• Wipro Acquires Gallagher Financial Systems To Enhance Loan Origination Capabilities

  Aug 15, 2008 | Mergers and Acquisitions by Andy Efstathiou
  industry: Retail Banks

  Wipro has acquired Gallagher Financial Systems (GFS) to enhance its loan origination capabilities. The transaction closed July 2, 2008. GFS was founded in 1985, has 20 clients and 115 employees, of which 110 are based in Brentwood, TN.

  GFS has 2 product solutions:

  • Millenium: a client/server based mortgage origination solution. 3 clients use the solution, including ANZ Bank in Australia.
  • NetOxygen: an browser based loan origination solution. 17 clients use the solution, including JP Morgan Chase, Wells Fargo, US Bank, and Astoria Federal.

  The NetOxygen solution provides the following functionality:

  • Workflow process automation
  • Browser-based .NET framework
  • Web services
  • Forward and reverse mortgage support
  • Decision engine
  • Product pricing engine
  • Smart document packages (automated consistency checks)
  • Mismo-compliant interfaces
  • Client customization

  GFS has sold the solution on a licensing basis. Wipro intends to offer the application on both a SaaS and ASP basis. The solution will be hosted in Infocrossing delivery centers in the U.S. The primary target market for the next few years will be large banks in the U.S. Pricing will be based on a per transaction model.

  Analyst comments:

  Wipro acquired GFS for several reasons:

  • The crisis in the credit markets (and specifically the mortgage markets) has reduced bank capital, which increases the appeal to banks of a "pay as you go" model. Central to Wipro's business model going forward for GFS is offering this solution on a SaaS or ASP model
  • Wipro believes that there are synergies between GFS' product offerings and Wipro's offshore IT services capabilities. Specifically Wipro will be able to customize the solution to the requirements of large banks and do it with offshore labor and a low cost. Wipro estiamtes they will be able to offer clients 30% to 40% savings.
  • Wipro will be able to build off this acquisition over time and expand this offering into mortgage administration services over time.

  The turmoil in the financial marketplace is creating opportunities for vendors with financial resources. GFS lost several clients over the past 18 months to bankruptcy (including IndyMac), but its long term value to banks, who are now constrained from investing in solution upgrades, has actually increased. We expect to see more consolidation among vendors producing strengthened value propositions for banking clients.

• BancTec Partners With GHX To Expand Accounts Payable Offering for the Healthcare Sector

  Aug 14, 2008 | New Offerings by Katharina Grimme
  industry: Healthcare Providers

  BancTec announced a partnership with GHX, who operates an electronic trading exchange and invoicing network for the healthcare sector, to provide hospitals with OnDemand AP, a software-as-a-service (SaaS) solution that speeds up the invoice-to-payment process.

  OnDemand AP enables hospitals to receive 100% of their invoices electronically, even from suppliers who still submit invoices via fax or mail, thus streamlining the accounts payable process.

  Analyst comments:

  This partnership places BancTec in a strong position to become one of the leaders in the provision of accounts payable outsourcing services to healthcare providers, and join Perot Systems, already strongly positioned as a major provider of accounts receivables management outsourcing services to healthcare providers, as one of the industry leaders in the emerging F&A outsourcing market in the healthcare provider segment.

• First Data Announces Q2 2008 Revenues Up 10% to $2,204.3m

  Aug 14, 2008 | Financial Results by Andy Efstathiou
  

  First Data has announced Q2 2008 revenues for the period ending 30 June 2008, of $2,204.3m, an increase of 10% compared to Q2 2007.

  Q2 2008 revenues (and revenue increase) by activity were:

  • Transaction and processing service fees: $1,443.7m (+5%)
  • Investment income: $35.8m (+n.m.)
  • Product sales: $214.0m (+7%)
  • Reimburseable fees: $510.8m (+19%)

  Analyst comments:

  Despite a downturn in its traditional Financial Services business, First Data has had a successful quarter in two of its key strategies:

  • Increasing its emphasis on Merchant Services, where the company increased its domestic merchant locations by 7% and its revenues by 8% compared to Q2 2007
  • Pursuing geographic expansion, with First Data's international revenues increasing by 20% to reach 21.5% of total revenues.

