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Acquisition-Hungry Oracle Grows Financial Services Presence
June 9, 2008
Oracle Corp., a technology giant that has gobbled up dozens of smaller vendors over the past few years, is approaching the financial services industry from both horizontal and vertical perspectives, says Don Russo, group VP of its financial services division.
Best known for its powerful databases--which compete with IBM Corp.'s DB2, Sybase and Microsoft Corp.'s SQL Server, among others--Redwood Shores, Calif.-based Oracle has used acquisitions to build up an extensive portfolio of applications aimed at financial firms. In June 2007, it rolled more than 300 products and 12,000 employees into a New York-based financial services unit that offers an integrated set of solutions.
In capital markets, Oracle hasn't yet had a major impact, says Adam Honore, senior analyst at Boston-based Aite Group, adding that Oracle's problems are typical of horizontal technology companies seeking to address the needs of financial firms. "Oracle doesn't really get capital markets," he says, "although BEA will get them a lot further into this space."
Oracle in April completed its $8.5 billion purchase of BEA Systems, a Web services infrastructure provider that has recently been touting its complex event processing (CEP) offerings to financial firms. "Oracle has pooh-poohed the CEP space, but BEA is an active participant," notes Honore, who calls BEA "a company that does actively participate in the needs of the industry."
Russo notes that Oracle has enjoyed success in selling its databases to Wall Street. "Sybase still has a significant installed base on the trading floor that is more legacy in nature from investments in the 80s and 90s," he says. Looking at new purchases of database licenses, "most of it goes to Oracle."
Co-opetition
In the application business, adds Russo, the company is often in "co-opetition" with Microsoft and IBM. "We run a lot of databases on Microsoft infrastructure and we have people here who work very hard to tune our applications to support Microsoft products," he says. "While our database does compete with Microsoft SQL Server, this is no different from gearing our solutions to run on IBM WebSphere while we still compete with IBM DB2."
Oracle's financial services presence was particularly bolstered by a pair of key acquisitions: In 2005 it bought PeopleSoft, an enterprise resource planning software provider, for $10.3 billion; and in 2006 it added customer relationship management (CRM) pioneer Siebel Systems for $5.8 billion. "PeopleSoft was Oracle's biggest competitor in financial services and Siebel had been the most focused of the CRM vendors in financial services and wealth management," says Russo.
In August 2005, Oracle bought a 44 percent share of Mumbai, India-based I-flex Solutions, a global provider of banking and back-office systems, from a Citigroup subsidiary for $909 million. Through a series of transactions since then, Oracle has increased its stake to 81 percent and in April I-flex said it plans to change its name to Oracle Financial Services. "The new branding reflects the importance that Oracle attaches to the financial services sector," said Charles Phillips, president of Oracle and an I-Flex director, in a statement at the time.
I-flex in October 2006 acquired Mantas, a Fairfax, Va.-based anti-money laundering technology specialist that has since developed its offering into a broader compliance engine, for $122.6 million. "We now have a pretty complete set of products for the front office in wealth management and some good analytical products on the back end with Mantas and Reveleus, which is our risk management suite focused on Basel II," explains Russo. An Edison, N.J.-based risk analytics division of I-flex, Reveleus' risk analytics software is offered as part of Oracle's Governance, Risk, and Compliance for Financial Services suite introduced last year.
