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January 19, 2009updated 04 Apr 2017 1:14pm

Scandal creates chaos in Indian IT sector

The revelation has shocked the countrys IT community and, coupled with a World Bank statement on outsourcer Wipro, shone an unwelcome spotlight on Indias $50 billion financial technology industry. The rapid fall from grace of Indian IT services giant Satyam after the founder and chairman Ramalinga Raju was arrested for orchestrating one of Indias largest ever frauds has left the countrys $50 billion IT-to-outsourcing sector in disarray, scandalising the industry and its corporate governance standards in the middle of the savage global economic downturn.

By John Hill

India has discovered its own Enron in software vendor Satyam, writes John Hill. The revelation has shocked the country’s IT community and, coupled with a World Bank statement on outsourcer Wipro, shone an unwelcome spotlight on India’s $50 billion financial technology industry.

The rapid fall from grace of Indian IT services giant Satyam after the founder and chairman Ramalinga Raju was arrested for orchestrating one of India’s largest ever frauds has left the country’s $50 billion IT-to-outsourcing sector in disarray, scandalising the industry and its corporate governance standards in the middle of the savage global economic downturn.

India - top 10 software companies by profit after tax, FY07Satyam, India’s fourth-largest software services provider has been embroiled in a fraud investigation after Raju admitted inflating the company’s balance sheet by over INR50.4 billion ($1 billion), wildly overstating the group’s profitability, cash reserves and other assets for several years.

Satyam, which specialises in business software, outsourcing and consulting, has since appointed a new board in the hopes of boosting confidence, including Deppak Parekh, chairman of HDFC Bank, India’s third-largest bank by market cap and C Achuthan, director at India’s National Stock Exchange.

But in a further knock to the Indian IT industry, the World Bank recently banned Satyam from bidding for orders for eight years as well as local IT rival Wipro, the country’s third-largest outsourcing vendor, for four years.

The World Bank stated that both companies had been providing “improper benefits to bank employees” in the form of shares offered to its staff during the software companies’ IPOs in the US.

For investors and banking clients alike, the main worry will be whether Satyam’s disgrace is an isolated incident or an indication of problems throughout the Indian IT sector. NAB, one of its major clients, has said it is already in the process of reviewing its relationship with the company.

A spokesman for Tata Consultancy Services (TCS), the biggest player in the Indian IT sector and ranked sixth overall in the world in last year’s Financial Insight Top 100 list with financial services revenues of $2.31 billion (see RBI 603), said in a statement that the company is still confident: “[Satyam] has not affected the credibility of our company. In fact it is business as usual for TCS.”

Of the three IT companies larger than Satyam, neither TCS, Infosys nor Wipro have as yet suggested any plans for an acquisition or merger, or indicated any interest in buying up smaller chunks of the beleaguered company. India’s second-largest IT services company Infosys said they were largely prepared for any fallout from the scandal.

Kris Gopalakrishnan, CEO of Infosys, said: “We are not proactively canvassing for Satyam business for obvious reasons. It is not the right thing to do.

“Infosys is very well prepared. Whatever questions that clients have, we are able to answer. We have increased our level of disclosure; we want to make sure that we give comfort to customers, prospects, investors, about [our] corporate governance practices.”

Infosys recently reported record-breaking third-quarter results after many cost-cutting clients looked to increase their outsourcing practices.

Net income was up 33 percent to $336 million, sales jumped 35 percent to $1.2 billion, while revenue was $1.17 billion, just under the company’s October forecast of $1.18 billion.

IT Contracts  RBI Fintech DealWatch tracks recent major technology contract wins with a focus on the retail financial services industry as well as fintech mergers and acquisitions and innovative new product launches
Country Participants Type/value Details Date announced
South Korea Kookmin Bank, IBM

Core banking contract win

Korea’s Kookmin Bank has selected IBM System z10 mainframe technology and DB2 servers as the foundation for a next-generation core banking application platform designed to consolidate all of the bank’s different business units across the world.

15 January

Iraq

Rafidain Bank, Misys

Project launch Rafidain Bank, the largest bank in Iraq, has gone live with a turnkey solution from Misys. Rafidain Bank’s international branches, comprising operations in Jordan, Lebanon, Egypt, Yemen, UAE and Bahrain, have all been fitted with the new system. Misys’ regional partner, B-Plan Information Systems, will commence roll-out of the system to 147 of the bank’s branches across Iraq.

14 January

Central and Eastern Europe

Raiffeisen, Infosys

Contract win Raiffeisen International has selected Finacle from Infosys to standardise its technology platform and enable consolidation of operations across Central and Eastern Europe. Infosys will implement Finacle Universal Banking Solution across multiple countries in parallel. This will include deployment of Finacle core banking, CRM, e-banking, mobile and alerts solutions.

14 January

Global

Santander, Norkom Technologies

Core banking contract win

Spain’s Banco Santander is set to roll-out anti-money laundering (AML) software from Dublin-based Norkom Technologies across its AML units. Santander can deploy this suite across all its European and Latin American operations with the first implementation planned in Spain.

12 January

India

Kotak Mahindra Bank, IBM

Core banking contract win

India’s Kotak Mahindra Bank has agreed a $5 million IT infrastructure services deal with IBM for the construction and maintenance of a green data centre and IP network infrastructure. The aim is to save $1.2 million in operational efficiency and reduced energy costs over the next five years.

8 January

Philippines

Philippine Farmers Bank

Contract win Philippine Farmers Bank has chosen Misys to help it strengthen its lending business.

