Magazine article American Banker

Oracle, Seeing a New Wave, Starts a New Unit

Magazine article American Banker

Oracle, Seeing a New Wave, Starts a New Unit

Article excerpt

Oracle Corp. says its creation of a business unit to serve financial companies positions the database vendor for an anticipated wave of conversions of banks' core accounting systems.

The Redwood City, Calif., company discussed its commitment to banking at a meeting Thursday in New York, which is the headquarters for the new unit, Financial Services Global Business. Two large U.S. banks are considering upgrading their core banking systems with Oracle software, Oracle said at the meeting.

Oracle historically has offered so-called horizontal products that can be used in common functions across different industries - customer relationship management, for instance, or human resource management. Charles Phillips, it president, said it plans to become more vertical, concentrating on specific markets.

"We picked a number of industries that we're going to invest in. Financial services is the largest of those industries," Mr. Phillips said at the presentation before several hundred customers, analysts, and reporters.

He predicted that large banking companies, insurers, and capital markets firms will increasingly turn to vendor software, rather than building computer systems in-house, as banks traditionally have done.

"People used to build their own HR systems. Nobody does that anymore," Mr. Phillips said. "We're in the very early stages of that same shift in financial services."

Though Oracle has long extolled its commitment to financial services, focusing on any specific industry is something of a departure. In its annual report, Oracle does not break out its sales by industry segment, but its recent results give an indication. It reported that database and middleware brought in 73% of its $4.9 billion of new-software license revenue in its fiscal year that ended May 31, 2006, versus 27% for application software.

Oracle strongly signaled its interest in financial services in November 2005, when it bought Citigroup Inc.'s 43% ownership stake in the Indian core banking software developer i-flex solutions ltd., which was founded in the mid-1980s as a Citi subsidiary.

Oracle, which now owns 83% of i-flex, named two executives of the Mumbai company to top spots in Financial Services Global Business. Rajesh Hukku, i-flex's chairman and managing director, was named to the additional positions of senior vice president and general manager of the new unit, and R. …

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