Ebix, Inc. (NASDAQ: EBIX) is a supplier of software and e-commerce solutions to the insurance industry. The company makes money by providing a series of application software products for the insurance industry from carrier systems, agency systems to custom software developments in both insurance and financial industries. Because IT infrastructure is not a material revenue generating factor in most businesses, it is often neglected during business downturns, therefore hurting Ebix's margins. The recent increased consolidation within the insurance industry will help boost Ebix's top line.
The insurance industry has undergone significant consolidation in the past few years driven for the needs of economies of scale. As the insurance markets have also seen a steady increase to reduce paper-based processes and efficiency, the fact that 71% of Ebix revenues came from on-demand insurance exchanges helps drive business growth for Ebix. The management believes that the insurance industry will continue to require a need for software integration services as consolidation continues, creating new opportunities for Ebix.
When a company is strapped for cash, improvements in Information Technology is often put on the back burner as the company needs to focus on its core products. This is specifically because information technology facilitates efficiency, but managers' intentions to protect the bottom line often strip IT spending until it is absolutely necessary.
In the case of an economic downturn, it is highly likely that Ebix will lose a large part of its business. Further, if Ebix attempts to replace this lost traffic, it may be likely that the increase in sales and marketing expenses does not offset additional revenue.
Cloud Computing technologies have become more and more useful in corporate daily operations. The ability to work on the same project, but thousands of miles away saves money and time on business travel. As a result, businesses have become keen on adopting these technologies to create greater efficiency.
One problem that occurs in any new adoption of IT technology is the integration of old technologies. As businesses continue to adopt cloud computing resources, clients will need the services of IT developers such as Ebix to provide an easy transition. Ebix therefore stands to gain greater customer traction through these venues.
The IT industry is dominated by large players such as: