BANGALORE/MUMBAI: Wipro Technologies on Tuesday said it is buying the IT arm of Citigroup in India for around $127 million. The deal could yield contracts worth up to $1 billion for India’s third-largest software exporter from the global financial services provider.
The all-cash deal to acquire Citi Technology Services (Citos) comes with a commitment by Citigroup to outsource all future infrastructure management contracts to Wipro, which will absorb some 2,000 Citos staff in Mumbai and Chennai. As part of the deal, Wipro will deliver infrastructure services and provide application development and maintenance to Citi for six years, assuring the Bangalore-based company of at least $500 million in revenues over the period. “It could be twice as much over the next few years,” said Jagdish Rao, Citi's global technology head. “As we face these challenges, there will be greater demand for moving more work to offshore locations,” he added.
Captive organisations of large customers have always been an attractive target for technology vendors such as Infosys, TCS and Wipro. In October, TCS acquired the Indian BPO arm of Citibank for around $505 million in a deal which came with assured business of some $2.5 billion over nine years from Citibank. Citigroup Global Services, the BPO arm, is expected to generate revenues of around $278 million this year alone.
Citigroup outsources IT contracts to leading vendors such as IBM, TCS, Wipro and Infosys. “A large part of our IT budget is dedicated to infrastructure and application maintenance, and that will remain a mandatory spend,” he added.
Move affects employees?: Yes
The move incidentally would also help Citi in cutting down its employee strength. Citos employs close to 2,500 people and has offices in Mumbai and Chennai. Citi had earlier said that it is looking at cutting down 15% of its employee base or 52,000 employees in the next one year.
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