JP Morgan Chase has signed a significant seven-year outsourcing
deal with IBM valued at more than $5bn (£3.1bn).
Under the agreement, JP Morgan Chase will outsource a significant
portion of its data processing technology infrastructure, including
data centres, help desks, distributed computing and data networks
and voice networks, to IBM.
Approximately 4,000 JP Morgan Chase employees and contractors will
be transferred to IBM in the first half of 2003, said JP Morgan
spokesman Michael Dorfsman.
JP Morgan Chase will retain application delivery and development,
desktop support and other core competencies.
Under the contract, IBM will deliver "on demand" computing services
to JP Morgan Chase. That means the bank will buy and pay for only
the IT services it needs, rather than buying fixed IT services and
paying fixed prices.
Dorfsman said the pact would allow JP Morgan Chase to save money,
expand its business, offer added benefits to shareholders and
clients and provide more career opportunities for employees.
In October, IBM announced a fundamental change in the way its
computing resources would be delivered to businesses, allowing
customers to tap into its vast computing network and rent server
processing, data storage and other IT resources on a pay-as-you-use
basis.
IBM said its on-demand computing strategy would transform a
company's business by allowing it to sharpen its focus on core
business operations.
One specific technology developed by IBM Research to help JP Morgan
Chase transform its core business processes is UMI, or utility
management infrastructure, said Eric Ray, vice-president for the
financial markets industry at IBM Global Services.
Based on open standards, UMI is advanced software from IBM that
will tie together the bank's different types of servers and storage
devices without requiring new applications to be written for each
system.
This "resilient infrastructure" will allow the bank's computer
systems around the world to perform at greater efficiency, while
improving system availability, reliability and security, providing
scale and capacity on demand, as well as the ability to self-heal.
Gartner analyst Susan Cournoyer said the deal reflected the fact
that IT costs in the financial services industry have remained
constant whether business is good or not.
"This deal will help JP Morgan Chase address this fact," she added.
"For IBM, JP Morgan Chase is a marquee customer giving a stamp of
approval for [IBM's] outsourcing model. It's a validation of IBM's
focus on its IT services business, [rather than] its long-ago model
of its focus on hardware."