i-flex solution limited ………..wining unconventionally

OVERVIEW OF THE CASE

Case Objectives and Use

This case discusses the successful internationalization of an Indian software product company. It was developed with a view to fill the gap in extant literature on internationalization of firms from emerging economies. The primary objective of the case is to analyze how an emerging market firm navigated through the strategic and organizational challenges in its journey to becoming a world leader. What makes the case a compelling one is the fact that the company achieved a leadership position for a mission critical application like a core banking solution among perhaps the world’s most conservative set of customers viz. banks. What is even more interesting is the company’s emergence as a product and thought leader in the rapidly evolving space like compliance and risk management despite being located in an emerging economy. Towards the end, the company’s Chairman finds himself grappling with the challenge of maintaining the leadership team’s strategic and operational freedom in charting the company’s future even as he seeks to leverage the benefits of having a large global corporation, which has its own agenda, as a strategic investor. The case can be used in courses in international business, business strategy, and leadership and general management in MBA and Executive Education programs.

ORACLE acquisition of i-flex.

Founding of i-flex

Growing of the company

Product development

Marketing the product {flexcube }

Market leadership

Growing services

Building partnership

Acquisition

Managing the company

Re-architecting the company

What is the benefit of acquisition for oracle?

Ans-

i-flex is the hottest software company in the banking industry.

Banking is the strategic industry for oracle with nine out of ten banks running Oracle ERP solution.

Oracle wants to go beyond ERP & offer customer industry specific functionality.

FLEXCUBE – was number one selling core banking solution

It had 600 banks in 120 countries

What is the benefit for i-flex out of that partnership with oracle?

Ans-

It will help i-flex to provide its global customers truly integrated solutions across the front, middle & back office.

It will help them to provide better information at low cost. It will help to accelerate the growth of the company. To become youngest it company to reach a billion dollars in revenue. The unwillingness of many top tier banks to work with them due to

the old ownership structure will go away. It will give them reach. 8500 banks will be the potential customer---15 times more than

present customer base.

CASE FACTS

Founding the company-

Citicorp setup –CITICORP OVERSEAS SOTWARE LIMITED in India in 1985 .

They started with maintaining & supporting the implementation of cosmos- a banking software solution.

Then the a new version of software called – Micro banker Rajesh Hukku was selected to lead the new version of software.

Guiding principle- Focus on domain expertise & specialization. Think & act global. Customer focus.

Growing of the company-

The company begin its operation by developing & selling Micro banker It first focused on improving its market share in Africa. It did not succeed in India. Initially it served the foreign market by flying out teams from India. But very soon they started with ‘fly in , fly out ” model. They entered into partnership with IT companies & distributors in the

countries they served. They offered immediate help by establishing local support centers. In order to provide higher support they setup state of the facilities in India

that support all the sites of the world 24*7 basis. They strengthen their marketing effort by initiating the practice of

organizing periodic user meet. It became the market leader in Africa. Then it started targeting the markets in Asia-pacific, middle east, Caribbean

7 eastern Europe. Though it focuses on micro banking it also provided consultancy services to

its customers. Micro banker became the world’s top selling corporate banking solution. It was unable to participate in US due to therstriction imposed by regulation

k –square.

Developing the product:

The company set up a new product development team with a mandate to develop, ground up, a product that would help banks the world over to compete effectively in the rapidly changing business environment.

It recruited the bankers irrespective of the understanding of IT and assigned them to develop the team.

The product’s core has three layers: the data base layer, the business logic layer and a presentation layer.

The team also debated whether the architecture of the new solution should be multi-lingual and multi-currency or not.

After many heated discussion they decided to develop a multi-currency multi-language system because it would enable to the sell the product all over the world.

The main frame environment did not support many technologies such as relational database.

Finally decided to go with Oracle relational database even though it would result in time delay and cost overrun.

Oracle database was selected because of higher development productivity. Flexcube is actually a family of solutions that integrate with each other out

of the box but they can operate on a standalone basis and solve a particular problem.

