India Service Providers turn to software market

Talen crunch in financial market makes software sales more appealing

Banks have looked to India for low-cost IT and business services for years. But the competition for talent and subsequent rising salaries are diminishing benefits to banks and Indian services providers. That's causing both to modify their strategies.

Tata Consulting Services, for one, is getting deeper into the software business. Last week, it formed TCS Financial Solutions, its first products division, to sell core banking, CRM, wealth management, and other software applications to financial companies.

Tata acquired Financial Network Services, maker of a popular banking app called Bancs, in 2005 for $26 million. Last November, it acquired a majority stake in TKS-Teknosoft, maker of the Quartz wholesale banking apps, for $80 million. Strong reception of these products, and for software it has developed in-house for banking customers, prompted Tata to create a business focused on software sales, says Financial Solutions VP Terence Donnelley. Financial software sales grew 66% in Tata's last fiscal year, to $170 million.

That's just a fraction of the $1.8 billion Tata grossed from financial services, and it plans to tack on customization and integration services as part of the software sale. Unlike its services business, though, the software unit isn't built around cost arbitrage. "Our products aren't sharply discounted, and they don't need to be," boasts Donnelley. Tata's financial software will be sold under the brand name TCS Bancs.

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