The challenges Citigroup faces as an institution - and they are monumental and sweeping - are ones Marty Lippert confronts every day. CEO Vikram Pandit is the public face of Citi, but it is Lippert, as chief of a newly centralized global technology and operations division, who is the fulcrum for the transformational change that Pandit has outlined, and that must occur if Citi is to survive to see its bicentennial in 2012.

Like the rest of the industry, Citi is caught in a 100-year storm, with things worsening since November when it announced massive layoffs and the government said it would not buy the kind of toxic assets that burden Citi's balance sheet, spooking investors. For a tense week the market wondered if Citi might actually fail, or be sold in a fire sale a la Bear Stearns. Instead, federal regulators stepped in with an unprecedented offer. The government will back about $306 billion in loans and securities and directly invest about $20 billion in the company.

That still might not be enough. If Citi is to survive, the global operations Lippert runs must be remade - and technology will prove vital to this effort. The bank must cease to behave as a quasi holding company and transform into a single global enterprise, capable of leveraging its scale and consolidating assets not just to reduce costs, but also to serve clients better. Citi's operations are vast and complex and the events of the last six months mean Citi does not have a lot of time to put things in order. Yet, if anyone can rise to the occasion, Lippert is, by most accounts, that person (In November, Lippert was honored by BTN with a lifetime achievement award at The Innovators gala, an annual tribute to the industry's most advanced technologists).

Lippert was recently vice chairman and group head of global technology and operations at RBC. He was central to expansion into the U.S., integrating disparate and cross-border back-office processing systems for various lines of business, including RBC Centura (now RBC Bank), Dain Rauscher and Tucker Anthony. His responsibilities touched many business divisions, including global financial institutions, cash management, payments, trade finance, investor services and security lending. "Marty is a champion of business and technology transformation, but at Royal Bank of Canada he had a very gradual style. Citi needs major surgery now," warns TowerGroup analyst Guillermo Kopp.

Before RBC, Lippert served at Mellon Bank for 16 years, where among many achievements he spearheaded Mellon's early move into Internet banking. He eventually rose to evp of information management and research and CFO of technology. "At Mellon we prided ourselves on our technology, but not technology for technology's sake, technology as a means of implementing our strategy, and Marty was a key part of our strategic thinking," says Martin McGuinn, retired chairman and CEO of Mellon Financial Corp. He says Lippert also possesses personal traits, particularly collaborative skills, which should serve him well in his new role. "Citi is one of the greatest global franchises on the consumer side," McGuinn says. "The trick will be getting everyone singing from the same hymnal. But he is up to the challenge."

A challenge indeed. The scope of his responsibilities at Citi is truly dizzying, including call centers and all processing areas of the organization, real estate, sourcing, shared services, financing, human resources, even executive planes and dining rooms. He directly oversees 150,000 people and $20.5 billion in spending. From his perch he must rationalize technology and operations and drive efficiencies across a company operating in more than 100 countries, with more than 12,000 offices and more than 200 million customers.

It won't be easy. Pandit's goal is to reduce operating expenses from $62 billion to between $50 billion and $52 billion. Sources say Lippert must cut his own costs by $1.5 to $3 billion, and help other parts of the organization to follow suit. Of the 20,000 O&T job eliminations in 2008, some came as recently as November, when Citi announced another major round of layoffs. Yet Lippert must continue to fund and drive innovation or rivals are sure to leave Citi behind. "Marty's appointment emphasizes the importance we place on technology in driving enterprise transformation, and we'll be looking to him to be a key architect of that change," Pandit says. "This role is central to Citi's commitment to operational excellence and cost management."

As daunting as that sounds, Lippert himself seems to define his responsibilities even more broadly, referring to his group as the underlying engine that drives the company. "As we look at some of the underlying goals that Vikram has defined for the company around restructuring the organization and maximizing the value in the organization, the operations and technology group ends up playing what I think is a pivotal role."

Lippert describes two overriding strategies that guide his organization: to improve operating leverage within the organization and to differentiate the client experience. "The second of these takes people a little by surprise, but when you look at the organizations that make up O&T, we touch more of the end clients than most of the front-line organization, whether it's through the call center, the Internet, banking channels we build and support, or the processing of mortgages and loans. All those things have a direct impact on customers."

