IBM announced today that it had finalised a seven year IT outsourcing contract with J.P. Morgan Chase, which the firm expects to be worth over $5 billion.
JPMorgan Chase will outsource what IBM describes as “a significant portion” of its data processing technology infrastructure, including data centres, help desks, distributed computing, data networks and voice networks. The agreement includes the transfer of approximately 4,000 JPMorgan Chase employees and contractors as well as selected resources and systems to IBM in the first half of 2003. Application delivery and development, desktop support and other key tasks will be kept within JPMorgan Chase.
Like any out-sourcing deal, says IBM, the benefits for the bank lie in increased cost variability, access to the best research and innovation, improved service levels, and greater adaptability to changes in market conditions. Less usually, IBM is also promising “absolute costs savings.”
“We view technology as a key competitive advantage,” says Tom Ketchum, the former JP Morgan banker who served as CEO at Euroclear in the early 1990s who is now vice chairman, J.P. Morgan Chase. “Our agreement with IBM will create capacity for efficient growth and accelerate our pace of innovation, while reducing costs, increasing quality and providing exciting career opportunities for our employees. IBM’s global strength and computing capabilities, delivered on demand, will help us create significant value for our clients, shareholders and employees.”
IBM Global Services and JPMorgan Chase say they are creating a virtual pool of computing resources that will be accessed and deployed as needed. The underlying technology, developed by IBM Research, is called Utility Management Infrastructure (U.M.I.). U.M.I. uses advanced software based on open standards to tie together disparate back-end systems, such as different brands of servers and storage devices, without requiring new applications to be written for each separate system. The technology also enhances the availability, reliability and security of IT infrastructure.
“We’ve invested heavily in Research and Development to create ‘on demand’ technologies that will dramatically change the way IT is delivered,” says Doug Elix, senior vice president and group executive, IBM Global Services. “JPMorgan Chase will be receiving a continuous infusion of technology and business process innovations from IBM Research.”