Troubled Citigroup Sells IT Services Arm To India's Wipro - InformationWeek

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12/23/2008
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Troubled Citigroup Sells IT Services Arm To India's Wipro

The $127 million deal includes a six-year outsourcing contract under which Wipro will provide tech support to the bank.

Citigroup, one of the U.S. banks hardest hit by the global credit squeeze, continued to sell off piece parts this week in an effort to shift the bulk of its focus onto core banking operations.

In the latest deal, Citi said it had reached an agreement with Indian IT outsourcing company Wipro Technologies under which Wipro will acquire Citi's tech services unit for $127 million. As part of the deal, announced Tuesday, Wipro will provide a range of IT services to Citi for six years for at least $500 million.

"This transaction is consistent with our efforts to improve our operating leverage while we focus on our core banking competencies," Citi chief administrative officer Don Callahan said in a statement.

An undisclosed number of employees of India-based Citi Technology Services, as the bank's IT services arm is formally known, will join Wipro.

Citi executives hinted that the deal signals a plan to rely more heavily on offshore services in an effort to cut costs. Indian programmers are generally paid less than half of what their American counterparts earn.

"This partnership enables Citi to leverage Wipro's expertise in information technology services where we have significant plans for driving higher efficiencies by leveraging the global delivery model," said Citi CTO Marty Lippert.

In October, Citi reached a deal to sell its business services unit, Citigroup Global Services, to India's Tata Consultancy Services for $505 million. The unit provides call center operations management and other services to Citi's worldwide operations.

The pact includes an arrangement for TCS to provide business services to Citi for 10 years for $2.5 billion.

Earlier this month, Citi announced completion of the sale of Citibank Privatkunden AG & Co. KGaA, its German retail banking operation, and a number of affiliates to French bank Credit Mutuel-CIC, for about $6.6 billion.

In its most recent quarter, Citi reported a net loss of $2.8 billion, or 60 cents per share. Citigroup shares were off 1.63% to $6.64 in late-morning trading Tuesday.

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