Dan Callahan, Citi's chief administrative officer and Lippert's direct supervisor, says: "We see Marty and the global O&T organization as valued strategic business partners. In one of the most challenging times that our industry has seen, Marty and the O&T function are playing a key role as we revitalize and restructure Citi." For instance, Lippert has gotten very involved in looking at collections activities across the enterprise, a function that's sure to become more important as the recession drags on. "We will look to maximize what the company can do on a global basis, as opposed to looking from one geography to the next, which is historically more the way the company has looked at these things. How do you blend our technology to look at [collections]," Lippert says. The enterprise-wide picture of collections not only helps with collections activities, but also helps Citi assist customers through the crisis.

In the process of transforming Citi, Lippert may also transform the role of the CIO throughout the industry, says Pete Kight, vice chairman of Fiserv, who has worked with Lippert on previous projects at RBC and Mellon. "Financial services is digitally delivered information, and that information will increasingly be delivered through the CIO's office and less and less through branches, phones, and officers. And Marty could be on the cutting edge of that evolution."

For Citi, the bank that 10 years ago redefined modern banking, the next few months will be critical. Through aggressive acquisitions in the 1990s, then-CEO Sandy Weill built Citigroup into the world's largest financial supermarket through the merger of Travelers and Citibank, forcing the government to repeal the Glass-Steagall Act.

The capstone to Weill's M&A campaign - the creation of Citi, as it is now known - may have been its last shining moment. From 1999 to last month, Citi shareholders lost 70 percent of their value. As recently as 2007, Citi was still the world's largest bank by market capitalization, worth more than $250 billion; but last quarter, when its value fell to $20.5 billion, Citi was smaller than each of Canada's top three banks.

Another problem for Citi is that its global footprint and full array of products and services is no longer a unique advantage, and could be a hindrance. HSBC is an obvious global competitor, but more worrisome for Citi are large competitors with more focused operations that can outmaneuver Citi in a face off, such as Wells Fargo and The Bank of New York Mellon. "They've got their thumb in so many pies, they can't focus," says Bart Narter, a senior analyst at Celent. "There's just so much to wrap your brain around. That's a fundamental problem for Citi, and a fundamental problem that Marty will face."

To many, Citi is a complex and siloed organization. Its four major divisions - Consumer Banking, Global Wealth Management, Global Cards, and Institutional Clients Group - have a longstanding tradition of utilizing technology on a business-by-business basis, but not making purchases looking across the enterprise to leverage scale or share expertise.

That might seem nonsensical today, but it's a logical result given how Citi has grown the business over the years, evolving multiple business lines through acquisitions; each line of business came with its own set of systems, and these units have continued to make technology and operations decisions independently based on preexisting conditions. The fact that Citi's enormous complexity is imbedded in the company's very creation leads many to believe attempts to rationalize operations are, if not futile, very nearly impossible.

Lippert argues that comprehending Citi's sprawling operations and controlling them is not only possible, but attainable in a relatively short time period. "You see a lot of things written about the complexity of our organization, the global footprint, the global scope and so forth and, candidly, when we peel the onion back on that, the complexity level is maybe overplayed a bit. ...Vikram is often asked if the company is too big to manage. After four or five months here, I can tell you categorically from an operations and technology perspective the answer is 'No,' it is not too big to manage. ...It's vast, but the underlying opportunity that exists is massive."

The opportunity is massive, he contends, because the universal banking model that Citi embraces has been somewhat affirmed by recent events - at least for now (It should be noted that European universal banks have not fared well in recent times). Citi's serious risk management failures in the subprime realm have been nearly debilitating, but it is still standing while more focused financial institutions such as Lehman Brothers and Bear Stearns failed. And Goldman Sachs and Morgan Stanley's application for bank charters, which would give them access to highly coveted deposits, pushes them in the direction of a universal bank model more closely resembling Citi's business.

Key to fulfilling the universal bank promise, however, will be integrating a hodgepodge of platforms more tightly than has ever been done. "Consolidating to a single platform not only drives out a lot of operational cost us the ability to much more effectively service customers by having a single platform and single view of the customer, and that gets to the issue of the universal bank and customer centricity."

But Citi's ability to knit all of this together and deliver on the universal bank promise remains a tough sell to many. At the very least, some observers argue, Citi should jettison its brokerage operations, which have never been well reconciled, and perhaps divide itself along functional lines. "Breaking up the firm would go a long way to managing the business more efficiently. In its current form, perhaps small incremental gains could be made, but banking on a widespread improvement anytime soon seems like a tall task," says Chad Brad, president of Peridot Capital Management.

