Citicorp Plans Unified Global Network to Cut Costs
Seeking to slash expenses and bring order to its tangled communications web, Citicorp said Tuesday that it is planning a unified global network.
In a letter to employees, chairman John Reed said the bank will cut $100 million a year in communications costs through the consolidation of over 100 networks that now exist in all areas of the bank.
"By consolidating, we can get vendors to cut more efficient deals for us," said Colin Crook, chairman of the bank's corporate technology committee, in a press conference Tuesday.
Other savings would come from combining networks, reducing equipment costs, and an unspecified number of job cuts.
The consolidation will eliminate the need for multiple network management and data security systems, as well as allow the bank to negotiate lower rates from vendors, Mr. Crook said. He added that the bank will probably reduce the number of network vendors it uses.
Citicorp has built many local-, wide-area and international networks and over the years -some overlapping - which are costly to staff and maintain.
The networks are vital to Citibank's businesses, as they provide internal and external voice and data communications within the bank for wholesale and retail banking, corporate finance and trading operations, as well as transmit hundreds of thousands of automated teller machine and branch-banking transactions a day.
Citicorp was one of the first banks to decentralize technology and network management, putting it in the hands of business unit managers, consultants said.
The proliferation of personal computers in business units also helped fuel the growth of networks, because PC users needed to share information and access information from host computer systems.
"In the past we let our business managers run all aspects of their world, but now what we're seeing is that we'll serve our customers better by integrating" functions such as communications under a single central unit, said Ira S. Rimerman, group executive in charge of Citicorp's corporate infrastracture.
Expense Cuts Necessary
The bank's consolidation of networks is expected to provide better management of its communications.
But a key motivation behind the move is clearly cost cutting, observers said. Citicorp is under intense pressure to reduce expenses and raise capital.
The bank reported a loss of $885 million in the third quarter, suspended its dividend on common stock and set aside $750 million for charges and reserves related cost cutting and restructuring.
Bank officials said Citicorp will begin realizing the $100 million in annual savings in 1994. The bank expects to realize some savings from the consolidation next year and in 1993, but bank technology executives declined to specify the amount.
Team Will Develop Plan
The consolidation is to result in the elimination of some network centers and an unspecified number of jobs.
Citicorp officials said it was too early to say which of the more than one dozen key network nodes around the world would be combined or which voice and data communications units would be eliminated as a result of the consolidation.
"We are forming a transition team consisting of over 70 telecommunications people from our various businesses around the work who will develop the implementation plan," said Mr. Reed in the letter to employees. "The team will, by the end of the year, identify the people, assets and facilities that will form the Citicorp Global Informations Network."
Citicorp is taking similar steps with its data processing facilities, consolidating centers and reducing its staff. The consolidation began two years ago and has resulted in the elimination of several hundreds jobs.
Ex-Sprint Exec at Helm
Citicorp hired Howard A. Brooks, a former vice president and general manager of international network services at Sprint International, to head up the global information network unit. Mr. Brooks will report to Mr. Crook and Mr. Rimerman.
The bank will work with some of its vendors on the consolidation, Mr. Crook said, but he declined to say which ones.
Citicorp has a special contract with American Telephone and Telegraph for volume discounts for voice and data services, but the bank also does business with many other telephone companies.
Mr. Crook also said that turning over the management of some networks to an outside firm is an option the bank must consider.
Other large network users, such as Visa and MasterCard, have signed contracts with outside firms, a practice known as outsourcing.
PHOTO : Collin Crook, Citicorp