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Agenda
     Introduction
     Process outsourced by Citigroup
     Decision making process
     Outsourcing considerations
     Risk involved
     Comparison of expected outsourcing strategies & real situation
     Competitive Advantage brought by outsourcing
     Recommendation
     Conclusion


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What is                      outsourcin ?
     The practice of contracting out a business function previously
      performed in-house to an external provider




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Business Process Off-shoring (BPO)
 Subset of outsourcing
       Involves the contracting of specific business operations/functions
        to a third party
 Comprised of two methods of outsourcing
         Nearshoring
           Outsourcing to nearby foreign countries
         Offshoring
           Outsourcing to distant foreign countries




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Reasons to outsource
 Cost advantages
 Focus on core competencies
 Improve overall efficiency
 Increase customer satisfaction
 Gain competitive advantage




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Outsourcing Lifestyle Model
                                           Building block 1
                                            Investigate
     Building block 9                                                        Building block 2
        Refresh                                                                  Target


                           Regenerate                  Architect

    Building block 8                                                             Building block 3
       Manage                                                                      Strategize



    Building block 7                                                             Building block 4
      Transition             Operate                     Engage                      Design



                        Building block 6                      Building block 5
                          Negotiate                                Select
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Citigroup Inc.
 American multinational financial services company based in
    New York City.
   Formed from one of the world’s largest mergers in history by
    combining Citigroup and Travelers Group together on April
    7th, 1998.
   Over 200 million accounts spanning 140 countries.
   Primary dealer in US Treasury securities.
   One of the “Big Four Banks”




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Citigroup and Tata Consulting Services

 Tata Consulting Agency acquires Citigroup Global Services
  for $505 million on Oct. 8th, 2011.
 $2.5 billion contract providing outsourcing services,
  application development, and infrastructure support to
  Citigroup and its affiliates for the next 9.5 years.




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    Processes outsourced by Citigroup




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Processes outsourced by Citigroup
     CGSL services five of Citigroup’s nine product lines in more than 45
     countries:
                                             Consumer
                            Cards
                                               Finance


                           Retail            Capital
                          Banking           Markets &
                                             Banking

                                     Global
                                  Transaction
                                    Services
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Processes outsourced by Citigroup (Con’t)

                        • Customer call centers
     Process services   • Document imaging



      Application       • Mobile banking applications
      development       • End to End solutions



                        • Delivery of its mainframe, Windows,
     Infrastructure       Unix, Linux
        support         • AS/400 outsourcing services

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     Decision making process for
             outsourcing




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The decision making process I
     Why does Citigroup choose to outsource?

                       • Align with business strategy
                       • Citigroup implements a broad
         Internal        cost-cutting strategy to increase their
                         profitability


                       • Improve competitive capabilities
                       • Fierce competition among global banks
         External        regarding various products offerings at
                         different prices




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The decision making process II

  Indentify sourcing strategy :
   Offshore outsourcing
  Choose which function to be outsourced:
   BPO Non-core competencies
  Select outsourcing service providers
   -Country
   -Company




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The decision making process III
 Outsourcing considerations - Country selection



                                         Labor Cost
     Regulation?                         Language
                                         Talent pool
                                         Risk
                                         Employment regulation
                                         Government support
                   Sufficient supply     Cultural compatibility
                   of qualified labor?




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The decision making process IV
 Service Provider selection & evaluation I
 Does the SP

  Have the ability to fulfill detailed business requirements of
   Citigroup
  Tangible resources (e.g. robust IT infrastructure, equipment )
  Intangible resources (e.g. talent, human resource)


  Have relevant experience in providing the required services



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The decision making process V
 Service Provider selection & evaluation II
 Does the SP

  Have satisfactory performance track record in providing
     similar services
  Have financial strength to take the engagement and compliance
   to requirements
  Large in size-have a group chunky enough to amortize physical
   cost
  Have good reputation and social recognition Goodwill


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     Outsourcing Considerations




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Outsourcing considerations: Why India?




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Outsourcing considerations: Cost




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Outsourcing considerations:
Scale & Quality of the workforce




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Outsourcing considerations: Infrastructure


                                                       Broadband:
     Infrastructur                   Allow private     India ranks
      e spending      Developed      firms to issue   2nd in largest
         to $1          telecom      infrastructure     quarterly
       trillion in   infrastructur      bonds to       percentage
        the five            e            attract      reductions in
          years                        investment       price per
                                                         megabit




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Outsourcing considerations: Risk Profile &
Law and Policies
  India counts 0.48% ranked 23rd for the vulnerability of
   security attack while China ranks second at 12%.
  The penalties for defiance of laws are high.
  Legal contracts are based on- buyer country, seller
   country and international legal systems.
  Everyone tries to minimize uncertainty & reduce transaction
   costs. Lack of confidence makes it difficult for contract
   setting up.



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Outsourcing considerations:
Opportunities for banking industries




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Outsourcing considerations: Why TCS?

                         Financial      Relevant
      Large in size
                         strength      experience



     Fulfill detailed       Good
                                          Social
        business        performance
                                       recognition
      requirements      track record




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Outsourcing considerations TCS:
Size, Financial strength
      A part of the Tata Group


      India’s largest industrial conglomerate, TCS has over 116,000 of the
       world's best trained IT consultants in 50 countries.

      Financial strength to take the engagement and compliance to
       requirements

      The company generated consolidated revenues of US $5.7 billion
       for fiscal year ended 31 March 2008
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Outsourcing considerations TCS:
Relevant experience
  Involved in Banking and Financial Services BPO for three
     decades.

  Worked with leading banks and financial institutions like
     Deutche Bank, Royal Scotland Bank, HSBC Bank, etc.

