BANGALORE: Having sold its back office and IT captives to TCS and Wipro last year, Citigroup is now exploring sale of its internal technology platforms, bundled wit outsourcing contracts worth almost $350 million, as the bank seeks to exit non-core businesses and outsource more processes.
At least three persons familiar with Citi’s outsourcing strategy said the bank is in discussions with Indian tech firms and other multinationals for an outsourcing contract, which will come with an upfront payment of anywhere between $25 and $50 million each for the bank’s internal equity trading and asset management platform.
“These internal technology platforms are being used for delivering equity trading and asset management services. By selling these off, the bank wants to monetise these assets, and also bundle a multi-year outsourcing contract for better rates,” said a person familiar with the discussions. As reported by ET a few months ago, Indian tech firms were exploring to buy Citi’s internal technology systems for gaining better expertise and capability to serve more customers using the same platforms. Another person familiar with Citi’s plans told ET that the bank has been discussing this transaction with HCL, Wipro, TCS and Patni Computer Systems. These companies would not offer any specific comments about a potential deal with Citi.
When contacted by ET on Monday, a Citi India spokeswoman declined to comment on this issue. “If discussions progress the way it’s expected, we could see these transactions happening by around Thanksgiving (November 26),” another person added.
Meanwhile, this is not the first time Citi is exploring a transaction bundled with a multi-year outsourcing contract. Citibank sold its Indian back office business to TCS for around $505 million in October last year, and Citi Technology Services for around $127 million to Wipro in December last year. Both these transactions came with assured outsourcing business of almost $3 billion for these vendors.
By selling off these non-core captive operations Citi was able to get better rates. Outsourcing expert Siddharth A Pai, MD of TPI India, say that service providers buying platforms from customers is not a new trend, and it makes sense if leveraged well.