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Oracle flexes its muscle
si Team
Thursday, September 1, 2005
Oracle’s recent acquisition of 41 percent stake in i-flex, the maker of the world’s most popular banking and financial software product ‘Flexcube’ marks a paradigm shift of Indian companies becoming a valuable asset in the global market place.

Though international companies have acquired prominent Indian BPOs like Daksh in the past, their interest in Indian IT companies has remained limited for two reasons: they consider home grown companies are overvalued and, Indian companies are viewed as nothing more than a factory of labor arbitrage.

The $909 million acquisition [including the $316 million open offer] reflects a different light on the Indian software companies. The acquisition elevates the perception of domestic top-tier firms to a different league. When Oracle completes the deal towards the end of 2005, i-flex will see a huge upside in the business. i-flex will be ready to access Oracle’s global customer base of 8,500 banks which includes 95 percent of the world’s top-tier banks.

Oracle’s predominance in North America is the biggest advantage as, i-flex has not been as successful in North America as in Africa, Europe and Japan. There are obvious synergies too. At least 90 percent of i-flex customers using Flexcube are already on the Oracle platform.

Though Oracle insists that it would encourage Flexcube’s development on competitors’ platforms, one of the first few casualties could be the division that works on reducing i-flex’s dependence on the Oracle platform. Unlike Citigroup, which positions itself as a mere investor in the company, Oracle is not going to be a hands-off investor.

The buyout gives Oracle a significant head start in a domain where it was absent. Also, the company’s shareholders are unlikely to complain, as they are most certainly bound to gain.
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