  In addition, First Data is continuing to invest in new product development including mobile commerce initiatives, which will be key to the company's future success in emerging economies.

• Logica Announces H1 2008 Revenues Up 16% to L1769m

  Aug 14, 2008 | Financial Results by Rachael Stormonth
  

  Logica has announced H1 2008 revenues, for the period ending 30 June 2008, of £1769.4m, up 16% on H1 2007 revenues of £1,525.3m. On a pro forma basis, revenue was up 6%.

  H1 2008 operating profit was £29m, representing an operating margin of 1.6% (H1 2007 margin 2.9%). Adjusted operating profit before exceptional items (£41m associated with the revitalization plan, £5m related to the WM-data integration) and £43m of amortization of intangibles) was £118m, compared with £90m on a pro forma basis in H1 2007. This represents an adjusted operating margin of 6.7%, up from 5.9% in H1 2007.

  H1 2008 revenue breakdown by geography (with actual and pro-forma revenue growth) was:

  • Nordics £497m (+17%, +8% pro forma)
  • U.K. £354m (+6%, +6% pro forma)
  • France £354m (+22%, +7% pro forma)
  • Netherlands £284m (+20%, +6% pro forma)
  • Germany £101m (+25%, +10% pro forma)
  • International £179m (+13%, +3% ).

  H1 2008 adjusted operating profit and margin by geography (with comparative pro forma margin in H1 2007) was:

  • Nordics £42m, 8.4% (8.8%), of which Sweden 56% (c. £23.5m)
  • U.K. £22m, 6.3% (1.3%)
  • France £26m, 7.3% (7.7%)
  • Netherlands £21m, 7.5% (8.4%)
  • Germany £4m, 3.6% (3.6%)
  • International £3m, 2.0% (3.1% ).

  The decline in operating margin in France and the Netherlands was due to an imcrease in the use of sub-contractors.

  H1 2008 book-to-bill was 105%, up from 100% in H1 2007.

  H1 2008 book-to-bill by region (with book-to-bill in H1 2007) was:

  • Nordics 115% (101%)
  • U.K. 98% (104%)
  • France 106% (94%)
  • Netherlands 100% (106%)
  • Germany 110% (93%)
  • International 103% (94%)

  Headcount at end H1 2008 was 39,201, a net addition of 461 from end December 2007

  Headcount at end H1 2008 by region was:

  • Nordics 9,795
  • U.K. 5,536
  • France 8,979
  • Netherlands 5,967
  • Germany 2,050
  • International 6,874.

  Headcount in near/offshore locations increased at end H1 2008 was over 3,900, up from 3,450 at end 2007, with most of the increase (400) in India. This total number includes personnel engaged on internal support activities. Logica has identified c. 500 posts in areas such as application development and maintenance which will start to be offshored during H2 2008.

  Outsourcing contributed 31% of total revenues (also in H1 2007).

  Logica has revised full-year 2008 guidance of pro forma revenue growth in the region of 4%, up from prior guidance of 3%.

  Analyst comments:

  Given that Logica is just a few months into its revitalization plan, this is a solid half year's performance. Logica achieved:

  • Revenue growth in all geographies and in all sectors, even financial services, which posted 5% year-over-year growth
  • Improvements in profitability, excluding exceptional items
  • Improved book-to-bill at group level.

  In the U.K. revenue in the commercial sectors was up 4%, a marked improvement from 2007 when commercial sector revenues declined by 24%.

  The book to bill ratios in the U.K., the Netherlands and in the Outsourcing division (102%) present immediate challenges. Logica has recently strengthened its sales capabilities in these geographies, but a significant improvement in the book-to-bill for outsourcing may not be evident before 2009.

  Logica is not the only vendor who has had to increase its use of subcontractors in France this year: other vendors in this situation include Sopra and Atos Origin. While the use of an additional 400-500 sub-contractors in France and the Netherlands gives an increased flexibility in an uncertain market, Logica will need to demonstrate an improved margin in these countries during H2 2008.

