Absence of banking software Wipro's Achilles' heel

As demand in the information technology (IT) sector rebounded after a slowdown, local tech vendors rushed to make up for the dip in the growth they suffered during the recession.

However, Wipro couldn’t do much. Even as it may have badly wanted to, its weakness banking financial services and insurance (BFSI) vertical constrained it from going whole hog after growth.

This was the major reason it lagged peers Infosys Technologies, Tata Consultancy Services (TCS), Cognizant and others. 

Suresh Senapaty, chief financial officer (CFO) of Wipro, believes the third largest tech company could not make the most of the resurgence in demand because it could not play in the BFSI software market due to the absence of a product of its own.

This, he said, has given Infosys and TCS, which have Finacle and BaNCS, respectively, a major lead over Wipro.

“Competition (Infosys and TCS) has two streams of revenues. They have their own banking software and services. We don’t have our own software, so if you remove the banking software, in the banking services we grew faster than them (in the third/December quarter). It’s because we don’t have a software product that we are growing slower,” he told DNA Money.

Wipro earns merely 27% of its revenue from the BFSI segment. In contrast, Infosys, TCS and Cognizant earn 36.2%, 44.6% and 42.3% of their revenues, respectively from the vertical, which is growing at the fastest rate with banks and financial services firms in the US and Europe increasing outsourcing to meet the stricter
compliance and regulatory norms.

For instance, in the December quarter, Infosys’ revenues from its banking software Finacle grew 28.8% sequentially and 66% on year-on-year basis.

Haragopal Manigupdi, global head, Finacle, Infosys, said the product arm of Infy even crossed last year’s annual revenue of $208 million in just nine months this year with revenues of $209.5 million during that period.

Manigupdi said the main driver of this robust growth was transformational programmes of the Tier-I banks, where it bundled banking IT product, services and support. 

“We took the position of transformation partner (with the banks). Infosys as a whole brings in all competency for transformation rather than just the product alone. Many Tier-I banks see that as key differentiator because for them it is not only about buying the product but the ability to implement it in their context is also very important,” he said.

Then Infosys also launched its second version of mobile banking software in November that was quickly picked up in the market. 

“In just few months (of launching mobile banking software), we are seeing a good traction in the market. Three banks have already signed up in various parts of the world and we are going to talk to many more as we go. Mobile is going to change the business for consumers and banks as we go forward,” said Manigupdi.

So, while Infosys and TCS earn three streams of revenues from BFSI — licence fee, services and annuity for technical support — Wipro earns just one.

“Licence fee is based on new wins, services income on concurrent programmes running at that point in time and annuity is on the installed base of a customer,” said Manigupdi.

He said Finacle’s contribution to Infosys’ revenue grew to 5.16% in the third quarter this fiscal from 4.1% during the same period last year.

Interestingly, Cognizant, which is all set to overtake Wipro in terms of revenues, has grown its BFSI revenue despite not having banking product. Last quarter, its financial services vertical grew 46.5% on a year-over-year basis.   
Debashis Chatterjee, senior vice-president and global head of banking and financial services practice, Cognizant said this was because it was partnering with financial product partners.

“Cognizant has entered into global partnerships with key financial product vendors such as Temenos and Calypso to implement solutions for our marquee financial services customers. These partnerships have helped Cognizant offer value-added, integrated solutions to our existing customers and, in the process, merit a bigger share of their IT spend,” he said.

BFS is Cognizant’s largest vertical practice, serving nine out of top 15 North American financial institutions, four out of top five UK financial institutions, and several leading financial institutions in continental Europe and Asia Pacific