Citigroup hugs TCS, Wipro; ditches Infosys

By SiliconIndia   |   Friday, 29 May 2009, 03:22 Hrs   |    8 Comments
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Citigroup hugs TCS, Wipro; ditches Infosys
Bangalore: India's second largest IT exporter Infosys Technologies could see around $25 million of its annual revenues from Citigroup go to rivals, as the U.S. financial major planned to consolidate its outsourcing in India with TCS and Wipro, dropping others such as Infosys.

The Citigroup had sold its back-office captive centres to TCS and Wipro last year. As part of the deal, Citibank has a $2.5-billion nine-year contract with TCS and a $500-million six-year contract with Wipro, reported The Economic Times. An official at one of these companies, requesting anonymity, said "Citi's entire infrastructure management, back office and maintenance work is being shifted to TCS and Wipro, including around $25 million worth of contract with Infosys."

However, since Infosys derives only negligible amount of revenues from Citi, the company is not expected to be hit severely. Infosys has over $50-million contracts with top U.S. banks like Bank of America and American Express. Concerned companies are yet to comment on the deal.

Like last year, Citigroup plans to spend around 8 percent of its revenues on IT this year and also wants to work with fewer vendors handling more work at lower rates to control the cost. According to an outsourcing expert, who requested anonymity, Citi wants to save over $1 billion in IT costs this year alone by integrating various systems and consolidating its supplier base.

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 for the vendors. By selling off these non-core captive operations, bundled with long-term outsourcing contracts, Citi was able to get better rates from TCS and Wipro.

Jagdish Rao, global technology head, Citi said in December last year that he would focus on reducing costs. "The focus is on how much more can we get out of the existing budget," said Rao. Citigroup outsources IT contracts to leading vendors such as IBM, TCS, Wipro and Infosys. "A large part of our IT budget is dedicated to infrastructure and application maintenance, and that will remain a mandatory spend," he said.

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