Citicorp has awarded contracts totaling $750 million to two technology vendors for one of the biggest system implementation projects ever undertaken by a banking company.
Citicorp said it called in Digital Equipment Corp. and Electronic Data Systems Corp. to "accelerate ... a global technology standardization program" linking thousands of personal computers around the world.
The price tag is greater than on many of the technology outsourcing deals into which banks have been entering.
But the $264 billion-asset Citicorp prefers to describe its approach as "insourcing." It intends to "control the architecture and the tools" while relying on Digital and EDS for execution, said Ranjit Singh, vice president in charge of the effort, called Project Enterprise.
Digital, based in Maynard, Mass., will handle the bulk of the three-year assignment, receiving $500 million in monthly installments to convert and maintain 21,000 desktop computers. EDS, of Plano, Texas, will receive $250 million for 10,000 desktops.
Citicorp in all has 60,000 PCs and uses 2,000 local area networks to link such devices. Since last year, Citicorp has brought 5,000 PCs into the common framework that is designed to "integrate our processes across the entire bank," said senior technology officer Colin Crook.
The project is so vast and complex - requiring the harnessing of highly decentralized client/server computing resources - that Citicorp called on the two system integration groups to bring it to a faster conclusion.
But for its "insourcing" label, Citicorp would be seen as breaking a technology tradition emphasizing aggressive innovation and tight in-house control. While it has been a major customer of system vendors for key aspects of its operations - it has worked with Digital, for example, since the dawn of distributed data processing - it never favored outsourcing.
While it may be edging in the direction of outsourcing, "the real issue is to build a global infrastructure," said Mr. Crook. "This is a critical step that will enable us to go forward."
Mr. Crook said Project Enterprise will enable the bank "to manage technology assets more efficiently and build an enabling infrastructure for introducing technological innovation."
Industry watchers saw the announcement as further evidence that even the largest banks have grown willing to farm out well-defined operational tasks if that frees their management to focus on more strategic concerns.
"Even if you're a financial institution the size of Citicorp, it still makes sense to outsource what might not be viewed as one of your core competencies," said William Bradway, a consultant at the Tower Group in Wellesley, Mass.
"Global institutions are finding that infrastructure support and maintenance in a geographically diverse system becomes more costly than any one institution can keep up with alone," said Lawrence Willis of First Manhattan Consulting Group in New York.
"Technology is shifting so fast," said Mr. Crook, "we would like to have the outside firms focus on servicing the systems so we can develop new applications."
With Project Enterprise, which started with a pilot phase in 1994, Citicorp is moving to a Windows NT- based platform that supports Microsoft Office desktop software and Novell software for local area networks. Digital was involved in the pilot, affecting computers in New York, Texas, Florida, Virginia, and Singapore, said a Citicorp spokeswoman.
In the next phase, Citicorp will assign territories to Digital and EDS. Consultants suggested those companies won the bidding against at least two others because they have business presences in many of the same overseas markets as Citicorp.
"The real challenge to this type of assignment is the global reach of Citicorp," said Mr. Bradway. "That must have limited the short list of potential vendors."
"Citibank has always led the industry in the application of technology, and this project is no exception," said Coley Clark, head of EDS' financial services business. "Their decision to partner with more than one company is an excellent way to test capabilities and performance in a rapidly evolving marketplace."
Said John Rando, vice president and general manager of Digital's services division: "This contract represents a significant change in the way global corporations choose to manage their information systems." It shifts the focus from management of mainframe data centers to "desktop computing environments ... where worldwide standardization and consistent management can reap the greatest benefits."
Jeffrey Kutler contributed to this article.
