Oracle Corp. has become a bogeyman to America's traditional financial services vendors, with executives and analysts alike frequently speculating about what the $23 billion firm, which has spent a lot of money in the past few years gobbling up tech companies that play in the financial services tech space, will do to increase its stamp on one of the most lucrative sectors in the technology business.

Oracle's mid-decade acquisitions of a majority stake in Mumbai-based i-flex solutions, which offers an open architecture banking core, PeopleSoft, and CRM giant Siebel Systems, which gave it branch, teller and contact management capabilities, seemed harbingers of a sweeping move deep into bank technology. Even its 2009 deal to acquire Java-giant Sun (which just passed muster with European Union regulators in January) was viewed as evidence of its impending force in financial services, given Sun's impressive penetration of the sector. Not to be forgotten is the company's claim that 20 of the top 20 banks run Oracle databases.

But fears of a quick move to industry domination seem misplaced for now. Oracle's progress in financial services looks more like incremental advance than "progressive transformation," as the company has called its strategy.

That branding aside, Oracle's actions in the ground resemble a firm selling a wide range of IT a la carte more than a company looking to seize the entire enterprise in a single stroke. "We have a lot of flexibility in terms of how we can migrate institutions into new technology," says Don Russo, an svp in Oracle's financial services global business unit. "Banks can put in small slices of our solutions as they have the appetite. There is no big bang required."

Put another way, Celent's Bob Meara says, "You have to wonder about Oracle's ability and willingness to focus adequately to get their fair share of the U.S. banking market."

For now, Oracle's share of the U.S. financial services tech market is worth about $2.8 billion, according to Financial Insight's estimates of its 2008 financial services revenue. But most of these dollars are generated outside the U.S., and the financial services division accounts for only 12 percent of Oracle's total revenue.

Oracle's modest penetration of the market is not for lack of investment. In addition to i-flex and Siebel, CEO Larry Ellison has added numerous applications specifically geared toward the financial industry including business intelligence, financial messaging, wealth management CRM, and AML and fraud detection (via its 2006 Mantas acquisition). Oracle has also responded to regulatory pressure for institutions to integrate their views of risk and performance management, releasing in September a suite of financial services analytical applications that augment its enterprise performance management software. "We see tremendous opportunity in the analytics realm," Russo says.

And there have been some compelling success stories in some non-core banking projects. Bank of Montreal is a progressive user of Oracle's Reveleus Market Risk suite. Oracle reported last year that JP Morgan Chase uses Oracle's distributed document capture application to capture and index business documents, including loan applications, financial statements, invoices, and checks. BNY Mellon is a long-term customer of Oracle's Siebel CRM and BI suite across its client base; PNC is also a Siebel CRM user. The most recent version of Oracle's Flexcube Universal Banking system has timely appeal, given the market-it includes integrated support for all stages of loan origination and servicing, including mortgages.

"It's another avenue to reach out to institutions," says Karen Massey, senior analyst in IDC Financial Insight's consumer banking division.

And if it's had limited success penetrating the large U.S. institutions that would seem the best fit for an enterprise vendor of Oracle's heft, the door to the smaller bank and credit union market may be pried open a crack with the long-awaited first installation of the Siebel teller system that's rolling out this month. Ogden, Utah-based America First Credit Union, a $4.9 billion asset institution with nearly 500,000 members, announced three years ago that it would become Oracle's first teller-system client in this country.

While the rollout to America First's 100 branches has taken about twice as long as anticipated, credit union executives are enthusiastic about the system they helped Oracle design. "It's been a long road, but the reward will be very much worth it for us," said Randy Halley, svp of branch delivery at America First.

Among the changes America First requested to the Oracle system, which lengthened the implementation time, were the integration of check-image capture and a contact management system that links with the call center, e-mail and chat. "In the long run, what we've received from Oracle is a great system," Halley says.

America First was not deterred by Oracle's lack of U.S. retail banking experience when it signed on to become its first customer here, Halley said. It was more interested in being able to have a hand in designing the system.

But the America First rollout won't likely but much of a spigot in the near term, with retail banking shaping up to be one of the industry's lowest priorities in terms of financial technology spending. U.S. banks are only expected to increase annual spending on retail banking technology by 1.9 percent through 2012, compared to a rate of 4.5 percent for wholesale banking, according to a January report from Celent.

One thing analysts agree on, it's not lack of technical sophistication or innovation that's holding Oracle back. "Unquestionably, Oracle has the technical expertise and implementation prowess to succeed well in the U.S.," Meara says. "That's not up for debate. What is concerning is that Oracle's primary competitors in the U.S. space have lived their entire lives in financial services."

And while declaring it wouldn't be prudent to ignore the competitive impact of IBM, HP and Oracle, Fiserv CEO Jeff Yabuki says it's his intention, when possible, to continue to partner with these firms to bring more value to mutual clients. "Whether any of them will go further into the financial industry, I don't know; some of our peer companies have made a bigger discussion point of that," Yabuki says. "To date we haven't seen anyone go in with any real mass...and part of that is just a complexity issue. It's just a far more complex service model to deal with the 16,000 or 17,000 small institutions in the U.S."



Larry Ellison is the only CEO in Oracle's 32 year history. His two line, official Oracle biography adds, "he also races sailboats, flies planes and plays tennis and guitar."

The company's total revenue in FY 2009 was $23 billion; Oracle has made more than 50 acquisitions since 2005.

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