Assuming Citi's operations are not too complex to manage, how will Lippert go about remaking how the enterprise functions? Kopp, for one, says Lippert's best chance is to transparently show how operational complexity undermines financial performance on a case-by-case basis, "then he can make the case strongly that maybe it's time to spin it off. And that if the front line can't produce, then operations and technology should not be burdened." Even if he can manage this, however, Lippert must still cope with the culture of Citi, which will be difficult to alter. "Citi needs a core culture that's more focused, rather than divergent cultures fighting for a future," Kopp says. Ironically, Citi's dire circumstances may help Lippert overcome these cultural challenges. "Citi knows it has to change drastically. So Marty is going to be able to bypass a lot of bureaucracy, and that's to his advantage," Kight says.

Another helpful bit of leverage at Lippert's disposal is the scope of his newly created position. "This is about breaking things down to component parts," he says. "I don't look through the lens of an operations or technology group, but from the standpoint of having the expertise on a bunch of different fronts. ...Now, when you see initiatives, you've got business people on the team, operations people on the team, technology people on the drive a solution that not only [provides] operating leverage, but a better solution for the customers and typically in a [faster] time frame."

To tackle what Lippert sees as his first directive, to increase the operating leverage within the organization, he has traveled extensively to see and understand what's going on at Citi's far-flung locales. In doing so, he's uncovered "gems," such as when he visited Citi's operation in a town north of Warsaw that's home to four universities and where Citi is the largest employer. "When we looked at the cost of operating there, it's competitive with Bangalore."

This research was part of his push to create "centers of excellence" in various locations around the globe. Citi recently set up such centers around finance operations in Costa Rica, customer service in the Philippines, mortgage processing in St. Louis and collections in Jacksonville, FL. These are examples of how Citi can concentrate work in a given location and achieve some economies of scale - and then leverage the company's best intellectual property and drive that across the globe.

This approach "not only enhances our ability to perform more effectively, but also reduces some of that complexity around how you manage," Lippert says. "When you take one approach to managing across the company it simplifies underlying reporting and review of how the business is performing."

On another front, Lippert has looked to achieve cost reduction via measures such as centralization of IT operations, elimination of duplicate and redundant technologies - such as 16 separate database technologies - and data center consolidation. He says Citi now has 14 consistently constructed and architected data centers across the world. "There is a core competency around how we run those data centers consistently from one part of the world to another."

Lippert is also looking to find savings by rationalizing the company's real estate footprint. Related to this effort is leveraging alternative work space (AWS) technology; by the end of 2009 he estimates that 50,000 employees will work from home. Right shoring, right placement and process optimization are also part of the effort. In October, for example, Citigroup sold its Citigroup Global Services arm in India to Tata Consultancy Services for $505 million. As part of the deal, Tata will provide process outsourcing services to Citigroup under a nine-year contract worth $2.5 billion.

While taking costs out of Citi's sprawling operation is a must, observers caution that Lippert walks a fine line between cutting costs and starving innovation. John Nerenberg, president of CIO & CTO Interim Services and the former svp and CIO of CIT's commercial finance division, compares Citi's IT challenge to the U.S. government's after the Cold War. With no merger to generate the huge cost takeout needed, all the saving must come from current operations. This kind of self-digestion is much more difficult from an operations, technology, cultural and political point of view. "Hitting the cost targets without paralyzing the firm's ability to innovate will be difficult. While this is true for all stand alone credit-crisis survivors, by sheer scale based on its pre-crisis IT budget, Citi's task is on the order of...the federal government's [IT glut] following the fall of the Berlin Wall."

Lippert says the cost savings can be achieved, and they must, because that's where the money will come for innovation. "How do you drive innovation and drive the change that needs to take place, and at the same time take out the level of costs we've been charged with taking out? We have to recognize that a lot of this stuff has to be self-funding, so we have to overachieve on the expense initiatives and use some of that overachievement to drive the investment we need to make." Overachievement, then, is an imperative since by Lippert's own admission he cannot achieve the second of his directives, to differentiate the client experience, without investment and innovation. "We need to get stronger at the underlying process management inside the organization and process we run the organization from an end-to-end standpoint from the time the customer first starts to interact with us. ...and that's where the consolidation of operation and technology is going to lend itself quite well."

Assuming Lippert's task is theoretically achievable, as a practical matter, will he have the time? Some industry observers say Citi must make major progress before the end of 2009 or risk being overtaken by events and forced into a break up. Congress is impatient, taxpayers are angry, and competition is relentless.

For his part, Lippert is pushing ahead with all due haste. "In a few years we will have [Citi] positioned where we want it to be and the underlying power of the company will come through and our competitive position is really going to be very significant." Lippert must keep a close eye on the clock. Time is quickly becoming the most precious commodity.

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