JP Morgan Chase Cancels IBM Deal

Both thestreet.com and CNNMoney.com as well as other news outlets last week reported that J.P. Morgan Chase & Co. had canceled its $5 billion outsourcing deal with IBM. After J.P. Morgan Chase’s $58 billion acquisition of Bank One in July, the financial services giant seems to be following Bank One’s practice of bringing information technology in-house. Bank One decided on that route a few years ago and has since spent over $1 billion to upgrade its entire technology suite, including building data centers. For 4,000 J.P. Morgan workers who had been transferred onto IBM’s payroll, that philosophy and the cancellation of the IBM deal means they will rejoin the bank. The divorce appears to be without recriminations, as IBM says it expects its stock price to go up, indicating it wasn’t as sweet a deal for them as might have been expected.

This isn’t the first time anybody’s rethought the outsourcing plan and realized the work could be better (or more economically) done at home. (See CIO’s story from last year, Bringing I.T. Home, which shows how three CIOs brought outsourced work back into the fold—and how reinsourcing saved money.) The Morgan Chase one, however, is a rather large and public reversal of direction that might get some folks thinking.

Meantime, if outsourcing is a topic of conversation at your organization, check out our Consultants’ Briefing from BearingPoint, Optimization Through Outsourcing, which may help you determine the best course of sourcing for your company.