The Kenya Commercial Bank (KCB) and an international software company are embroiled in a Sh5.1billion claim at the heart of allegations of software piracy, copyright infringement, threats and intimidation, The Informer can authoritatively reveal.
Already, Nagalakshi Solutions Limited (NLS) through Lumumba and Lumumba Advocates has applied for court injunction to restrain KCB from continued fraudulent use of the NLS computer software. However, NLS has not filed Sh5.1billion demand in court.
Investigations by The Informer established the strain between the bank and NLS was sparked by botched takeover bid of NLS shareholding by the bank’s top officials, a move that was declined by NLS management.
The bank’s top management is split right down the middle over what insiders’ term as “administrative failures” in handling the matter that risks possible bank shutdown.
The Board of Directors is set to have a crisis meeting to deliberate over the matter. They prefer an out of court settlement with the software provider to save the bank from hefty compensation.
KCB Chief Executive Joshua Oigara is at the center of the much intricate controversy pitting Kenya’s biggest bank in terms of asset base and where government is a major shareholder.
Already, NLS Chairman Nagarajan Karthik has recorded statements at the Directorate of Criminal Investigations headquarters headed by Ndegwa Muhoro over threats he received from one of the bank top official.
KCB is also accused of falsifying information to other local and international financial institutions on the quality and efficiency of the NLS system which is also used by the Central Bank of Kenya.
In an blow by blow account, documents in our possession show that in 2015, KCB, though the then Chief Information Officer (CIO) of the bank, approached the software company’s chief executive officer with a proposal that would see the bank own 49 per cent of the company.
This, it seemed would make business sense for the banker. After all, between 80 and 90 per cent of the banks businesses went through applications designed by NLS.
NLS maintains that to date, KCB still runs a bulk of its business on NLS software, even after the software developer manufacture terminated the contract between the two companies.
NLS claims Sh5.1 billion demand for illegal use of the software as well as lost revenue as a result of what it claims to be malice on KCB’s part.
Further, KCB is expected to pay Sh2million per day since last year when the asserted to have dropped the NLS Software but continued to use it without authority.
NLS signed the contract on May 18, 2011 and terminated it on November, 27, 2016. The bank has deliberately frustrated attempts to bring on board an independent software auditor to establish the bank’s claims. For close years the two companies worked together to create a near perfect platform that partly contributed to the bank’s super growth between the years 2012 and 2015.
In 2010, NLS Banking Solutions won a contract for the defaulter reporting system by 2010 at KCB. After a successful implementation of the system KCB insiders told The Informer that NLS was seen as a team that could get KCB solutions to address some of their most burning IT issues.
Current and past employees of the bank say during this time, KCB was facing persistent network downtimes particularly with branches in rural areas that are usually characterized with poor network infrastructure. The only option at that time, it seemed, was satellite communication.
These brought about several other challenges like teller systems downtime, performance issues and high operating expenses, which meant serving customers was near impossible. Another key concern was around their transactional processing systems.
Particularly, according to an internal KCB audit of their systems timeouts were pervasive (around 75% of transactions timed out or took long to complete), inability to effectively manage a silo of channels.
NLS stepped in the gap and filled this gap. And for the next few years, the bank and its clients saw better and faster service delivery by the financial institution.
Sources within KCB have informed us that NLS is threatening to strip its various software after it terminated that contract with KCB. Stripping of software is seen as an option KCB will not consider as that could have serious effect on operations and customer services.
Stripping of software is also a complicated process that will involve systems auditors. There are very few IT systems auditors for banks in Kenya. KCB upgraded its core banking system, Temenos T24 during the first half of 2016. NLS was recently selected to provide its branch resilience and teller integration platforms to several banks in Zambia.