  Ability to fulfill detailed business requirements of Citigroup
     in terms of its physical assets (e.g. robust IT infrastructure )
     and human resources (e.g. talents pool)


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Outsourcing considerations TCS:
Company Fame
         • Good performance track record in providing similar services
     *

         • The Capability Maturity Model (CMM), a worldwide certification is
     *     the industry standard

         • Companies like Tata Consulting Services and Infosys are renowned at
     *     level 5

         • Good Corporate Sustainability programme
     *

         • TCS has implemented programs and initiatives for the betterment of
     *     society, communities and the environment

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     TCS had much of what Master calls ‘the
     soft infrastructure’ in place—English
     capabilities, a cultural and business
     affinity with its Western customers, rule
     of law,”



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     Risk involved




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Risk involved & risk management I

                        Implement and execute procedures to:
                        • Ensure that all vendors under its control are
     Loss of control      performing in accordance with contract and
                          performance expectations




     Inconsistency in   Assure that the controls over outsourced information
        controlling     and transaction processing activities are equivalent to
                        those that would be implemented if the activity were
                        conducted internally




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Risk involved & risk management II

     Over-dependence
     (“over-trust”) on   Conduct reviews of the service provider
                          Implement multiple checks & balances
     the vendor



      Incomprehensive
          contract       Ensure the contract including Exit Strategy
                         (end-to-end process)




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        Comparison between
     expectation & real situation




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Expected sourcing strategies for Citigroup I
          Keep core
                             • Avoid vulnerability of strategic information
       competencies &
                             • Avoid risk of leaking out trade secrets or
      outsource support        proprietary information
          functions
        Keep strategic       • Avoid vulnerability of strategic information
          systems &          • Avoid risk of leaking out trade secrets or
      outsource support        proprietary info
           systems           • Capabilities to manage strategic systems

                             • Cheaper
     Rely on single vendor   • Easier to manage relationship
                             • Be aware of over-dependent on the vendor

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Expected sourcing strategies for Citigroup II


                          • Strategic Partnerships
      Maintain long-
                          • Not only consider short-term
     term relationship      consequences & benefits
      with outsourcer     • Lower switching costs




     Find an outsourcer   • Takes over its worst IT staffs
            who:          • Provides better service with a lower cost


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Real situation between Citigroup & TCS
 Expected sourcing strategies for Citigroup        Real situation for Citigroup
 • Keep core competencies & outsource support      • Outsourced non-core assets: Process services,
 • functions                                       • application development & infrastructure
 • Keep strategic systems & outsource support      • support
 • systems
 Maintain long-term relationship with outsourcer   • Signed a 9.5 years-contract (Long-term) with
                                                   •Tata Consulting Services (TCS)
                                                   •TCS had been providing information
                                                   • technology & back-office services to
                                                   • Citigroup since 1992 (Reliable)
 Rely on single vendor                             • Single vendor: Tata Consulting Services
 Find an outsourcer who:                           • Offered Citigroup stronger growth potential
 • will take over its worst IT staffs              • & superior continued services to its clients
 • will provide better service with a lower cost   • around the world
                                                   • Helped reduce operating expenses related to
                                                   • business processing & allowed Citigroup to
                                                   • focus on core financial services competencies
                                                   • Didn’t take over IT staffs from Citigroup
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Real situation between Citigroup & TCS
 Citigroup was …
  Able to keep its core competencies & strategic systems
  Able to maintain long-term relationship with its outsourcer
  Able to rely on a single vendor: TCS
  Able to find TCS to offer better service with a lower cost
  Unable to find TCS to take over its worst IT staffs




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     Competitive Advantages




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Competitive Edge brought
       Focus in their core     • Focus in their banking business
          competency


                               • Reducing the cost of operations
     Operational Efficiency    • Allocate resources to perform other functions (e.g.
                                 consolidation of data center)



     Streamline Organization   • They Sell their back office operation to TCS



                               • Ready access to a pool of qualified technology
      Increased productivity     professionals
                               • Improved productivity of internal technology resources

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Summary of Citi’s outsourcing strategy
       Focus on cost saving       • Help save 30% expense over doing it in-house



      Providing a streamline      • Through selling non-core business process
        business structure


                                  • Signed a 9.5 year contract with TCS in call-center
      Tend to make strategic        outsourcing
     partnership with vendors     • Contract cost 2500 million USD


     Various measures to assist   • Advisory Services Group
     management throughout        • Management Steering Committee
      outsourcing initiatives     • Offshore Interest Group


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Citigroup’s vendor management


 Advisory Services         Management                  Offshore Interest
 Group                     Steering                    Group
 • Helps mitigate          Committee                   • Clearinghouse for
   administrative          • Responsible for policy      ideas and a forum for
   burdens                   and control setting         discussion of
 • Aims to capitalize on   • Create and set the          outsourcing strategies
   technological             standards for             • Members include
   efficiencies              outsourcing initiatives     Gartner, MetLife and
                             (E.g. Information           Verizon
                             security)




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     Recommendation




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 Recommendation
      Cost is not the only factor to be considered when outsourcing
      Contract should include the ability to shift the focus towards
       enhancement and innovation
      Buyer organizations should use a structured, strategic approach
       to calculate the true costs of outsourcing
      They should include favorable transition clauses in the contract
      Should have vendor management measures




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     Conclusion




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 Conclusion
      There are internal and external reasons in outsourcing
      A few factors are needed to be considered while considering
       outsource
      A risk is always involved in outsourcing so a control mechanism
       is needed
      When doing outsourcing right, it could bring business values to
       the company




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