JPMorgan chase cancels US$5 billion outsourcing deal with IBM

The inexorable march of outsourcing took an abrupt about face yesterday, when JPMorgan Chase bank cancelled its US$5 billion outsourcing deal with IBM and said it would take back the 4000 employees working at IBM on the bank's IT programs.

The move is in line with the thinking of the bank's CEO, Jamie Dimon, who had questioned the value of outsourcing when the bank was previously called BankOne.

In April 2002, in a speech reported by American Banker, Dimon said, "Bank One is taking back the management of its databases. We're taking back all our own programming. Our critical systems will be managed, produced, and maintained by Bank One folks and not by anybody else. We want to be in control of our own destiny."

The destiny of IT at the JPMorgan Chase - its new name after the merger - will begin in January 2005, the bank and IBM said in a press release.

The release went on to state: "The recent merger between JPMorgan Chase and Bank One created a new firm with significantly greater capacity to manage its own technology and infrastructure. After a rigorous review, the merged firm concluded it now has the significant scale, enhanced capabilities, tools and processes to build its own global infrastructure services organisation."

IBM put a positive spin on the cancellation, stating that it would actually help its 2005 earnings. JPMorgan Chase likewise said the cancellation would have no material impact on its business.

The bank noted that IBM remains a key technology partner and provides IT services and products to a number of its businesses. The functions to be reintegrated back into the bank cited by the two are "the previously outsourced portions of its technology infrastructure, including data centres, help desks, distributed computing, data networks and voice networks."

The bank's CIO, Austin Adams, supported the management of its own technology infrastructure as best for the JPMorgan Chase's long-term growth. "In addition, there will be many career opportunities for returning employees," he said in a statement. The bank's IT employees transferred to IBM in early 2003.