This non-exclusive agreement with Oracle sees the financial services group provide payment and settlement capabilities to Oracle's B2B exchange, OracleExchange.com; implement the Oracle internet procurement solution on a global basis, and market the B2B exchange to its corporate client base.
Citigroup also plans procure its internal needs through OracleExchange.com. According to Michael Robertson, vice president, global cash and trade, Asia Pacific region head, the group intends to use the exchange for a "substantial portion of internal spending in a phased approach", but declined to place a figure on the volume of transaction that the exchange will get from the group. According to Robertson, the group expects to save between 3%-5% annually on procurement costs as a result of transacting through the Oracle exchange.
Further to the terms of the agreement, Citigroup will look to embed its financial services (CitiConnect) into Oracle's exchange platform technology, including the platform used by OracleExchange.com. Citigroup and Oracle are keen to emphasize that the exchange is an open one and so is the choice of financial services on the exchange. This is important, as the monogamous route does not necessarily work when it comes to online payment. B2B participants may not want to change or establish new banking relationships for payment purposes.
According to Robertson, Citibank aims to be the preferred payment method on OracleExchange.com, but on a co-branded linked exchange, Citibank will be the only payment method. The agreement also calls for the development of this co-branded site that will link to OracleExchange.com. No details as to this co-branded linked site have been announced.
The agreement looks to be an important one for Oracle and may put the software vendor finally on par with its rival. "The Oracle exchange platform has lacked a few functionalities," observes Matthew McGarvey, senior analyst, internet research at IDC Asia. "It is not the most popular exchange software at the moment in terms of usability, and scalability. This alliance will boost the functionality of the platform. But Oracle is a bit late. Players like Ariba and Commerce One were announcing alliances with financial institutions months ago," he adds.
The e-commerce software vendor Commerce One has pipped Oracle, pairing up with Citigroup's e-Citi unit in February to build an online B2B marketplace. Citibank also said at the announcement that it will use Commerce One procurement software in a new Citibank Procurement Connection portal. Ariba, another e-marketplace platform developer has also linked with a number of global banks such as Bank of America and ABN AMRO.
Banks have been seeking such alliances to ensure a slice of the bourgeoning B2B market. Not content with payment and settlement services, the financial institutions have been stretching their services, with the help of the alliances with e-commerce software vendors, to services such as procurement, and catalog hosting.
The Asian flavor in this latest alliance between Citigroup and Oracle will not be amiss. "We are in active discussions with Oracle to formulate our concrete plans in Asia. Details will be finalized shortly," says Robertson.