Deals and restructuring aren't new trends -- they've been part of our industry for as long as there has been banking technology. But there has been so much news on this front over the past few weeks that it really causes one to wonder if there is some kind of fundamental change under way, not only in the banking business, but also in the technology industry.
There are two dominant themes that are emerging. One is expense management as a way of life -- the "new" guiding principle at Citigroup, which on April 11 outlined plans to reduce its $52 billion expense base by $2.1 billion in 2007, $3.7 billion in 2008 and $4.6 billion in 2009. Nearly $1.5 billion of that will come specifically from corporate operations and technology. Chairman/CEO Charles Prince addressed the need to shift from an "episodic" to a continuous approach to expense management, and COO Robert Druskin's presentation cites as a goal for the future to "change the way we operate."
For organizations of all sizes that have been accustomed for some time to lean-and-mean operations and "doing more with less" as standard operating procedures, Citi's newly affirmed commitment to belt-tightening and efficiency may raise some eyebrows and inspire thoughts of, "Welcome to the club." It will be interesting to see if, moving ahead, Citi -- which has been a forward-looking pioneer of a number of banking/technology trends ( see my March editorial) -- ends up blazing a new trail in areas such as workforce management, vendor contracts and IT deployment.
The other big theme that has come to the fore is the role of private equity in the financial services technology market. The news during the past month that First Data Corp. has decided to sell itself to Kohlberg Kravis Roberts & Co., and that Warburg Pincus plans to acquire a 25 percent equity stake in soon-to-be-spun-off Metavante signifies an escalation in the scope of these kinds of deals.
Based on these transactions, one would have to say it must be a pretty good time to be investing in banking and payments technology companies. If your bank is a client of these firms, having deep pockets behind them should create a feeling of confidence -- unless, perhaps, you're the executive charged with squeezing a better deal out of them.