JP Morgan signs outsourcing deal with IBM

Financial services company JP Morgan Chase has finalised a seven-year outsourcing agreement with IBM valued at over $5bn (£3.12bn) to transform the company's technology infrastructure.

As part of the agreement, JP Morgan Chase will transfer approximately 4,000 employees and contractors, as well as IT systems, to IBM in the first half of 2003.

JP Morgan Chase will outsource a portion of its data processing technology infrastructure, including data centres, help desks, distributed computing, and data and voice networks.

Application delivery and development and desktop support will be retained inside JP Morgan Chase.

The plan is to create a 'virtual pool' of computing resources to be accessed and deployed as needed.

IBM Research has developed a technology called Utility Management Infrastructure (UMI) to underpin the virtual resource pool.

Previously code-named Blue Typhoon, UMI ties together disparate back-end systems without the need for new applications.

"IBM has invested heavily in research and development to create 'on demand' technologies that will dramatically change the way IT is delivered," said Doug Elix, group executive at IBM Global Services.

"JP Morgan Chase will be receiving a continuous infusion of technology and business process innovations from IBM Research."

Thomas Ketchum, vice president at JP Morgan Chase, said: "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."

JP Morgan Chase has over 30 million customers and operations in 50 countries.

The agreement is part of an increasing trend towards outsourcing by major international banks.

It follows close on the heels of IBM's 10-year outsourcing deal with Deutsche Bank in mid-December valued at $2.5bn, covering the bank's European computer centres.

EDS, which lost out to IBM for the JP Morgan Chase business, is shortly to begin work on a $4.5bn (£2.8bn) multi-year outsourcing agreement with Bank of America.