Citibank Overhauls Overseas Systems

Analysts: Replacing systems, creating cross-border standards may exceed $100M

In what analysts are estimating to be a $100 million-plus project, Citibank is replacing a decades-old set of back-office corporate banking systems in all of its overseas corporate offices with a single platform, which will allow it to create a cross-border set of standard user interfaces and business processes.

The New York-based bank has already completed changeover projects in the Asia-Pacific region, Western and Eastern Europe and Latin America, using a software suite it purchased from an India-based technology vendor spun off by the bank three years ago.

The changeover, which began in early 2000, is expected to continue through 2004. There are still rollouts to be completed in more than 100 countries. Citibank formally disclosed its work on the project late last month.

The bank said the project will pay for itself by letting the company avoid development costs related to a clunky legacy back-office system. Developed in-house in the 1970s, the old system has morphed into 58 disparate software applications, said Jeff Berg, executive director of program management at Citibank's parent, New York-based Citigroup Inc.

"In the '70s, we were growing rapidly in countries around the world. To get up and running quickly, we'd use this system called Cosmos [Consolidated Online Modulated Operating System]," Berg said. "As the bank grew, we did make a mistake in that we released the source code to each of the countries, and they changed it."

Berg said Citibank now has a single system that's customized for each country it operates in, using each nation's language, regulatory rules and business processes.

Although it's not unique, the back-office system replacement is the largest of its kind, analysts said.

According to Avivah Litan, an analyst at Gartner Inc. in Stamford, Conn., mapping historical data is usually the biggest challenge in a systems changeover for an organization of Citibank's size. "Also, it's all the logic on the accounts," Litan said. "They have all these business rules . . . embedded in old Cobol code. [In] the old systems, the data and intelligence [are] all in the same programs. They're not separated out into different ones like modern applications."

Both Litan and Octavio Marenzi, managing director at Boston-based Celent Communications LLC, said the project will cost more than $100 million and could even run in excess of a half-billion dollars. The ultimate cost of the project will depend on how many consulting firms Citibank uses to help analyze the existing systems and migrate data over to the new platform, said Litan.

Berg said Citibank plans to reduce the number of its data centers in Europe from 18 to about four by standardizing on the new banking platform from i-Flex Solutions Inc. in Bangalore, India. The bank anticipates an 18-month return on investment, said Berg.

The software, called Flexcube, is based on an Oracle database. It automates the general ledger as well as customer accounting, deposits and withdrawals, and interest on accounts, among other services. Instead of addressing multiple platforms, Citibank will be able to simply change parameters in the new software to incorporate a particular country's language, regulations and currency conversions.

"The conversions are quite exciting. Those are weekend kinds of efforts that usually occur around month's end," said Berg. "What we're finding is anytime you install a system like this, you have opportunities to reconsider your business processes. Because we're making the shift from a country to regional back-office system, it definitely gives us opportunity to create . . . standardization."

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What Citibank had:

A back-office corporate banking platform built in the 1970s and used in more than 100 countries; because source code was released, the bank wound up with 58 disparate platforms.

Each platform conformed to local business rules but didn’t share information efficiently across borders. Citibank would have to recode the software on each of the 58 platforms to update them for a standard format.

What Citibank will have:

A single platform based on software from a former offshore development arm of Citibank

Four data centers in Europe, consolidated from 18.

Language and regulatory requirements that can be adapted through use of parameters in the software

A new set of standardized, cross-border business procedures

Copyright © 2002 IDG Communications, Inc.

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