Looking to game it

SILVERLAKE Axis Ltd has made a name for itself as a leading financial solutions software company in South-East Asia. Today, more than 40% of the region’s top 20 banks uses its core banking solutions. However, founder and group executive chairman Goh Peng Ooi is now looking beyond just the bread-and-butter business that has taken it thus far.

That is why in the past five years, through a series of acquisitions, the company has moved beyond the banking industry to retail, logistics, payment, insurance and mobility/internet solutions. It is also diversifying geographically, as analysts believe the acquisition of New Zealand Stock Exchange-listed Finzsoft Solutions Ltd will provide the company the platform to expand in the wider Asia-Pacific region.

Though Goh will not admit it, competitors are out there. Silverlake Axis’s website lists Infosys Ltd, Tata Consultancy Services Ltd, Oracle Financial Services Software Ltd and Temenos Group AG as its competitors. Therefore, the company has been looking at where its next growth areas will be.

For now, UOBKayHian analysts say that the company’s revenue growth will be driven by the resilient recurring income from the maintenance and enhancement services segment, where revenue rose 20% in the second quarter ended Dec 31, 2014 compared to the same quarter a year ago. On the other hand, sales of software and hardware products plunged 78%, software project services fell 27% and software licensing posted 9% lower revenue.

Overall though, Silverlake Axis saw net profit grow 18% year-on-year for the first half of financial year ending June 30, 2015 compared to the same period a year ago.

The future, Goh believes, is in game theory and its use to predict changes. He is interested in how these changes can affect businesses. In fact, Goh has refined his theory into the Goh Mathematical Intelligence game theory or Goh (MI) for short.

He is convinced that the company’s future lies in software and not hardware. Goh says software margins are superior to those of hardware margins but the cost pressure from employees who sell hardware is higher. “We try very hard to focus on software,” he adds. The company’s gross profit margin is around 66%.

Game theory is predicated on mathematical principles. In fact, throughout the two-plus hours interview with StarBizWeek, game theory, mathematics and philosophy were constantly referenced.

Goh says a management meeting was held earlier this week in which the past 25 years of Silverlake Axis’s work was recapped. “It took me three hours for that simple talk and I was trying to make it simple. It was about what made us successful, why we did things and what we are going to do. If you look at it, it is all about predictions. Business is about the prediction of demand,” he points out.

“The game theoretic business is coming. I am very good at Goh (MI) game theory and I am not going to be humble about it,” Goh says, adding that the use of mathematics as the foundation of Silverlake Axis’s business has allowed the company to stay ahead of the competition.

Where does he see the company moving to from here? “People ask me where I am going from banking. I think that question is fundamentally wrong. Everything is game theory but the game has different types of characeristics. The first one is the one-to-the-power-of-n game,” he says.

This is when supply is more than demand. “The way to lift the game is through franchising. I am surprised that people think I am in the banking business and I write banking software. We write game theoretic software, if we specialise in game theory, why should we fight in the one-to-the-power-of-n game? We will do a game of game, which is like franchising,” Goh says.

In fact, the company hopes to use game theory to predict so-called exceptions, which are instances that deviate from the norm that people still cannot accurately predict, the “unknown unknowns”. Goh hopes that the solution will not only be useful to banks but other industries too.

“When you look at game theory in business, it will be first applied to where the money is, which is banking. That’s why people thought we’re a core banking vendor but people don’t know we’re actually a research group researching on Goh (MI) game theory, there are so many places where the theory can be applied to but it will take some time for people to appreciate it,” he says.

Goh, who holds a 66.29% stake in the company via Intelligentsia Holding Ltd, says the move into non-banking businesses will also eventually see the listing of parts of Silverlake Axis. “It’s all about the right place and time. There’ll be more listings to come,” he says. But investors find it hard to comprehend technology-based companies and even in the region, where Singapore-listed Silverlake Axis has a S$3.19bil market capitalisation, and where the bulk of its business derives from, many do not understand the company.

Indeed, UOBKayHian’s analysts say the company’s Chinese subsidiary, Beijing-based Global InfoTech Co Ltd, has submitted its initial public offering application and is on track to be listed in the second-half of this year.

Although Goh prefers to list in Singapore, the lack of investor understanding of Silverlake Axis’s business is an obstacle to a successful listing in South-East Asia. Plus, there is a need for share subscribers, which will be fewer if investors do not understand the business.

“In South-East Asia, we’re recognised for our core banking, but in other parts of the world we are recognised as an advanced software developer that develops game theorectic software. We’re in airlines, retail, stockbroking, insurance, investment funds and in many industries. But we don’t do it the one-to-the-power-of-n way. That’s the reason why people don’t recognise us because they’re only familiar with what they can see,” he says.