Analysts: Oracles I-flex Buy to Revolutionize Banking Industry

By Lisa Vaas  |  Posted 2005-08-05 Print this article Print

Updated: Analysts praised Oracle's announcement that it will purchase a majority stake in the banking software firm I-flex, saying that the database giant could well revolutionize an industry that's still stuck

Analysts praised Tuesdays announcement that Oracle will purchase a majority stake in the banking software firm I-flex Solutions Ltd., saying that the database giant could well revolutionize an industry thats still stuck in legacy mode. "Seventy percent of that industry is using either custom applications or legacy applications that may not be the right applications to play in the new regulatory environment were in, with [the Sarbanes-Oxley Act] and others," said Trip Chowdhry, an analyst at FTN Midwest Research Securities. "Its time that the regulatory pressures are pushing these companies to upgrade to newer technologies. That whole market opportunity which is available in the banking sector is underserved."
That market opportunity is worth a hefty $70 billion, according to Chowdhry. Oracle Corp.s investment in I-flex will stand the company in good stead to take a big bite of that pie. In I-flex, Oracle picks up whats known as the worlds best-selling banking software and one thats used by 575 banking customers in 115 countries.
"Oracle has a database platform thats well-known," said Chowdhry. "I-flex gives them a vertical expertise they hadnt had before. Thats a new industry. They may not have brand equity in that space, but I-flex definitely has. … So immediately Oracle gets a global footprint." Unlike trading, which is bankings more technology-savvy cousin in the financial services world, banking has been slow to give up its reliance on mainframes and client/server architectures. Very few banking applications are Internet-enabled. With I-flex, Oracle plans to change all that. Oracle is aiming at nothing short of redefining the industry, Chowdhry said, as it talks about moving from solution selling and technology selling to service selling. By that, Oracle means grid technology—its hotly marketed 10g platform—with I-flexs software as a service solution on top. John DiFucci, a managing director at Bear, Stearns & Co. Inc., said that Oracle is already well-established as an ERP (enterprise resource planning) platform in the banking industry. With this purchase, Oracles intent is to get its own industry-specific applications running above and beyond the general ledger systems. "They want to get industry-specific," he said. "And thats what I-flex brings to the table." Next, the perennial question: Who will Oracle buy next? Bear Stearns, a global investment banking, securities trading and brokerage firm, finds the size of the I-flex purchase to be "meaningful," said DiFucci, and one that impacts future Oracle purchases. He estimates that after all is said and done, the tender offer is completed and the acquisition is closed, the size of the deal will be around $900 million. Thats a fraction of the size of Oracles PeopleSoft deal, but double the size of its Retek buy, DiFucci said. It also puts a new spin on oft-repeated speculation that Oracle will buy BEA Systems Inc. "If this all goes through, we dont think Oracle is going to buy BEA anytime soon," he said. "Oracle is gaining a lot of traction with their own applications server, significantly more so than previously, especially with the R2 version of the 10g application server. BEA is no longer strategic to them. "With I-flex, theyre buying something they dont have." At this point, DiFucci views systems management as the hole in Oracles product lineup and regards Micromuse Inc. as the right technology at the right price for the next Oracle purchase. Editors Note: This story was updated to remove inaccurate information regarding BEAs stock price. Check out eWEEK.coms for the latest database news, reviews and analysis.
Lisa Vaas is News Editor/Operations for and also serves as editor of the Database topic center. Since 1995, she has also been a Webcast news show anchorperson and a reporter covering the IT industry. She has focused on customer relationship management technology, IT salaries and careers, effects of the H1-B visa on the technology workforce, wireless technology, security, and, most recently, databases and the technologies that touch upon them. Her articles have appeared in eWEEK's print edition, on, and in the startup IT magazine PC Connection. Prior to becoming a journalist, Vaas experienced an array of eye-opening careers, including driving a cab in Boston, photographing cranky babies in shopping malls, selling cameras, typography and computer training. She stopped a hair short of finishing an M.A. in English at the University of Massachusetts in Boston. She earned a B.S. in Communications from Emerson College. She runs two open-mic reading series in Boston and currently keeps bees in her home in Mashpee, Mass.

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