Citigroup’s move to significantly reduce its reliance on external IT contractors could be cause for concern for contractors who have built their portfolio in the banking industry
In an internal presentation by Tim Ryan, Citigroup’s head of technology, staff were informed that the bank intends to decrease its reliance on external IT contractors, reducing their share of the workforce from 50% to 20%, it has been reported. Such a move could spur a broader shift away from contractor-heavy models, driven by regulatory pressures and a desire for enhanced internal control.
This strategic adjustment is part of a wider plan to increase data security, improve risk management, and ensure stricter compliance with regulatory requirements. Citigroup plans to increase its internal IT staff from 48,000 in 2024 to 50,000 by the end of 2025, according to Business Day.
Regs and fraud: what’s behind Citigroup’s contractor cull
Regulatory pressures are a primary driver. Citigroup has faced regulatory penalties, including a $136 million fine in 2024, due to data governance issues. The need for greater control over data and systems is driving banks to take key IT functions in-house, according to India Today, which means US banks will rely less on external contractors.
Risk management is another factor. A $22.9 million fraud case involving external contractors has further underscored the potential risks of outsourcing. Banks are seeking to mitigate these risks by bringing critical technology functions in-house. As stated in a Reuters report, “Citi is growing our internal technology capabilities to support our strategy to improve safety and soundness, enable revenue growth and drive efficiencies”.
Which contractors will be affected?
The immediate impact is a potential reduction in contract opportunities within the banking sector. Contractors specialising in IT, particularly in areas related to data governance and risk management, are likely to be most affected. This trend may force contractors to seek opportunities in other sectors or consider transitioning to permanent employment.
What are the wider implications of contractor engagement?
Citigroup’s move could signal a broader trend within the banking industry, with other institutions potentially following suit. This shift could lead to a restructuring of IT workforce models within the financial sector. The effects of this shift, are also being felt by companies that provide those contract workers, as seen by the effect on the stock of companies such as LTIMindtree, according to a report by The Business Standard and Times of India.
The banking sector’s increasing focus on regulatory compliance and risk management is driving a fundamental shift in its approach to IT staffing. While contractors have historically played a vital role in providing specialised skills and flexibility, banks are now prioritising internal control and accountability.
It is looking like contractors will need to adapt, potentially by focusing on niche skills or seeking permanent employment. Banks, meanwhile, will need to ensure a smooth transition, managing the potential loss of expertise and maintaining operational continuity.
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