JP Morgan Chase-IBM: The Outsourcing Journey

Abstract

The case discusses the IT outsourcing strategy of JP Morgan Chase, a leading financial services provider in the US. It explains how IT was managed in-house at JP Morgan before the bank’s merger with Chase Manhattan. It details the circumstances under which the decision to outsource IT management to IBM was taken and the expected benefits from this deal. The case then describes how the merger of JP Morgan Chase with Bank One led in the cancellation of the outsourcing contract. Finally, the rationale behind the cancellation of the contract and its impact on both the parties is also presented. This case highlights the problems associated with IT outsourcing and compares it with in-house IT management.

"We believe managing our own technology infrastructure is best for the long-term growth and success of our company as well as our shareholders. Our new capabilities will give us competitive advantage, accelerate innovation and enable us to become more streamlined and efficient."

- Austin A. Adams, CIO of JP Morgan Chase.

"The combined firm found itself with an abundance of IT assets. This decision was like other business decisions related to the merger."

- James Sciales, Spokesperson, IBM.

By January 2004, the transfer was complete and work began on consolidating data centers, upgrading hardware and setting up a common networking infrastructure, a task that was scheduled to take two years to complete.

In July 2004, Morgan merged with the Chicago-based Bank One to create a financial behemoth with combined assets of $1.1 trillion. Bank One was a strong player in the consumer banking business. The deal reduced Morgan's dependence on investment banking. Bank One was also adept at managing technology in-house. It had developed considerable expertise over the years in managing technology and integrating systems from acquired businesses.

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        Case Code   ITSY047
   Case Length    11 Pages
              Period    1999-2005
 Organization     JP Morgan Chase
        Pub Date     2005
Teaching Note    Not Available
     Countries    US
      Industry    Financial Services

Issues

• Analyze the issues pertaining to technology management in a large financial services company.

• Understand how IT integration is achieved after a merger.

• Examine the reasons why organizations outsource IT infrastructure management and how the process is managed.

• Appreciate the advantages and disadvantages associated with outsourced and in-house management of technology infrastructure.

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.