Indian information technology (IT) services companies such as Tata Consultancy Services (TCS), Infosys, Polaris Financial Technologies and Infrasoft Technologies are giving a tough fight to global peers in the financial products segment.
Among the top five vendors of the Celent Big League Table 2012, while US-based FIS was ranked first, Infosys and TCS were ranked second and third, respectively, followed by Sopra Banking Software and Temenos. The rankings are based on the net score of deals during the year. Celent is a research and advisory agency in financial services. Celent's Big League Table tracked core banking deals across markets, measuring the number of new banking deals that vendors win for the 12 months starting from July 1, 2011 to June 30, 2012. Finacle is the banking product from Infosys and TCS' banking offering comes under the brand name of Bancs.
The 2012 report attributed FIS' number one ranking to the wins it had in China. Infosys came second on the traction it witnessed in Eastern Europe, Middle East, and Africa. TCS led the metric on the back of its wins in the Asia-Pacific, mostly in India, attributable to its data centres. Indian IT companies also led because a majority of core banking solutions' growth came from Asia-Pacific markets, with the mature markets of the US and some parts of Europe being slow on implementation.
TCS signed 155 deals for the year. About 130 came from India, making it the leader by total deals. Outside of India, TCS scored deals with six small banks in Singapore, a large bank in China and a midsize bank in Malaysia. Another notable win was the Indian operations of a large multinational financial services company with a little over $500 billion in assets globally.
"TCS had the highest overall deal score for the second straight year, leading for 2010-2012. In 2010-11, TCS had a mega-deal with Deutsche Bank which propelled them to the top. This year, TCS signed an abundance of small community banks in India to their hosted services, far overshadowing the other vendors for total deals. TCS also won a number of other significant high value deals. Some of their top wins were four global locations for TC Ziraat Bankasi, a $92-bn asset bank from Turkey, and AmBank Berhad, a $38-bn asset bank in Malaysia," said the report.
Infosys' Finacle, which propelled the company's third quarter numbers, is also gaining market share. For the mentioned period, Infosys also saw growth in the APAC and EEMEA regions. The largest win was India Post, for installing the Finacle core banking software in 150,000 post offices. Infosys did well selling in EEMEA, an increasingly active global region, signing 14 deals.
In addition to core banking, Infosys sold solutions for e-banking, mobile banking, customer relationship management, treasury and Finacle Inclusion, their product offering aimed at gathering deposits from the underbanked. They also signed a deal for their Finacle Lite Core Banking solution.
Haragopal Mangipudi, global head, Finacle, Infosys Technologies, attributes the stellar performance of Finacle for the quarter ended December 31, 2012, to the increased penetration the sales team has done in the Middle East, Southeast Asia and APAC.
"During this quarter alone, we had 18 wins, compared to the 16 we had in the first half of FY13. We have seen growth from tier-II and III banks, and smaller divisions of tier-I and II banks' spending," he added.
Analysts said the sale of products is a positive for IT services companies, as it gives them higher margins. "Sale of licences and the maintenance work they generally bag come at a higher margin. In several cases, these margins are higher than the company average," said an analyst of a leading brokerage house.
But the impact of these deal wins, as of now, will not be significant. "Simply because banking products' contribution to the revenues of both, Infosys and TCS, is small. They make just about four to five per cent of total revenue. Also, this business is lumpy in nature," said Ankita Somani, research analyst – IT, Angel Broking. More, a majority of deals are from small to mid-tier banks.
Polaris Financial Technology, which traditionally has had success in India, had 14 wins across six different countries, up from 10 in 2010-11. Mumbai-based Infrasoft Technologies also managed to increase its total sales number from 12 in 2010-2012 to 22 in 2011-2012.
These wins, as Celent point out, is the reflection of the shift in the market. Large deals are not restricted to only markets such as North America but have become much more global. For instance, for Temenos, the large wins came from Brazil; for FIS, it was China.
"Competition within core banking is increasingly becoming intense, as global players look to flush out the wide range of opportunities coming from emerging geographies. Compared to last year, the total number of core deals has gone up dramatically, going from 226 in 2010–11 to 445 in 2011–12," said the report.