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JPMorgan Chase ends ITO/’on demand’ deal with IBM

As was speculated when the merger was first announced earlier this year, The Wall Street Journal reported (JPMorgan Ends Accord With IBM) that, he combined company of JPMorgan and BankOne will bring back in-house ” a wide variety of core technology functions” previously outsourced in a 2002 deal with IBM. The deal, valued at $5B, was originally struck between JPMorgan and IBM and was one of the first ‘on demand’ contracts, but was made less strategic when JPM acquired BankOne, which has spent heavily ($1b) on its own technology infrastructure and skills.

“It’s in our better interest to manage and control this,” Mr. Adams (JP Morgan Chase CIO) said yesterday, speaking of the outsourced IBM operations. A statement from the companies also noted the postmerger size of J.P. Morgan, saying the bank “now has the significant scale” needed to do the job itself. The companies spent several months discussing the issue, including considering a hybrid approach that would bring some of the operations back to the bank, leaving some with IBM. That idea ultimately didn’t work out.

The companies said about 4,000 IBM employees and contractors would be transferred to J.P. Morgan, starting in January. Many of those same workers had made the transfer in the other direction when the deal was begun. The arrangement, which covered infrastructure from data centers and help desks to voice and data networks, was to have run for seven years and was pegged at more than $5 billion.

Information Week notes that this flows from the do-it-yourself-in-house ethos of Jamie Dimon, now head of the combined entity. In 2002, while heading BankOne, he broke a similar outsourcing contract with IBM and AT&T, saying that their “outsourcing experience ‘hadn’t worked out’ and that henceforth it needed to ‘control its own destiny.’”