Oracle added masala to its buffet - it announced today it was acquiring Citigroup's 41% stake in i-Flex for $ 593m, and it will also purchase another 20% on the open market. i-Flex, an Indian software company offers core banking software, and it also provides custom and package implementation services aimed at banks and insurance companies.
i-flex is somewhat different from other Indian firms like TCS or Wipro in that a significant portion of its revenues comes from packaged software. It also has done very well in Asia and Africa, whereas most of the other Indian firms have traditionally done well only in English speaking markets. i-Flex software has done well in smaller banks and subsidiaries of larger ones.
Oracle is acquiring at 6X revenues of apprx $ 250 m for the year ended March 31. This is a lot more than what Larry likes to pay (almost twice revenue multiples what it paid for PeopleSoft and Retek), but clearly banking is a significant market where Oracle can today only offer financial and HR software. (Also, the better run Indian services firms, Wipros and Infosyses are valued even higher at over 10X). The new software, and the domain knowledge of the consulting side should allow it more penetration in the operational areas.
Oracle Consulting will have to learn how to run i-Flex's GDM effectively if the high price tag is to pay off. In doing so, it will also start to compete more with offshore firms like Cognizant and TCS and US firms like Accenture and IBM for whom banking is a sizable vertical focus. More convergence of software and services.