It took a structured feedback from the customers and the partners about the problem they faced in the past.

After analysis the first move from the traditional account centric system to customer centric system.

They could now track customers instead of accounts and do several things, which they could not do before.

Midway through the development phase, the company encountered a new challenge.

Everyone in the technical team wanted to work on the new product and the company found it difficult to motivate the technical team working on micro banking.

It then merged the hitherto separate teams and started the practice of rotating people across two products.

This led to the delay in the completion of the development effort causing frustration and concern over the budget overruns.

Was finally released in Nov 1997 as FLEXCUBE.

Marketing FLEXECUBE:

The company launched FLEXCUBE at its second biannual user meet in Bangalore in India.

Within three months of the launch, the company had its first two customers for the product Robobank of Netherlands and HDFC Bank in India.

It also conducted the targeted marketing programs in different countries. As a part of its marketing efforts the company entered in alliances with

global IT majors such as IBM and Hewlett Packard. To further improve market coverage, each of the subsidiaries opened branch

offices to serve important market in the region. The company strengthened its go to market strategy by changing the format

of its user meets. Over the years these meets have become knowledge platform. Today wide range of people from the financial service and technology

industries participate in their user meets, not just our customers. It is more like an industry forum with everyone wanting to update

themselves with the traits in the world of banking and technology. A quarterly journal in which IT and finance experts published their research

on emerging traits in finance and technology. In company’s marketing efforts started paying off. FLEXECUBE started gaining market share. By the end of millennium it had

40 customers. It became one, its 42nd customer in 2001. But before that the company changed its name from CITIL to i-flex solution

ltd. The CITIL name was evoking mixed reaction in the market place. They were not satisfied with their explanation that they were an independent

company and city bank was only a passive investor. So they thought it best to change the name. City bank decided to replace, its old cosmos system with FLEXCUBE.

MARKET LEADERSHIP

The cosmos system had served Citibank well. But the years the system had become rather unwieldy due to individual country level adaptations & had become expensive to maintain.

The bank had spent over 400$ million to adopt Cosmos to y2k problem. The bank could not receive the same information in every country due to

constraints imposed by legacy system. The bank planned to have one more back office in UK for the entire

continent with only sales & marketing front ends in each country. This required technology platform that would seamlessly support

Multilanguage & multi currency operations. Within a year a FLEXCUBE in 5 countries was rolled out.

CITI BANK BREAKS BARRIERS (WITH ONE SHOT GAME BEATS 100 COUNTRIES)

The biggest barrier to entering any country was with a new product is the need for reference customer.

Every bank wants to see the product in operations in their customer. With that one deal we CITI bank broke that reference barrier for probably

100 countries. The company won the contract to install FLEXICUBE in 12 branches of

development bank of singapore across ten countries. Just few years after its launch, FLEXICUBE was ranked by IBS as the top

selling universal banking solution in the world for 2002.

GROWING SERVICES

The services where provided as a part of the portfolio because as we moved into the tier 1 space,

The services business grew rather slowly in the initial years, in large part because of the restrictive provisions of regulations k.

The underlying rationale was the COSL, its in house arm, would concentrated its efforts in the building its services business in the rest of the world, outside of the Citibank world.

The company sustained its growth momentum by setting up centres of excellence in the technology & business domains of strategic importance to financial institutions.

It also set up CRM( customer relationship management) coe to customise, Implement & support CRM applications, & the payments categories such as

interest, mobile etc. To help banks & financial institutions enhance their competitiveness, the co

set i-flex consulting in 2000.

STRENGTHENING THE COMPANY

This section discusses the company’s build-buy-ally strategy that helped it strengthen its leadership position

The company was growing at high peak by 2001 and tried to fund its building partnership, acquisitions, and expanding its market presence through IPO.

I-Flex’s offer of 3.96 million shares on a base price of Rs. 530 per share was oversubscribed 2.6 times.

