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By Larry Barrett  |  Posted 2006-01-14 Print this article Print

The bank's CIO says the move last year to bring its technology operations back in-house wasn't about money, but the bank is already seeing dividends.

.T. Becomes Really Strategic">

McNeill adds that less than 5% of all outsourcing deals are eventually insourced.

Other high-profile examples include:

  • In 2004, UBS AG modified its existing outsourcing contract with Perot Systems. The deal, originally inked in 1996, will now conclude in 2006. The bank says it will resume the consolidation of most of its existing infrastructure functions, including management of data networks, telephone systems, I.T. security and distributed computing and servers.

  • In May 2005, retailing giant Sears, Roebuck and Co. canceled a 10-year, $1.6 billion outsourcing deal with Computer Sciences Corp., citing "CSC's failure to perform certain of its obligations." CSC was providing infrastructure support services, including desktops, servers, and systems to support Web sites, voice and data networks.

    Scardino says banks and other large corporations often enter into billion-dollar outsourcing deals with the expectation that the vendor will handle its information-technology needs at the contracted price. But often, she says, a customer may find that an outsourcer is tacking on additional charges for mundane tasks such as adding employees to the e-mail system, or refusing to accommodate any new requests.

    For Adams, the challenges of terminating an outsourcing contract are apparently not too daunting.

    While CIO at Bank One, Adams canceled similar multimillion-dollar outsourcing contracts with IBM and AT&T.

    "It was a multi-step process that, in the final analysis, didn't make sense for us or, frankly, for IBM," Adams says, while discussing JPMorgan. "There were elements of the agreement that no longer made strategic sense for us, nor were they cost-efficient. There wasn't any malice at all. We still remain partners with IBM, but not close to the same degree."

    Adams says that his experience at Bank One, which long held the philosophy that it could best manage its information systems in-house, made the JPMorgan decision to bring its computing resources in-house a no-brainer. "We have successful competitors who outsourced more than we have," he says. "I'm not making a judgment about them or about us. But our operating committee of 15 people, from all critical business units, meets every week, and technology is always discussed. We believe in hands-on development."

    Among the projects JPMorgan Chase has completed on its own in 2005 was the conversion of 94 million credit card accounts to a single processing system. In 2004, roughly 60% of the credit card accounts were converted to the new processing system with the help of IBM Global Services.

    JPMorgan Chase also invested more than 59,000 development hours to integrate its transaction clearing system used for fund transfers around the world. Now, JPMorgan Chase processes more than 285,000 transactions every day that move more than $1.8 trillion.

    Adams says the bank made nearly 500 system conversions, designed to reduce by 35% the total number of applications used by employees. The project, which when completed will require more than 8.5 million hours of development by in-house staff, will result in the majority of JPMorgan Chase's transaction systems operating on one single, upgraded platform.

    Another project includes a companywide computing backbone initiative that began in 2002 and was scheduled to be completed by the end of 2005. The project will put together a large pool of shared computers in-house in a grid capability to power seven of the bank's eight core transaction systems. In 2004, Adams says, the project saved more than $5 million.

    Story Guide:
    JPMorgan Chase Retakes Control of I.T.

  • Ditching "Information Utility" for "Internal Strategy"
  • How I.T. Becomes Really Strategic
  • Saving Money, Saving Staff

    Next page: Saving Money, Saving Staff

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    Senior Writer
    Larry, of San Carlos, Calif., was a senior writer and editor at CNet, writing analysis, breaking news and opinion stories. He was technology reporter at the San Jose Business Journal from 1996-1997. He graduated with a B.A. from San Jose State University where he was also executive editor of the daily student newspaper.

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