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Module 1: Studi di caso

    Study Reminders

    This is also a case study taken from my book only on case studies. Kindly go through
    this case study in the book, I am analyzing this case study for your benefit so that you
    will get to know how to analyze this type of case study.
    How do you go about introducing this form? This form Gartner defines a core banking
    system, as a bank end system that processes daily banking transactions and posts updates
    to accounts and other financial records. So, this I-flex as you can make out if in the
    business of core banking system. It is a backend system, it processes daily banking
    transactions this is updated to accounts and other financial records of the bank.

    This I-flex has been constantly innovating new products for its global customer base.
    And today it is considered the leading provider of each solutions for financial services
    industry worldwide. Here is a form which started with a humble base and then has more
    to be a global service provider ok. So, we will come to that a little later.
    It has a CMM SEI CMM level 5 rating. This places them among the top two percent of
    all the software organizations in the world. As of 2013 its customer base spread across
    one 142 countries. It may be interesting for you to look at the customer base in the
    present-day context, how is the how was the present customer base improved further.
    Maybe 2018 19 you can try to get the data and make a comparison how it has improved
    (Refer Slide Time: 04:05)

    Started as a Citicorp in Information Technology Industries Limited back in 93 could not
    sell products to Citi Bank’s competitors; because these were people who broke away
    from Citi Bank started this company called Citicorp Information Technology Industries
    Limited. So, Citi Bank put one rider before leaving them to start this venture that they
    cannot sell products to Citi Bank’s competitors. In other words, this is a Citi Bank team’s
    outfit, which started this company.
    First as Citicorp Information Technology Industries Limited; then in the year 2000 it was
    called I-flex first it was called Citi then in the year 2000 its name became to I-flex. Lot of
    internet was used top line solution which was provided by this company was

    FLEXCUBE that is the product which became highly popular by then only was
    FLEXCUBE. So, one of the beneficiaries of this FLEXCUBE was also the Canara Bank.

    Now, by 2005 this Oracle financial software solutions shortly known as Oracle bought I-
    flex. Hence, I-flex ceased to exist as Oracle acquired I-flex by 2005 and it was bought by

    Oracle for 909 million dollars. Just to see the type of capitalization this firm market
    capitalization this firm has achieved in a very short time. Just in a matter of a decade it
    has moved to 909 million dollars so, acquired by Oracle for 909 million dollars.
    (Refer Slide Time: 06:57)

    What are the types of product offerings which this company gives? One of the products
    which is very well known given by this company is the FlexCube what is this FlexCube?
    FlexCube is a universal banking solution which meets enterprise needs in retail,
    corporate and investment banking. In other words, it is a back end tool for banking
    It is reliable, possesses industry strength and is available with multi currency and multi
    lingual support. This is one of the reasons why this I-flex this FlexCube has been able to
    penetrate the global market. It was ranked as the number 1 selling banking solution for 4
    consecutive years from 2002 to 2005. So, its a great achievement for a.

    When it was started as Sital it was just a start up from this start up when it became I-flex
    to come out with a product FlexCube and then to be ranked as number 1 selling banking
    solution for 4 consecutive years; quite a significant achievement from 2002 to 2005.
    Reveleus is the next product it is leading global provider of analytical applications for
    financial services industry. In other words, this is one of the earliest forms to apply
    analytics for providing solutions to the banking industry in particular. This is again a
    great achievement considering that it was from 2000 only this form has delved into
    analytics. In order to come out this with this product it must have done lot of research
    even much before that.
    The third product is what is called the DaybreakTM. What is this DaybreakTM? It is a
    comprehensive consumer lending system that streamlines all aspects of automobile
    financing. Initially if you saw the first two products, it was in the banking industry and
    the financial services industry. Now, keeping the same core of finance this product
    DaybreakTM moves into automobile financing.
    The fourth product which this company was able to get was by acquiring a majority stake
    in a company called Castek Software Inc - this is a Toronto based global insurance
    system provider, again in the financial industry; I-flex acquired a major stake in this
    company with the result it could move into this insurance systems also.
    The last one is Mantas; it is a behaviour detection platform, what does this give? It is a
    most comprehensive solution for detecting risk enhancing customer relationship and
    addressing regulatory requirements and anti money laundering. So many cases listed
    again a so many leading people in this money laundering act by the government.
    This is a product coming out by this farm I-flex Mantas which can help detect risk
    enhance customer relationship and address regulatory requirements and anti money
    laundering. When you look at these products you will feel very happy that have formed
    which started as a small form a breakaway from Citi Bank. A group of people breaking
    away from Citi Bank were able to come out with a start up then changed the name then
    came out with such wonderful products.

