Citigroup BPO Sale Should Go Through This Time

Ann All

Just about a year ago, reports of Citigroup's intent to sell its captive BPO operation in India started appearing everywhere, creating buzz of a coming flurry of such sales. Neither that deal nor the copycat sales materialized.

 

At the time, though, consulting company TPI noted three trends it said could lead to more companies selling their captives: a need for companies to relieve themselves of "stranded assets" by offloading captives in favor of third-party BPO deals; captives mature enough to spur buyer interest; and visible valuations of captives.

 

Since then, we've seen spiraling costs in India, which tend to hit captives harder than other outsourcing operations, and a growing interest in BPO. Not only that, but Citigroup -- and other U.S. financial services companies -- are still struggling to recover from the credit crisis that hammered their bottom lines.

 

So not surprisingly, once again Citigroup Global Services is reportedly about to be sold. This time it seems like a safer bet the deal will happen. The Economic Times reports that IBM is the lead suitor for the deal, though Europe's Capgemini and India's Tata Consultancy Services are also rumored to be in the hunt.

 

Citos, the Indian operation's technology and infrastructure arm, also will be part of the deal, according to the Times, which puts the price at $800 million.


 

What will the buyer get? In a sidebar, the Times says that Citos employs 2,500 people based in four facilities in Chennai and Mumbai. It provides services for Citigroup in 30 countries. It handles remote infrastructure management and a small amount of application development. Citigroup Global Services employs 11,000, mostly in Mumbai.

 

According to the Times, the deal would include all staff and hardware assets, and more important, a commitment of minimum business for three to five years. This seems like a perfect fit for IBM, which has been pumping up its presence in India.

 

Centralizing its internal tech operations should yield up to $3 billion in savings over three years for Citigroup, the company's chief administrative officer said during a recent call with analysts.



Add Comment      Leave a comment on this blog post
Nov 30, 2009 2:01 AM David David  says:

I totally agree that the Citigroup BPO Sale Should Go Through This Time.

Thank you

Reply

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