IT cos to gain from Citi’s cost-control steps

  CITIGROUP is believed to be looking at ways to trim IT costs. This could spell good news for Indian IT vendors such as TCS and Wipro who count Citi as their top client. The bank, which has been repeatedly bailed out by the US government, has undergone a major restructuring exercise of its business portfolio in the recent past. It is looking to integrate thousands of systems and cut down on application, maintenance and development (AMD) costs, said a source close to Citi. This integration process will bring new
business for Indian IT vendors such as TCS, Wipro and Infosys as the bank is keen to outsource the process to save costs. A Citigroup spokesperson said, "We have no detail or confirmation of these developments at the moment."
    While this could translate into new business contracts for Indian IT vendors, the existing AMD and IT services contracts could see a 15-20% drop in budgets over the next 6-8 months. After the acquisition of Citi's back-office CGSL in the second-half of 2008, TCS considers the bank as its top client accounting for 4.7% of its revenues in fiscal 2008-2009. This has dropped by 1.5% since the first quarter.
    However, a TCS spokesperson declined to comment on any specific client, while a Wipro spokesperson said, "We do not comment on speculative reports and we continue to partner with Citi in increasing diverse initiatives to improve the efficiency of their IT systems and operations."
    Infosys, which has a contract of around $30 million with Citi, believes that this could create an outsourcing opportunity for them. "The bank's decision to cut down on their IT spends will not impact us. This exercise could actually create more outsourcing opportunities for us," said Infosys CFO V Balakrishnan.
    Citi, which has about seven data centres and accounts for almost 60% of its IT budgets, has also started the integration process of these centres, aiming to bring them down to four, said another source.

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