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August 22, 2005

Kanbay continues growth as financial sector IT specialist

Since going public last year, financial sector IT services provider Kanbay International Inc has grown its revenues and workforce at a fast pace and expanded its client base. Earlier this month the company reported solid sales and incomes, and it expects revenue of at least $235m for the full year, up from $182m in 2004.

By CBR Staff Writer

Looking to the future, Kanbay’s strategy for continued growth strategy relies mostly on organic growth, either by expanding its existing relationships with its clients or by adding new customers, said Jean Cholka, Kanbay’s executive vice president of sales, marketing and strategy.

The company has a 97% retention rate among its 55 clients, giving it a steady, dependable source of revenue from existing clients. Morgan Stanley and banking group HSBC and investment make up about 80% of its revenue as of Q3 2005, but Kanbay is confident about these contracts. For example, Cholka said the deal with HSBC, by far Kanbay’s biggest customer, is a long-term arrangement.

Cholka also said the company, which saw a nice inflow of cash from its $93m IPO, would be interested in future acquisitions as a way to improve its services or to add new clients.

The company continues to rely on its specialized offshore delivery model that establishes a scaled, offshore version of a customer’s IT operation. Staffing is largely local Indian hires and specialists from the relevant fields. For example, Kanbay would place employees with direct experience working in the insurance industry on its insurance projects.

Kanbay currently has 4700 employees worldwide and plans to expand its operations in India to have some 6500 workers in that country alone by early next year, Cholka said. The company currently has development centers in Pune and Hyderabad, and it has just bought land in Chennai to set up a new center.

The company continues to closely monitor its pipeline and make staffing decisions based on which deals it believes will most likely be signed, Cholka said. The overall ratio of onshore to offshore employees is about one to six, she added.

Kanbay concentrates on four main financial services areas. Credit card processing accounts for 41% of sales, banking for 22%, capital markets for 21%, and the insurance industry for another 21%. Cholka said the company doesn’t expect these numbers to change that much, although insurance revenue may increase because the industry has been late in terms of IT spending and has only lately increased its technology investment.

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Some 81% of Kanbay sales come from North America, another 11% from the Asia-Pacific region, and 8% from Europe. Cholka expects the European market to pick up, driven by an improved outlook for outsourcing deals in the region.

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