Building partnership -

I-flex enhanced its value proposition by partnering with other product companies and offering their products as part of its solution to clients.

The company offered some products of the rival companies as well if it is suited to the customers.

They were buying products or take strategic stake in companies that are complementary to their product offerings.

Their main strategy was not to leave any possible gap between their services and customers demand.

Making acquisition -

Acquisitions were combination of strategy and opportunities Acquired companies –

o Super solution inc – for $11.5 million –developed ‘daybreak’ (a

consumer leading suit)o Equinox – KPO arm in India –mortgage institution, auto finances and

credit card companies.o Login SA -33% stake- treasury solutions

o Castek software- 34% stake- insurance systems for property and

casualty insurance industry.o CAPCO- ORTOS (operational risk tool suite) – IP rights –integrated

consulting, processing services and products for the financial services vertical

Thought leadership-

In 2002, the company launched reveleus, a suit of analytical applications for the financial services industry in the areas of risk management, customer insight and enterprise financial performance.

Sensing the growing need for better operational risk management among banks and other financial institutions, the company started developing a range of business intelligence and data analytics application that sought to enable financial institutions to strengthen their decision making processes.

Reveleus / i-flex has made a substantial in creating a solid risk management capabilities that qualifies for the leaders quadrant.

It has put emphasis on leveraging its financial service domain expertise as well as building a deep understanding of risk, and the Basel II issues in particular.

This emphasis almost gives the impression of consulting, rather than application development.

MANAGING THE COMPANY

Managing the companies plays an important role in winning through unconventional manner, where i-flex realized objectives was an open collegial non hierarchical organization a place where issues and personalities dominated discussion. Hukku explained

Communicated that everyone’s ideas were welcome irrespective of seniority. This often lead t heated arguments and free for fall meetings.

Conducting of quarterly meetings and open house annuals in which the members of the top management interact directly with all our people

So there has been a very consistent management interact directly with all people

Managing Operations -

The company began its operations by adopting a functional structure with all the functional heads reporting to Hukku

At the turn of the millennium, the company embarked on a focused plan to globalize its operations

the idea was to create a management structure that was closer to the customer

The company started expanding themselves internationally; it started hiring people locally for sales, support and implementation functions. today people more than 17 countries work in the company across its sales support and development functions

Embedding Process Orientation -

Flex strong process orientation is one of the reasons for understanding track record of implementation out of 260 in 95 countries that has not gone well. The product groups in turn classified into three categories: customer specific, religion specific and generic product changes to make the changes and developed a product release calendar

The company had a well defined process in place to manage customer acquisition.

Globalizing Management-

The company started recruiting foreign nationals at senior positions in small numbers. These people either worked with i-flex at the partner companies or through referrals

Re-architecting the Company

Even before the Oracle deal, it had embarked on a project to develop the next generation of FLEXCUBE in addition to the incorporating the learning from deploying FLEXCUBE at various costumer sites across the world sought to address the changing needs of customers.

People now are working on service oriented architecture as the next big technology leap, to make sure that they are not left behind by the competitors and importantly the follow up of the customers by following their future needs

Case Synopsis

The case maps the journey of i-flex solutions from its inception through its emergence as a leader in the banking software products space to the acquisition of a strategic stake in mid-2005 by Oracle Corporation, the US software giant. In FY2005, the company, whose revenues and post-tax profits were about $261

million and $47 million respectively, had 600 financial institutions as customers spread over 120 countries. Its flagship product FLEXCUBE was ranked the number one core banking solution in the world by International Banking Systems, a leading UK-based banking journal, for four consecutive years.

The case consists of five sections. The first section describes the origins of i-flex and the three guiding principles that its management established at the time of founding. The second section deals with development and marketing of FLEXCUBE as also the rationale for having a services business. The third section discusses the company’s build-buy-ally strategy that helped it strengthen its leadership position. The fourth section describes i-flex’s culture, process orientation and the systematic globalization of its operations and management. The last section engages with issues related to Oracle’s acquisition of a strategic stake in the company.