Oracle flexes muscles

Oracle is at it again. Barely a month after it completed the acquisition of retail software maker ProfitLogic, the company is buying a majority interest in Indian software firm i-flex for a staggering US$900 million.

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By  Caroline Denslow Published  August 14, 2005

Oracle is at it again. Barely a month after it completed the acquisition of retail software maker ProfitLogic, the company is buying a majority interest in Indian software firm i-flex for a staggering US$900 million. The software and database giant is purchasing a venture capital firm’s 41% equity interest in the banking specialist firm and is also initiating an open offer to shareholders to acquire an additional 20% stake. “i-flex is the hottest software company in the banking industry, signing more new customers than any other banking software company in each of the last three years,” said Oracle chief executive Larry Ellison. This is the sixth purchase made by Oracle this year, a move that is hardly surprising, given that the company has declared its intent to do more multi-million dollar deals (see IT Weekly, 23-23 April 2005). The buyout of Retek in April and ProfitLogic last month, which are both strong players in the retail market, indicates Oracle’s strategy to focus more on vertical segments of the market. Adding i-flex to its portfolio will solidify Oracle’s push in the financial and banking sector. “Banking is a strategic industry for Oracle with nine out of the top ten banks already running Oracle ERP applications. Oracle’s overall application strategy is to go beyond ERP and offer customers richer industry-specific functionality. i-flex gets us there in banking,” he added. While Oracle may have the controlling stake in i-flex, the banking software vendor will continue to operate under current management and remain a publicly traded company. It will, however, closely align its product development, sales, marketing and services activities with those at Oracle. Oracle president Charles Phillips, who will join the i-flex board, said that the purchase offers an ideal opportunity for the two companies to offer complementary technology to customers looking for next-generation banking solutions. “The inevitable transition from legacy systems to modern applications has created a multi- billion dollar opportunity, and because no single supplier has been able to meet customer needs, the banking software market is highly fragmented,” Philips said. The two companies are planning to develop the next version of i-flex’s banking solution optimised for the Oracle Fusion infrastructure. However, i-flex will also continue product development on non-Oracle technology platforms and solidify key partnerships with other companies, such as IBM. According to Michael Thompson, principal research analyst at Butler Group, the deal gives Oracle a strong foothold into the banking sector, which is currently being pressured to update its legacy and custom-built systems by factors, including the need to comply with regulatory requirements, integration and interoperability, intensifying competition, and commoditisation of basic services. “Clearly, their strategy was done to give Oracle a strong position in the financial sector. There is also a clear indication that Oracle is moving towards vertical markets for its ERP application and is moving forward with good momentum,” Thompson told IT Weekly.

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