In the entire gamut of the Indian software space, there is one company that has brought much-needed recognition to the ‘Made in India’ brand through its world-class product portfolio. The company is i-flex Solutions, which provides comprehensive IT solutions to the Banking, Financial Services and Insurance (BFSI) vertical. It is mainly a products company (61% of revenues in FY04), with services making up the balance.

The company’s flagship product, Flexcube, is an end-to-end product suite for retail, corporate and investment banking and asset management. In 2003, International Banking Systems (IBS) ranked it as the number one selling wholesale as well as retail banking back-office solution in the world for the second year running. In this article, we take a look at the company’s past performance and see where it is headed going forward.

As a matter of fact, the global financial services industry spends more on technology than any other industry worldwide. According to i-flex’s annual report, total IT spending in the global financial services industry is expected to grow from US$ 370 bn in 2002 to US$ 475 bn by 2006. Of this, the target market for i-flex is estimated to grow from US$ 140 bn in 2002 to US$ 186 bn by 2006.

i-flex’s business model…

i-flex has classified its revenues into two major business segments – products (comprising of product licenses and related activities) and services (comprising IT solutions and consulting services). The product portfolio comprises of Flexcube (around 97% of product revenues), Reveleus and Daybreak. This business enjoys higher margins, since it is less people-intensive, requires a high level of expertise to create, and is often used in mission-critical functions of the client, enabling it to cut costs, streamline its systems and processes, reduce its time-to-market, and compete effectively in its industry. Revenues from products flow straight to the bottomline after recovering costs associated with producing them, branding and marketing them.

The services business, on the other hand, is highly people-intensive, and therefore, the salaries component of the costs is high. Apart from this, over 60% of i-flex’s services revenues come from onsite services, where margins are lower. Thus, the end result is that i-flex’s services business margins are lower than those of its peers in the industry. The management has indicated in the past that the services business serves as an ‘incubator’ for the development of new technologies, and helps in cross-selling opportunities to clients.