) as its first Indian customer for Finacle CRM.

Infosys is positioning itself as the only vendor that satisfies two of the three requirements of banks, by offering core banking and four specialised products. Infosys recently bought technology from Trivium and created Finacle CRM, a banking-specific CRM product. Vaidya says, “Infy does not have a product for risk management for treasuries but we have alliances to fill up the gap. However, there is a big opportunity in services such as assets liability management and trading risk management.”

Vaidya believes that retail banking is undergoing a major change in core banking areas. Instead of customers going to banks, it is the bank that is coming closer, offering delivery channels such as, tele banking, Internet and phone banking, with a range of products.

Speaking on the company’s business strategy Vaidya says, “Our strategy is two-fold. On the one hand we will offer an end-to-end range of products—core banking, Internet banking and CRM, which will address the need for emerging technologies. Secondly we will form strategic alliances—BBU has alliances with Sun Microsystems, IBM and HP.

For the overseas market, Vaidya says, “We work with business alliance partners. Currently we have business alliance partners in 18 countries.” For the Indian market Infy has a direct sales model. In recent months, Infy has bagged projects from Punjab National Bank and UBI. Its clients in the banking space include ICICI Bank, Global Trust Bank, UTI, and ABN Amro—these banks are using at least three of BBU’s products in India. The division has 66 customers in 19 countries. National Commercial Bank of Jamaica and First Bank of Nigeria are its overseas customers. 54 percent of revenues come from India.

Infy offers Finacle—a core-banking product, CRM, Treasury for foreign exchange and money market. Finacle eChannels is the Internet banking solution for retail customers while Finacle eCorporate is the Internet banking solution for corporate customers.

Infy has a global alliance with Sun Microsystems to jointly market a technology platform that aims to address enterprise banking and transaction-intensive network computing requirements. Vaidya says, “About 60 to 70 percent of our banking customers are using Sun hardware.”

Sun’s platforms and technologies will power the Finacle suite of banking products. ICICI Bank has been using Infosys’s banking solutions on Sun for a long time now. Vaidya adds, “We provide solutions both on .NET and J2EE. We also have alliances with other hardware vendors—IBM and Hewlett-Packard (originally Digital). These alliances help us to increase our market reach and opportunity. Sharing technology know-how with the rest of Infosys helps enhance product efficiency so that it works better on diverse hardware platforms.”

Sanchez Capital Services
The customer list of Sanchez Capital Services includes Vysya Bank, which has implemented Sanchez Profile, a core banking application, in 150 branches. Karungthai in Thailand is using Sanchez’s core banking software at 600 branches. Other customers using the company’s banking products are MetLife and Bank of Nova Scotia.

Jerxis Vandervala, senior vice president at Sanchez Capital Services, says, “Our parent company, Sanchez Data Systems, that has operations in the US and India, is planning to offer banking solutions based on an ASP model for smaller banks such as co-operative banks. Currently there are 200 banks in the US using our ASP-based solution. We are planning to launch these services in India soon. Prices are still being worked upon. Smaller banks will be in a position to save on capital investments by availing of this offering.”

Sanchez’s strategy for India is that it works with system integrators such as Tata Infotech and IBM. Overseas, Sanchez works with PwC, IBM, Compaq, Datawell, Oracle and Sun.

Sanchez Express provides CRM and Business Intelligence functions. For Internet banking Sanchez has an alliance with ING Worldwide. Sanchez CRM is a real-time Java-based CRM. Its product line includes Wealth Management, Ledger, Sanchez FMS and Web CSR (Customer Service Application) for call centres and back offices.

Zenith Infotech
Zenith Infotech is a banking product solution provider catering to nationalised and co-operative banks. Project value is lower in this sector, but Zenith Infotech is eyeing the huge number of potential customers—there are thousands of co-operative banks in India.