    And one of their products was rated as number 1 selling banking solution for 4
    consecutive years from 2002 to 2005 which is a remarkable achievement. And bought by
    Oracle in 2005 for a staggering 909 million dollars.
    All these information is available to you in the case study itself which is given here. This
    is also a wonderful way of studying an actual industry a realistic industry whether it is in
    software or whether it is in services that we discussed earlier that is the cafe coffee day
    You will be able to appreciate how these firms though they have operated in highly
    competitive environment are able to make a mark; create a niche for themselves in the
    marketplace and also able to have a wonderful market capitalization within a short
    This is apart from these offerings’; I-flex also steps in service sector through its domain
    and technology centres of excellence and provides customized solutions in BFS banking
    and financial services. These product offerings of I-flex have made a great mark; start
    looking at the way tracing its history within a very short period in a market place its
    product. Its product base also very good, one of its products used almost in a number of
    countries in the world that is a FlexCube.
    (Refer Slide Time: 15:43)

    When we look at all this we proceed to the next how do we do a SWOT analysis for this
    type of a firm. What is the strength of this firm, what are the weaknesses, what are the
    opportunities that are available to a form like this? If you look at the types of strengths its
    presence is in 142 countries that is 2013 data. It might have increased much further by
    Very strong financials, it has a very good financial base in the core banking system can
    give good financial solutions. It has unique and beneficial strategic relationship with
    oracle. Oracle was keenly looking at I-flex right from the beginning its offerings and all
    that ultimately bought over I-flex.
    High value products like FLEXCUBE 100 percent focused on banks and financial
    services it is not into any other field. It is concentrating on BFS totally into BFS. These
    are the strengths of this form. And when you start looking at this form, you will only
    admire the courage of this group which started this Sital, then became I-flex came out
    with such wonderful products again.
    Then what are the weaknesses of this form? One of the strong weakness of this form is as
    a 2013, 14 it was not having great presence in the United States. Any global form
    especially a software firm, to make its global presence felt it must and should have a
    presence in US. Because US is the number one leading country in all these types of
    services in the world.
    Here, I-flex was having minimum presence possibly by now due to its getting taken over

    by Oracle, its presence in US might have improved substantially. The other aspect of I-
    flex if you want to call it a weakness, sometimes you may try to say why it should be

    termed as weakness. But you are depending on one aspect very much that is I-flex was
    dependent on exports only, 96 of percent of its revenues were coming from exports. It
    was basically a financial services product industry making its revenue through experts.
    To that extent you can call it a weakness.
    Then what are the types of opportunities that you can have for a form of this nature? One
    of the great opportunities which it can have is to insurance, the area of insurance for

    which this company tried to get has tried to get in already. The second one is this fast-
    growing data warehousing business, this is the place to be; this was at to be tapped by

    this company at that point of time.

    It would be interesting for you to look at this S W O and T whether they remain the same
    or whether they have there are some changes in 2018-19. This was in 2013-14 this was
    the way you could do a SWOT analysis for this form. And it would be interesting for you
    if you attempt this same analysis in 2018-19 to find out how is this where the whether all
    this S W O and T remain the same or have they changed.
    The next one was spent driven by key trends-what is this spend driven by key trends
    what is this? This is your big data, mobility, cloud, all these contribute to these key
    trends. These are the ones which are providing the opportunities. You are getting into big
    data; you are getting into big data itself is a big opportunity which the company can tap
    Then what are the types of threats? Any form which puts out a product into the market
    which I have discussed so many times, lends itself vulnerable to imitation. The product
    becomes vulnerable to imitation. When it becomes vulnerable to imitation, the threat is
    that of substitute products being offered in a market at a lower cost to capture the market;
    that is capture the market share. Whether it is IT services or whether it is a product in any
    other type of industry manufacturing or whatever. If you put a new product into the
    market, you are always exposed to the threat of getting imitative or getting the products
    getting imitated by your competitors.
    When they imitate these products and are able to come out with substitute products at a
    lower cost; you are market share that is the company original companies market share
    gets affected substantially. In fact, just to give you an instance back in the 80’s IBM was
    the leading computer manufacturer.
    IBM 360 was considered to be one of the top and processing machines in the world. At
    that time the Soviet Union; now Soviet Union has got split; USSR it wanted to break this
    dominance of IBM. Hence, came out with its own computers in the market.
    What did they do? They took this IBM 360 and did what we call the reverse engineering.
    They ripped open the whole system, came out with a substitute which was very similar to
    the IBM 360. As USSR was a powerful country next only to the US, then it started
    exerting pressure on other countries to buy this product to try at least this product.

