JPMorgan Reclaims IT

CIO favors in-house operations over outsourcing.

"We believe managing our own technology infrastructure is best for the long-term growth and success of our company as well as our shareholders."

There. Thats what Austin Adams, JPMorgan Chases CIO, said in a statement earlier this month announcing the end of the giant financial institutions $5 billion, seven-year outsourcing deal with IBM, signed late in 2002.

Weve been hearing so much about how IT is a commodity that its refreshing—shocking even—to hear anyone dare to assert otherwise. In an interview, Adams explained to me that his position on the deal does not depend on particular expertise he and his people have in a breakthrough technology.

"The advantage of our approach to technology will be gained in the quality and efficiency of day-to-day operations," Adams said. Translation: He thinks hes better at running IT than any outsourcer. In fact, Adams has taken back IT operations from outsourcers six times with previous companies. Hed do it again, Im sure.

When JPMorgan Chase acquired Bank One earlier this year, the handwriting was on the wall for the big outsourcing deal. Jamie Dimon, who came from Bank One to become JPMorgan Chases chief operating officer, and Adams, who came from Bank One to become JPMorgan Chases CIO, are both believers in owning your own IT.

But arent some things, like desktop boxes, apps and networks, commoditized to the point where youre better off having an outsourcer handle them? No, said Adams. "The standardization and the consistency of the desktop and the currency of the technology in todays world is such that we see an opportunity there more than we saw a few years ago." Again, he believes he can just do it better.

Adams, however, said his approach is not for all. He said smaller companies are more likely to benefit from outsourcing. A company must be big enough to draw IT talent and have negotiating power, he said. The other requirement: Upper management and the CIO must think along the same lines about keeping IT in-house. With Dimon and Adams, thats true of JPMorgan Chase, but it might not be true of most other companies.

So what makes Adams so willing to bet hes better off doing things his way? Accountability. Adams said the tendency to point fingers when something goes wrong is bad enough in most companies; in outsourcing deals, its overwhelming—and unacceptable. Adams would no more think of outsourcing his IT troops than Tommy Franks would think of outsourcing the U.S. Army. Said Adams: "I have a belief around the advantage of in-house control of technology."

IBM couldnt have been pleased but outwardly took the setback in stride. A company spokesperson pointed to a decrease in expenses in getting the deal started. The spokesperson also said Global Services will continue with a significant amount of work for JPMorgan that was not covered under the deal in question.

Out and about

Speaking of it as a commodity, the über thought leader of that notion, Nicholas G. Carr, ventured into hostile territory recently when he was opening-night keynote speaker at the Society for Information Managements SIMposium in Chicago. Carr, author of a recently published book, "Does IT Matter?" and a previous Harvard Business Review article, "IT Doesnt Matter," faced tough questions.

/zimages/3/28571.gifClick here to read Carrs eWEEK column, "When Does IT Matter?"

For Carr to speak at such a gathering was a bit like Daniel in the lions den. Rejection took several forms. "I think hes absolutely wrong. Just imagine the business world trying to do what we do without the Internet," said David Luce, CIO of Rockefeller Group International, a real estate firm in New York and the incoming president of SIM. Keynote speaker Ed Brennan, executive chairman of American Airlines and former chairman of Sears, Roebuck, said, "With all the stuff thats been done, we still have 90 percent of it out there." Boeing CIO Scott Griffin seconded, "I agree with Ed Brennan. Weve tapped 10 percent of the potential."

It will be interesting to see whos right.

Stan Gibson can be reached at

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