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Infosys: Acquires, finally! - Views on News from Equitymaster
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  • Jun 20, 2002

    Infosys: Acquires, finally!

    Infosys that has been suffering from the problem of plenty has decided to finally do something about it. The company has acquired Trade IQ, product division of IQ Financial Systems Inc that is based in the US. The acquisition has been made to strengthen the company’s core banking product Finacle.

    For a quick recap, the company’s product sales that mainly consist of banking related products have shown a significant growth of 119% during FY02. However, the contribution to sales is small at 4% to sales. Increased contribution of product sales to revenues would mean higher operating margins for the company. Finacle has a 60% market share among the Indian banks. According to the company’s annual report, Finacle now powers four out of six old generation private sector banks, five out of eight new generation private sector banks and one out of two public sector banks in India.

    Coming back to the acquisition, Infosys has acquired the product, all assets and employees of Trade IQ. Acquisition has been made to strength the company’s banking group and the group will now be able offer a product for the wholesale and investment banking segment. The treasury systems of the existing product will also be enhanced. Finacle traditionally has had a focus on the retail-banking segment.

    The other benefits are that the banking group will acquire new clients and increase its reach. According to Infosys, existing Trade IQ clients include some of the top tier and largest commercial and investment Banks of Europe, Japan and US with installations in Switzerland, UK, US and Japan. The client list on IQ Financial’s website has names like Commerzbank AG, Deutsche Bank, JP Morgan Chase Bank, Lehman Brothers, Merrill Lynch and Morgan Stanley Dean Witter. Also, the banking group will now have ready-to-operate offices with employees in London and Tokyo. The size of the acquisition has been mentioned to be US$ 3.9 m (Rs 191 m) by almost all leading financial newspapers. According to the business dailes the buyout was through a all cash deal.

    The suite of products acquired include, Trade IQT - an Integrated Treasury System, Limits IQT - Limits Management System and Desktop Risk IQT. These products will be marketed and sold as modules or in a consolidated manner under the brand name, Finacle-Treasury. This is the second acquisition for the banking group in the recent times. Infosys in 4QFY02 acquired a product called SimpleRM to add CRM (customer relationship management) capabilities to Finacle. It has already launched a new product called Finacle CRM.

    Finacle is a glaring example of the company moving up the software value chain by successfully creating a mature product. While a wide acceptance of the product is a pointer to its success, another evidence of Infosys success is the fact that the company has outsourced implementation of the product. Infosys has appointed two companies, Telesis Technologies and Software Technology Group (STG) International, as service partners for Finacle. These companies will deliver training and implementation services to Infosys' customers for the product Finacle. Companies in general can hope to achieve this feat after a considerable amount of stability comes into their products. There is hardly any software company in India that has comprehensive products, which can be independently implemented. Till date, large companies like SAP, Ariba, Siebel had products which Indian companies (including Infosys) used to implement.

    In FY02, the company’s banking business unit acquired 11 new clients of which four were in India and 7 overseas. Infosys has been putting a lot of effort to develop a world class banking software. Acquisition of Trade IQ is another step towards that goal.



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