    One of the countries on which it exerted pressure to try this product was India too. What
    is the type of incentive? It gave to a country like India and said-why do you want to buy
    from IBM? We will supply a similar product like what you are looking for from IBM at
    no cost that is you do not have to pay anything. The only thing that we want from your
    side is that you were programmers will be assisting in solutions for problems in USSR.
    At one point of time there were 80 computer professionals solving problems of USSR in
    return for this type of computers. Now, the most important point, this is a computer
    which is based on the lines of this well-known IBM product; developed by this rival
    country but when developing this product one error happened, what is that?
    The processing time in this computer developed by IA USSR was at least 10 times more
    than that of the IBM. If you could solve in 1 minute a problem in IBM. Here you would
    require ten times that is ten minutes to solve the same problem.
    The second aspect which computer professionals noted was; it was they took lot of
    painstaking efforts to develop programs; then run on this computer. Sometimes it used to
    give wrong results and these results had drastic implications for the end user.
    For example, for one of the states, when it was asked to computerize the matriculation
    exam results at that point of time in the late 70’s. Due to some error in this processing
    what happened was good students got low marks; thanks to this imitated computer from
    USSR and students who had not done so well got very good marks.
    A reversal act taken place and this was a great heart burn for many of these merited
    students from a particular state in India and many of them committed suicide also. This
    is the type of drastic implications you can have when you try to imitate the product of a
    leading producer just by this method of reverse engineering that is ripping open the
    product and trying to come with an imitated product.
    Somewhere you are likely to make some errors which can prove very costly. This was a
    real instance which happened and its effects were felt in our country only. What is the;
    what is the implication? Those substitute products for FLEXCUBE; you can still find
    them. The banking system should be very wary of using such products; because one
    small error can be can prove to be very costly.

    The second threat is you have some well-established forms like Infosys, TCS, SAP they
    can give a very strong competition to in I-flex. In fact, at that point of time, Infosys had
    come out with Finacle - its financial offering to the market. And Finacle is also used by a
    number of banks and very successfully in the Indian market. One of the common banks
    which is using it on a day to day basis on an extraordinary scale and where it has made a
    very good mark is the ICICI Bank itself which uses the Infosys offering.
    The other threat which I just mentioned, easy imitation of product you can see how this
    product is functioning whether you can imitate this product all these types of things. The
    fourth threat is low growth due to global economic conditions; that is suppose the
    economy the global economy is not growing well. Let us say that is what is happening in
    the present day, then it is going to affect the growth of these types of companies also that
    is the revenues of these companies also. It is also likely to come down.
    This is what we are seeing in the present day due to this economic slowdown globally. If
    you saw some newspaper media announcements that in the next year there is likely to be
    a cut in jobs IT jobs, why the cut in IT jobs? This is because of this global economic
    slowdown. This is the type of analysis that you should be doing for a form of this nature.
    This gives you a wonderful base to analyze the from. We move further.
    (Refer Slide Time: 33:05)

    What are the types of key performance indicators that you can have? If you look at it the
    share of Europe, Middle East and Africa by revenue operating revenue its 34 percent;

    these are 2013 14 figures. Kindly note that and North America was 36 percent by that
    yardstick almost if you look at the competitors like Infosys more than seventy percent of
    its revenues was coming from North America during that time only.
    Asia in fact, even much more maybe 80 percent only. Asia pacific was contributing to 30
    percent. You have Europe, Middle East and Africa contributing to 34, North America
    contributing to 36, Asia pacific contributing to 30. This was the this was a type of
    performance which this form was able to craft by 2013 14. And what are the types by
    portfolio revenues by portfolio?
    The product revenue was contributing to 77 percent maximum by this FlexCube only.
    And services was contributing the financial services base essentially to 20 percent, the
    BPO services was contributing to 3 percent.
    (Refer Slide Time: 34:53)

    If you look at the types of customers serviced in countries by in 13, 14 the number of
    customers was something like 1132 and the country serviced was 142. 142 countries
    were serviced by this company I-flex. Quite a remarkable achievement for a firm which
    was more or less a start up to get this.

