Monday, August 20, 2012

FINACLE: INFOSYS’ BEST FOOT FORWARD?

Quite a few global IT giants have proved that it takes just one big killer product or application to enter the Fortune 500 league. Finacle was supposed to be that for Infosys! Today, it contributes just about 4% to Infosys’ revenues. What went wrong? by Virat Bahri

Apparently, one of the major reasons why Finacle has not been into the big bucks has been the fact that the US market, which is otherwise the highest contributor to Infosys’ revenues, has actually been very inimical for core banking solutions; as banks sitting on legacy systems for 2-3 decades were unwilling to change. As late as 2006, a report by Aite group revealed that around 12% of US banks and top 500 credit unions had reached a critical point for core system replacement, but only 4% were actually expected to do so. And the major culprits of complacency were the large banks, as the mid-sized banks have been more proactive. In 2008, an Oracle report reiterated, “Despite the costs and challenges associated with running antiquated solutions, most US financial institutions continue to proceed with caution and postpone their inevitable replacement of these crucial systems.”

The financial downturn seems to have ruffled feathers quite a bit, and underscored the need to get rid of legacy systems, which presents a great opportunity for core banking solution providers like Finacle. A global survey of 1500 banks by Accenture and SAP done recently reveals that around 20% of North American banks are planning core banking replacements within the next five years; compared to 30% for Europe and over 35% for Asia Pacific. Over 70% said the main problem they faced was flexibility. David Cartwright, ANZ Group MD, Operations, Technology and Shared Services (where Finacle was deployd recently), said: “Technology is key to ANZ’s aspiration to become a super regional bank. Implementation of a new core banking platform is crucial to our plans to grow our business and provide leading products and services to our customers in Asia.”

Infosys also did a study last year with BAI of 116 banking executives from 100 banks in the US. Around 88% admitted that innovation was the ticket to driving future efficiencies. Around 59% said IT was among the top two drivers to innovation in customer service and around 50% rated it as among the top two drivers to enable innovation in products and delivery. It is a time when the mid-sized banks are looking to gain customers of larger banks and the larger banks are, in turn, looking to defend their customer base and also develop a new platform to ensure faster future growth and market expansion. Consulting firm Celent has predicted that IT spending by US and Canadian banks will reach around $50.9 billion by 2010, driven largely by rehiring, post-merger integrations and new investments in wholesale banking “In 2010, bankers need to take a hard look at their business model and find new ways to generate revenues,” says Gwenn Bézard, Research Director, Aite Group.

Ostensibly helped in part by these changing paradigms, Finacle was able to take 31 projects live last year. Their customer spread shows that their presence in North America is still very low and is largely spread into Europe, Middle East, Africa and Asia Pacific. The company also launched Finacle 10 in 2008 to enable banks to be able to manage multinational operations on a standard platform. The software now has a set of over 5000 parameters and an enhanced scripting studio and also caters to Islamic banking, wealth management and mobile banking.


Posted by at
Labels: , , , , , , , , , , , , , ,