Zenith Infotech’s CEO Akash Saraf says, “The needs of nationalised and co-operative banks are different from that of private banks. However, they need the same level of customer service as private banks, though their budgets are limited in comparison. Our strategy is to offer an equivalent solution at a lower price with faster implementation.” Typically, private banks such as ICICI spend Rs 25 to 40 lakh per branch for computerisation. In comparison, smaller banks can offer the same level of customer service for an IT spend of Rs 4-6 lakh per branch. “Our flagship product, Banc724, can be easily implemented within 2-3 months while other banking solutions can take 6-12 months for a roll out. Typically, smaller banks will see a return on investment (RoI) in just 8-9 months,” adds Saraf.

There are several sub-brands under the Banc724 umbrella—core, retail, Internet and mobile banking and a Point of Sale (debit and credit) solution. Zenith Infotech’s clients include Central Bank of India, Allahabad Bank, Oriental Bank of Commerce and UCO Bank. Abroad it has customers in Bangladesh and Sri Lanka. The company offers banking services to Citigroup, ABN Amro and Developmental Bank of Singapore.

Louwke van der Steen believes that India needs to adopt technology more rapidly, especially on the mobile front

Polaris
For more than a decade, Polaris has been providing software services in the banking, financial services and insurance segment. The company provides customised solutions to leading banks and financial services institutions—Citigroup and American Insurance Group from the US; Commerzbank and UBS Warburg in Europe; and NEC, Hitachi and Shinsei in Japan. On the domestic front, Polaris has designed several applications for Citibank and it has implemented a product framework for Himachal Pradesh Co-operative Bank.

Recently, Polaris merged with OrbiTech Solutions, a technology subsidiary of Citigroup, and has further strengthened its position in the global BFSI solutions space. “The ‘know-how’ of Polaris’ banking solutions delivery combined with the ‘know-why’ of OrbiTech will provide the new merged entity a superior delivery platform for future customer acquisitions,” says Govind Singhal, executive director of Polaris Software Lab.

“The OrbiPack framework is capable of processing over 10-million customer transactions, giving us the space to leverage the large relationship mining expertise of Polaris. US / North America, Europe, south-east Asia and India are the major markets we work in,” adds Singhal.

Polaris now plans to accelerate its growth and capitalise on new opportunities by acquiring new customers and enhancing existing relationships. OrbiTech has products in the trade/cash management, treasury, cards, private banking, and corporate banking segments.

Post merger with OrbiTech Solutions, Polaris has acquired 57 product/solution Intellectual Property Rights (IPR) and a package of 17 products within the OrbiPack suite of products developed and used within Citigroup during the last 10 years.

Logica
The company has operations across the world. In India & SAARC its clients include both local and international banks. Logica plays at the very high end of the banking software space. The company is implementing a RTGS (real-time gross settlement) solution for the Reserve Bank of India and for Sri Lanka. The Indian implementation started last year and is expected to be completed by the end of 2003 or in early 2004. Sri Lanka just kicked off last month. The company is working with SI partners, particularly for mainframe work. Over 40 people at Logica India are working on the RBI RTGS project.

“We have global partnerships,” says Louwke van der Steen, country manager at Logica for India and SAARC. “However, we can deviate from that when it is required to do so in the local market.”

While Logica’s core competency lies in providing software and services to central banks, it has other offerings. “We use our work with central banks as a jumping board to offer a portfolio of offerings by following up on project implementations with participating banks,” adds van der Steen.

Logica has done ATM switching work for Centurion Bank and Indus Ind Bank in the country. It has a branch banking product—Questor. Van der Steen believes that India needs to adopt technology more rapidly, especially on the mobile front. Customer education is required to create this market but he believes firmly that “it will pick up.”

HMA STARware
HMA STARware’s chairman Harish K Murthi says, “In the last five years banks were bogged down with union issues. Today they are looking at technology as a way to be competitive.” Murthi cites the figure of ATMs in India that is expected to explode from the present 7,000 to 37,000 in the next five years. Another market expected to set a scorching pace is the POS (Point of Sale terminal) market. Murthi compares Korea to India—Korea has over 2,00,000 POS terminals versus a mere 50,000 in our country. “In technology, we have a lot of catching up to do,” adds Murthi. HMA was the first company in India to sell ATMs, especially to public sector banks. That, incidentally, is HMAS’s first line of business.

