i-flex, Mumbai-based maker of core banking software, flexcube, said it had agreed to buy an "operational risk management software product", Ortos, from a Belgian financial services IT firm, Capco, in an all-cash deal.
The two companies didn't say how much the deal was worth to them, but some six large banks and financial institutions, using Ortos, will now be serviced by i-flex. They include Ortos' maker, Germany's Dresdner Bank, which 18 months ago sold the software product to Antwerp headquartered Capco.
i-flex plans to merge Ortos or the operational risk tool suite with its own risk management software product, Reveleus, to go after a $8 billion-by-2008 market.
Tower Group, a market analyst, estimated that market to be worth some $6 billion today. Ten Capco staff, based at its Bangalore centre, will also move to i-flex.
This team will "immediately be doubled", said Vijay Sharma, a senior vice president at i-flex consulting and system integration, a division of the parent company.
Operational risk calculation involved measuring how much money a bank needed to cover the risks it faced in its day-to-day business, said Padma Parthasarathy, country manager of Capco India, a wholly owned subsidiary of Capco.
"Miscalculating this could lead to the bank pricing itself out of the market," Parthasarathy said.
Reveleus, the brand name under which i-flex sold its credit and market risk software product, was "complementary to Ortos," which as an operational risk management suite, rounded out i-flex portfolio of risk management software, N R K Raman, chief operating officer of i-flex said.
As a division, Reveleus contributed some seven per cent of the company's $139 million in product revenues, the rest coming mostly from flexcube. This was a relatively new area, and the business would become mature in two to three years, Raman said. Reveleus has 170 staff, he said.
Only the top 10 banks in the US, and large banks in Europe, were aiming to comply with the most stringent of the Basel II norms on capital adequacy, Sharma said. The rest, including most Indian banks would start at a couple of steps lower and slowly build up to the stricter norms, he said.
While all such banks were potential clients, the existence of local players in Europe and the US made the Asia Pacific more attractive, Raman said. i-flex's recent client acquisitions include Ta Chong bank in Taiwan, which had bought both flexcube and Reveleus, he said.