  There is likely to be an acceleration in the increase of the use of offshore resources for service delivery now the incentive plans include targets for offshore delivery.

• Logica Awarded Managed Testing Services Contract Extension by Volvo

  Aug 14, 2008 | Contracts by Rachael Stormonth
  industry: Automotive

  Logica has been awarded a testing services contract extension by Volvo.

  Logica has been providing test services from Volvo Cars' central test center in Gothenburg, Sweden since 2007. The initial contract was for performance testing; this has now been extended to include functional testing services.

  These services will be delivered from the Gothenburg center and also from other countries.

  Analyst comments:

  NelsonHall has recently published extensive market research on Testing Services (for details contact rob.hughes@nelson-hall.com). Logica is a major testing services provider with an estimated 10% market share in Europe.

  Volvo exemplifies organizations who have moved from staff augmentation for testing towards service delivery from factories. This contract illustrates a newer style engagement for specialist testing services, with the service provider being charged to take a systematic approach to the planning, design and execution of testing and having project management and IT advisor responsibilities. Service delivery will now move to multi-shore.

• Océ Business Services Launches Transpromo Suite of Offerings

  Aug 13, 2008 | New Offerings by Rachael Stormonth
  

  Océ Business Services has launched a suite of transpromotional print and mail (transpromo) services within its Professional Services portfolio.

  The suite comprises:

  • Océ TransPromo Application Development Services (TADS): application development and design, campaign and statement messaging strategy development, color consultations, usability testing, post-implementation benchmarking, data mining and data metrics, offered by Océ and through partners including NEPS, LLC and Art Plus Technology
  • Support services including consulting and workflow analysis, implementation services, application development, custom solution development, project management, customer education, print sample generation, media testing and ongoing support
  • Océ software and hardware products including Océ Document Designer Advanced software and Océ digital printers.

  Analyst comments:

  There is growing market interest in "transpromo" (combining promotional material with transactional documents such as statements and invoices) and a number of service providers are increasing their focus on this area.

  This new offering from Océ Business Services centers on Océ's software and hardware products with related IT and support services bundled in. It does not extend to a full business process outsource offering whereby the vendor takes on full responsibility for design, print & mail of transpromo documents for the client.

• Pitney Bowes Management Services Launches Government Document Processing Offering

  Aug 13, 2008 | New Offerings by Rachael Stormonth
  industry: Federal/Central Government

  Pitney Bowes Management Services' Government Solutions unit has launched a document processing offering for US. federal government agencies.

  Activities covered within the Pitney Bowes Document Processing Solutions for Government (Government DPS) offering encompasses contracts management, Freedom of Information Act (FOIA) requests, benefits and grants processing, claims management and review, and other workflow-related tasks requiring backfile conversion .

  The offering comprises:

  • Inbound document processing services
  • Records and information management.

  These are offered:

  • On a "best site" basis, with onsite, nearsite and offsite options: a network of regional and national processing centers in the U.S. provides imaging services for backfile conversion and government blowback projects
  • On a standalone or bundled basis.

  Benefits from this offering are based on:

  • The consolidation of mail, print, imaging and records management activities
  • Increased digitization of inbound transactional mail
  • Increased use of multiple channels
  • Standardization of document management processing and technologies.

  Analyst comments:

  In November 2007, following the announcement of its Q3 2007 results, Pitney Bowes announced that it was exploring strategic alternatives for its U.S. Management Services business. One of the major challenges being faced by the business was the underperformance of its litigation services unit, possibly reflecting a lack of integration of 2 acquired businesses.

  Pitney Bowes has recently concluded this strategic review, deciding in the end to retain rather than divest the business.

  The timing of the announcement of this new offering coming soon after the Q2 2008 earnings release (see separate article) indicates that it is one of several market opportunities for PBMS identified in the strategic review.

• T-Systems Awarded 7-Year IT Outsourcing Contract Renewal By Inselspital

  Aug 13, 2008 | Contracts by Katharina Grimme
  industry: Healthcare Providers

  T-Systems has been awarded a 7-year renewal contract by Swiss hospital Inselspital for the management of its IT infrastructure and applications.

