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Citigroup to stay with TCS, Wipro, drop Infosys
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Citigroup to stay with TCS, Wipro, drop Infosys
The Bangalore-based Infosys could see around $25 million of its annual revenues from Citi go to rivals like TCS and Wipro, according to an official at one of these companies, requesting anonymity.
Citibank has a $2.5-billion nind-year contract with TCS and a $500-million six-year contract with Wipro. However, since Infosys does not derive any significant revenues from Citi, the company is not expected to be hit severely. Infosys has bigger, over $50-million contracts with top US banks, including Bank of America and American Express.
“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,” the official said.
An Infosys spokeswoman declined to comment about a specific customer. TCS and Wipro officials also did not comment.
When contacted by ET on Thursday, Godwin Chellam, a spokesman for Citi did not offer any specific comments.
In a year when Citigroup plans to spend around 8% of its revenues on IT, unchanged from last year, the biggest US bank wants to sweat the buck more by working with fewer vendors handling more work at lower rates. 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.
“In tough times, customers such as Citi can give you volume growth, but lower rates, they have better bargaining powers,” admitted a senior executive at one of the vendors working for Citigroup. He requested anonymity because he did not want to offer official comments about a customer’s outsourcing strategy.
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 Mr 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.
While TCS gained a back office contract worth $2.5 billion over a period of nine years as part of the deal, Wipro signed a master service agreement with Citi for a six-year infrastructure management contract worth $500 million. “It could be twice as much of that amount over the next few years,” Mr Rao said. “As we face these challenges, there will be greater demand to move more work to offshore locations,” Mr Rao added.
Source:
http://economictimes.indiatimes.com/Infotech/Citi-to-stay-with-TCS-Wipro-drop-In