The software behemoth’s purchase of core banking systems provider i-flex is a vote of confidence in a fast-growing sector.
The core banking marketplace has been ignited with the news that software giant Oracle is to purchase a controlling stake of systems provider i-flex from Citigroup, ending a 20-year relationship between the bank and the vendor.
The deal, worth up to $316m, nails Oracle’s colours to the i-flex mast in a hotly contested market.
Oracle’s major competitor in the enterprise application space, SAP, has been active in the core banking area for more than eight years and offers its own solution (see the ‘Core Banking’ supplement in this issue) and Oracle’s challenge will surely spark concern.
i-flex had the largest number of new system sales (36) in 2004, according to the International Banking Systems sales league, outstripping its closest rival Temenos, which achieved 28 new sales of its Globus/T24 solutions.
The systems sector has experienced significant growth in the past few years, with the majority of core systems being sold to the international business divisions of large retail banks.
Possible tie-up?
Temenos announced last month that it had been selected by HSBC to build its international core banking software. There has been speculation that Temenos would itself be purchased this year, something the CEO Andreas Andreades has neither confirmed nor denied. With the new challenge to SAP, could there be a SAP tie-up with either Temenos or Misys?
Place on board
The Oracle/i-flex deal involves a purchase of the 41% share owned by Citigroup with a further 20% of shares being bid for, as mandated under Indian law for any share purchase of more than 15% of a company. The companies will gain a place on each other’s boards.
Whether the purchase will affect Oracle’s relationship with the other core system vendors that it supports remains to be seen.