  Services provided include:

  • Management of IT and TK infrastructures
  • Management of medical, administrative and financial applications
  • Electronic document management and archiving, e.g. of patient records
  • Management of 2,800 desktop users
  • IT modernization projects.

  Since 2000, T-Systems has managed the hospital's IT services and has helped implement workflow systems and an electronic patient record archive.

  Analyst comments:

  This is an important renewal for T-Systems as it strengthens the company's position in the healthcare sector, which has significant potential for further growth.

  Most importantly, T-Systems does not just provide basic IT infrastructure and network services, but also operates healthcare-specific applications such as hospital information systems and SAP for hospitals.

• First Data Awarded 7-Year Card Processing Contract By Nordstrom fsb

  Aug 12, 2008 | Contracts by Andy Efstathiou
  industry: Retail Banks

  First Data has been awarded a 7-year card processing contract by Nordstrom fsb, a savings bank wholly owned by Nordstrom Inc., the retailer. Nordstrom fsb has a 4.5m card portfolio.

  Services provided include:

  • Card processing
  • Call center
  • Middle office automation tools
  • Fraud and risk management
  • Customer analytics
  • E-statements
  • E-mail alerts for the card portfolio including: Nordstrom Visa, private label credit and debit cards and commercial cards for Nordstrom employees.

  Analyst comments:

  The Nordstrom contract has 3 interesting aspects:

  1. The contract was awarded based on the middle office automation tools and analytic tools provided. Increasingly card processing contracts are being awarded based on consumer analytic services and tools provided as part of the contract
  2. This contract has a term of 7 years. In recent years contracts have been written for progressively shorter terms. We are just beginning to see some contract written for longer terms, as is the case with this contract. Contracts written for longer terms are done when critical platforms are replaced or implemented. In this case, the analytics and automation tools are that change in platform
  3. Nordstrom fsb is a retailer owned bank. Retailers are increasingly exploring and setting up banking captives to provide financial services to their consumers. Those captive banks always require 3rd party processors to conduct operations.

• NCO Group Reports Q2 2008 Revenues Up 22.8% to $405m

  Aug 11, 2008 | Financial Results by Katharina Grimme
  

  NCO Group has announced Q2 2008 revenues, for the period ending 30 June 2008, of $405.0m, an increase of 22.8% compared to Q2 2007.

  The company incurred a net loss of $14.8m, with EBITDA of $31.8m. These results include an allowance for impairment of purchased accounts receivable of $24.6m and approximately $4.9m of restructuring and other non-recurring charges primarily related to the acquisitions of:

  • Systems & Services Technologies Inc.
  • Outsourcing Solutions Inc. (OSI)

  Excluding the impact of the impairment and non-recurring charges, NCO had revenues of $429.6m and EBITDA of $61.3m.

  Q2 2008 revenues (and revenue growth compared to Q2 2007) by division before intercompany eliminations were:

  • Accounts receivables management (ARM) $334.8 m (+45.5%)
  • Customer relationship management (CRM) $84.8m (+3.9%)
  • Portfolio management $8.8m (-79.8%).

  The increase in ARM's revenue is primarily attributable to the acquisition of OSI in February 2008, which added $106.0m of revenues.

  The fall in revenues from Portfolio Management is due to:

  • A $24.6m impairment charge
  • A weaker collection environment in 2008

  Analyst comments:

  NCO is feeling the impact of the economic downturn in its accounts receivables management with a decrease in collection yields partially offset by an increase in demand for early stage delinquency management services.

  NCO's top-line Q2 2008 revenue growth in accounts receivables management (ARM) was due to the acquisition of OSI, with ARM revenues down slightly on an organic basis.

  Approximately two-thirds of NCO's ARM revenues are priced on a percentage of collections, and collection yields decreased as a result of the economic downturn in the U.S. at the end of Q2 2008. However, the economic downturn also led to increased activity in early stage delinquency management services.

  NCO is also countering increasing cost pressure from its clients by decreasing its emphasis on its Canadian operations and enhancing its delivery capability in the Philippines and Central America.

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