HMAS is the distributor and implementation partner for Oasis products, from OTG Canada, in the SAARC region. The IST switch from Oasis has been well received in India with over 33 percent of the market (amongst all live switches in India) in a short span of 18 months.

Then there’s middleware. HMAS has been selling banking middleware not only in India but also in Cambodia and Maldives.

A recent development has been the growing interest in using Triple DES encryption and HMAS expects many banks to adopt this standard. HMAS has just started putting payment gateways in place. “Banks are talking to us for payment gateways and implementations are in progress.” A payment gateway could cost anything between Rs 20-30 lakh to Rs 3-4 crore depending upon the features, throughput required in terms of number of transactions, etc.

HMA STARware’s customers include Vysya Bank and Syndicate Bank. HMAS has sold its card management system (ATM cards) to 51 Indian banks. This system was created in-house and it runs on Windows NT. 60 developers work on this solution.

The company works with Infy and i-flex. It recently tied-up with Thales e Transactions, the French card payment systems and POS terminal company. Murthi would like to have a 50:50 revenue split between products and implementation, but the mix varies from year to year.

Nucleus Software
Nucleus Software focuses on BFSI and it has a strong presence in south-east Asia with offices in Tokyo, Hong Kong and Singapore. It also has offices in London, Australia and the US. A sales office in Dubai caters to Middle East markets. Recently the company bagged an order that is expected to be in excess of half a million dollars from the Arab National Bank in Saudi Arabia. In the coming year, Nucleus plans to focus on emerging markets in the Middle East, Japan, Singapore and Australia.

65 percent of Nucleus Software’s revenues derive from overseas markets, mainly from Japan (staff strength: 130 people) and Singapore (80 people), 5 percent from the US, 1.5 percent from the rest of the world and 20 percent from India.

Nucleus works with channel partners where it doesn’t have a direct presence. “We have about ten channel partners in Italy, Mauritius, Malawi, Philippines, Korea, Thailand, Oman and Emirates. Our customers include ICICI, IDBI, HDFC, PNB Paribas, Scotia Bank, GE Capital, GE Countrywide, Orix, American Express, Bank of America and CitiFinancial,” says Niraj Vedwa, Nucleus Software’s vice president of sales & marketing.

Nucleus would like to focus on nationalised banks in India as this segment is expected to grow rapidly, says Niraj vedwa

Strategically, Nucleus had been focusing on foreign and Indian private banks. Vedwa says, “In the current fiscal we would like to focus on nationalised banks in India as this segment is expected to grow rapidly. Recently, we bagged a project for Bank of India. We are talking with other nationalised banks and made presentations and have bid for tenders.”

Nucleus has more than 20 products offering banking and financial products for core banking—retail and wholesale banking (corporate banking). Its core banking solution FINNONE caters to retail and corporate banking. Its product portfolio includes CASA (current account and savings account), Web-based collections solutions and loan origination systems, a core lending solution, Liquideposits and general ledger and financial accounting. Bank@Will is Nucleus’s Internet banking product.

Currently, the core banking products work with Oracle 9i but Nucleus also plans to port its collections and cash management solution to an IBM platform. The product is due in mid-2003. “We are also formulating a strategy to use HP’s platform, which is expected by December this year. Recently, we tied-up with Fujitsu-Siemens to use their hardware for our banking solution. This alliance will help us strengthen our position in Europe and Japan,” adds Vedwa.

Nucleus Software’s revenues grew from Rs 16 crore in 2000 to Rs 35.5 crore in 2001. In March 2002, the company posted Rs 62 in crore revenues and in H1 2002, Rs 42.5 crore.