    (Refer Slide Time: 35:33)

    If you look at the achievements, its revenue increased by 8 percent over the previous
    years in 13-14 to 34739 million rupees. The net income increase to 1353 million again
    rupees; an increase of 26 percent company gained a profit of 11483 million in 2013-14
    which was an increase of 12 percent over previous year.
    In March 2001 FLEXCUBE bagged Banking Software 2000 Award from the chartered
    institute of marketing of Nigeria. December 2006 this forester research a very big name
    it plays I-flex in the leaders wave. In 2011 by which time I-flex had become OFSS that is
    the Oracle Financial Service Solutions; it was ranked 253 in fortune India 500 list so, a
    great achievement by this form.

    (Refer Slide Time: 37:11)

    The next ones are giving you some more details. These details are essentially coming
    from the types of ratios I have discussed when we do a case analysis. I said we will look
    at profitability ratios, we will look at activity ratios, we will look at liquidity ratios; we
    will look at current ratios and we will also look at other ratios. When you look at the of
    profitability ratios look at we are just at cash margin if you see, it is around 32.07 percent
    in 32.07 percent in March 14.
    If you look at the return on long term funds, very steady it is at 20.47 percent. From 2010
    to 2014 return is around 20 percent which is very steady. If you looked at the current
    ratios, again a very health healthy one standing at 6.6 to a quick ratio taking your
    inventory also into account. It also is at 6.55 in 2014 again very healthy for a form.

    (Refer Slide Time: 39:07)

    Now, these were the questions which were asked or which are being asked in this case. I
    am giving you some points here later on we will discuss them in more detail. The first
    question that was asked was should OFSS sustain FLEXCUBE for its brand value or
    think of cannibalizing it in the next two years? This was the first question that was asked.
    The answer for this shortly is you should cannibalize it by versioning that is come out
    with versions of the products.
    This was also the method which windows used kindly note that. Windows cannibalized
    its very good product Windows 95 came out with a new version Windows 98. Now, what
    is the present day situation; you are having you are 2010 upwards all these versions. If
    the present day boy who is using the IT may not even remember Windows 95.
    Apply software product strategy. This is the one which is these are two points which we
    will discuss these points in more in slightly more detail. I have all I am likely I have
    produced a word document where we give discuss this in further detail. These are points
    which I am giving as answers to this question.
    The second question that is asked was this discuss company’s possible strategy to tackle
    the emergence of new entrants in the financial service products and solutions market.
    What are the types of strategies that you could adopt? These are points which I am
    giving you we will discuss this in more detail in the word document which I am going to
    present to you in the next class.

    A few points or you can look at a low base product pricing strategy, then piggybacking
    on the Oracle brand; Oracle is a well established brand. And I-flex taken over by Oracle
    can always Piggyback on that brand then mergers and acquisitions have taken Daybreak;
    have taken Castek i.e. acquired these two forms international certifications that is the
    CMMI. These are the points which are being given kindly note we will expand on this in
    the next class.
    (Refer Slide Time: 42:29)

    The third question that was asked was should the company have an explicit TQM policy?
    Justify. Although Oracle FLEXCUBE is appreciated for its rich features it is often
    criticized for low quality and high occurrence of software bugs. This is where a TQM
    policy can be useful in improving the product quality.
    The fourth question that is asked is how can you draw a strategy canvas for OFSS for the
    international positioning of its product and services? How can you draw a strategic
    canvas? These are points kindly note you have to elaborate on all these points that we
    will I will do it in the word document which I am presenting to you.
    One is you can tap new technological frontiers, second is you can do the forecasting of
    the trend and pre emptive product development. You can look at what is a trend come
    out with the product developments pre emptive also before somebody you are competing
    comes out with a new version when you are there.

    Then country specific strategies, diversification of product offerings, then international
    campaigns tie ups and partnerships. These are the things which you should look at can
    look at in a strategy canvas for OFSS for the international positioning of its product and
    services. We will stop here in the next class we will discuss all these points through the
    world document which I am going to present to you.