Offshore outsourcing and IT services provider Wipro Ltd. is buying Citigroup Inc.'s IT subsidiary in India for $127 million, under a deal that also gives Wipro a six-year contract worth at least $500 million to provide technology services to Citi.
But as Soumitro Ghosh, senior vice president of finance solutions at Wipro, explains it, one of the major benefits that the Bangalore, India-based vendor expects to gain from the acquisition of Citi Technology Services Ltd. is the Citigroup unit's ability to deliver infrastructure outsourcing services to other customers.
Many U.S. companies, especially in the financial services industry, operate their own offshore centers in India and other countries as an alternative to contracting with offshore providers. Citi Technology Services, which was set up in 2005, has about 2,000 full- and part-time employees in the Indian cities of Mumbai and Chennai.
But Citigroup has been using its India-based operations not just for software development or tech support, but also to provide remote infrastructure management services, including administration of internal databases, networks, desktop systems and midrange servers.
The financial services firm "successfully demonstrated" that infrastructure outsourcing can work in offshore locations, Ghosh said. "What we intend to do now is scale it up," not only for Citigroup but also as a model for other clients, he added.
The sale of the Citigroup unit, which was announced today, is expected to be completed before the end of next year's first quarter.
Citi Technology Services is the second India-based operation to be sold off by Citigroup, which last month announced plans to cut 52,000 jobs. In October, Citigroup said it had agreed to sell Citigroup Global Services Ltd., which does business process outsourcing and IT services work, to Tata Consultancy Services Ltd. for $505 million. As part of that deal, TCS will provide BPO services to Citigroup under a contract valued at $2.5 billion over a nine-and-a-half-year period.