7 January

US

Goldleaf Financial Solutions, Integrated Bank Technology

Acquisition Tennessee-based Goldleaf Financial Solutions has agreed to sell its core processing and teller automation systems to Integrated Bank Technology (IBT). A strategic alliance will also see IBT provide core, teller and outsourced item processing to Goldleaf clients. The move is part of a strategy to focus on its payments technology business.

6 January

Russia

Alfa Bank, Misys

Core banking Misys has extended its partnership with Russia’s Alfa Bank to continue the development of the bank’s consumer banking infrastructure until at least 2020.

5 January

Ireland

MasterCard, Orbiscom

Acquisition MasterCard is acquiring Orbiscom, an Ireland-based payments solutions software provider for major financial institutions, for $100 million.

5 January

India

Citigroup, Wipro

Acquisition Citi is to sell its captive Indian IT outsourcing arm Citi Technology Services to Indian outsourcing specialist Wipro for $127 million. As part of the transaction, Wipro and Citi will sign an agreement for the supply and maintenance of Wipro services to Citi for a period of six years. The agreement provides for the delivery of at least $500 million in service revenues over the contract.

5 January

Uganda

Mercantile Credit Bank, Neptune Software

Core banking contract win

Uganda’s Mercantile Credit Bank has selected Neptune Software’s Banking Platform to power its retail banking activities. 31 December
South Africa

Gemalto, NamITech

Acquisition French smart card vendor Gemalto has agreed a deal to buy Allied Technologies’ NamITech South Africa business as it looks to expand its presence in the region. NamITech, with revenues of around €15 million ($19.7 million), provides secure cards and services in Southern Africa. 18 December
Russia

KIT Finance Bank, IBM, Chordiant

Core banking contract win

Chordiant Software, the leading provider of customer experience software and services, has announced that it and its global partner IBM have completed the pilot implementation of Chordiant’s front-office Cx solution at the retail arm of Russia’s KIT Finance Bank. 17 December
China Shenzhen, Yucheng Technologies Contract win Shenzhen Development Bank (SDB) has selected a platform from local vendor Yucheng Technologies to revamp its online banking offering. 17 December
Egypt

Egypt Saudi Finance Bank

Contract win Misys has announced that Egyptian Saudi Finance Bank (ESFB) has chosen Misys Equation for its 11 branches across Egypt. The solution is the latest version of the retail banking solution from Misys. 17 December
US

Fiserv, i_Tech, First Interstate BancSystem

Acquisition US fintech vendor Fiserv is to acquire i_Tech Corporation from First Interstate BancSystem for $40 million. i_Tech provides outsourced account processing services as a licensee and reseller of the Fiserv ITI Premier core banking system to 158 financial institutions. 16 December
Indonesia

BCA, Wincorp Nixdorf

ATM contract win Indonesia’s BCA has selected Wincor Nixdorf’s kiosk and cash-dispensing technologies for the expansion of its multi-channel self-service network. BCA will deploy 283 ProCash1500xe ATMs and 200 ProInfo 1000 kiosk systems. 16 December
Russia

Alfa Bank, Aladdin Knowledge Systems

Contract win Russia’s Alfa-Bank has rolled out 20,000 USB smartcard authentication devices from Aladdin Knowledge Systems to its online banking customers. 15 December
Netherlands

DSB Bank, Finacle

Core banking contract win

DSB Bank has selected the Finacle universal banking system from Infosys to overhaul its retail operations and power a new online savings bank. The bank will replace its legacy systems with the Finacle core banking and integrated customer relationship management technology. 15 December
India

Punjab National Bank, Finacle

Contract win India’s Punjab National Bank (PNB) is set to roll-out the Finacle universal banking system from Infosys across six regional rural banks covering 1,300 branches. The move is part of public sector bank PNB’s rural banking initiative, designed to improve customer services and gain new customers outside of urban areas. 12 December
US

Chase, Washington Mutual, Tsys

Contract termination JPMorgan Chase is bringing Washington Mutual’s card processing in-house, terminating the bank’s current deal with Tsys. Chase will pay Tsys an undisclosed fee for deconversion and termination. The deconversion should happen by March, after which Chase will process the WaMu portfolio in-house on a technology platform it licenses from Tsys. 3 December
Nigeria

United Bank for Africa, Actimize

Contract win Nigeria-based United Bank for Africa is rolling out fraud and anti-money laundering technology from Actimize across 700 retail distribution centres in the country. The bank has signed for the Actimize Risk Management platform and Enterprise Risk Case Manager to help it detect and mitigate employee, electronic payment, ATM and debit fraud, as well as money laundering. 3 December
UK

Standard Chartered, SmartStream

Strategic partnership Standard Chartered has selected technology from UK-based vendor SmartStream Technologies to power a new global reconciliations platform. The bank has selected SmartStream’s technology to integrate its existing reconciliations process into a single platform. 2 December
China

China Postal Savings Bank, CUP Data

Contract wins China Postal Savings Bank (CPSB) has agreed a multi-year credit card processing deal with China UnionPay Data Services (CUP Data). CPSB holds more than $200 billion in deposits and has more than 36,000 branches throughout the country. 1 December
Dubai

Dubai Islamic Bank, Fiserv

Core banking contract win

Dubai Islamic Bank has instituted centralised reconciliation technology from Fiserv’s CheckFree unit. Following rapid growth, the bank has moved to consolidate all reconciliation and exception management activity in Dubai at a “centre of excellence” using the CheckFree system. 1 December
US

Jack Henry, Saylent Technologies

Strategic partnership Jack Henry & Associates has established a strategic alliance with Saylent Technologies, a pioneering provider of payment intelligence software. 21 November

Source: RBI

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