IT Management and Cloud Blog

« | Home | »

The Greatest Insourcing Story Ever Told

By John | August 12, 2007

I recently read an article about NiSource Inc. pulling back a number of employees who had been outsourced to IBM because “some results had fallen short of expectations.” Over the last few years, a flurry of insourcing activity has occurred at companies such as Sears, Dell, and now NiSource, which have pulled back on outsourcing deals, but the J.P. Morgan Chase and the history of their CEO/CIO’s insourcing deals, IMHO, is the greatest insourcing story ever told.

 

Enter the dynamic duo: Jamie Dimon CEO and Austin Adams CIO, who ran Bank One before it was acquired by JPMC. Dimon and Adams are regarded by some as the champions of insourcing. After the JP Morgan Chase and Bank One merger, Dimon and Adams were appointed CEO and CIO, respectively, in the newly merged JPMC/Bank One organization. Under Dimon at JPMC, Adams is infamous for scrapping a seven-year, $5 billion outsourcing contract with IBM. Dimon and Adams have been in sync for years about believing mission-critical technology is better kept in house. In fact, even though the JPMC’s breaking the $5 billion IBM deal is the most famous story, this was not the first time that it had insourced. In the early 2000s, while back at Bank One, JPMC decided to insource Bank One from a major outsourcing contract with AT&T and IBM.

 

At the time, I was a Tivoli consultant, and my first exposure to the Bank One insourcing deal was when I noticed that Bank One started hiring some of the icons in the Tivoli community as employees. At the time, I called some people whom I knew over at Bank One, and they explained that as part of the decision to insource from the AT&T/IBM deal, the decision was made to hire the best in every technology silo (e.g., Tivoli, Unix, Oracle). I can tell you from my own experience that some of the groups at Bank One and now JPMC have some of the sharpest technicians in the business. Being in the services business as a small guy, I thought that this is a great story for me to promote about insourcing and how it can work.

 

Meanwhile, around this same time, a lot of my friends at Chase and JP Morgan were all being converted to IBM employees due the one of IBM’s largest outsourcing deals with the two merged companies (JPM and Chase). After the JP Morgan and Chase merger, pre Bank One, oustsourcing was full steam ahead under John Schmidlin, at the time the CIO of JPMorgan Chase. It was Schmidlin’s decision to do the outsourcing deal. About a year later, JP Morgan Chase again merged with Bank One. Now, some big decisions had to be made. On one hand, two very large banks, (JP Morgan and Chase) have merged and just signed a $5 billion outsourcing deal with IBM. On the other hand, we probably have the greatest test case for why insourcing works in the Bank One story. Under Dimon and Adams, Bank One had reduced head count by 12% from 2000 to 2003 and simultaneously raised revenue by 17%. So, in a simplified explanation, they stuck Adams and Schmidlin in a room for about 3 months and let the better man win. In the end, Adams won out, and the decision was made to continue with the success of Bank One’s initiatives of building the best of breed in house technology. This decision had to be terribly difficult. The penalties that JPMC had to pay to IBM have never been disclosed, but, IMHO, the accomplishments of Dimon and Adam’s insourcing must have been very compelling for the bank to make this decision.

 

Ever since the internet bubble, more and more CEO’s/CIO’s are of the belief that the management of information is now a core business process and that keeping that management in-house makes sense. Furthermore, with labor forces positioned globally, I think that Dimon and Adams have possibly created a brightly shining stake in the ground for insourcing. In my library ,they are the sole authors of the book called “The Greatest Insourcing Story Ever Told.”

Some other articles…

http://www.cioinsight.com/article2/0,1540,1776823,00.asp

http://www.baselinemag.com/article2/0,1540,1753487,00.asp

Topics: general, ibm | 1 Comment »

One Response to “The Greatest Insourcing Story Ever Told”

  1. My Top 17 Favorite Posts of 2007 at John M Willis Says:
    December 15th, 2007 at 7:31 am

    [...]  The Greatest Insourcing Story Ever Told [...]

Comments