JP MORGAN CHASE cancelled one of the world’s biggest IT outsourcing contracts yesterday, less than two years after signing a $5 billion (£2.8 billion) seven-year deal with IBM.
JP Morgan said that it had decided to end the contract after its merger with Bank One because it believed the enlarged firm now had the scale and capability to manage its own IT infrastructure. About 4,000 JP Morgan staff were transferred to IBM as part of the original agreement. It is expected that most will now be rehired by JP Morgan.
IBM shrugged off JP Morgan’s decision, insisting that because the contract was in its early stages, the cancellation would have a positive impact on its 2005 earnings per share.
A spokesman for JP Morgan Chase said that the company would continue to work with the firm. But he added that JP Morgan’s new capabilities would give the company competitive advantages, accelerate innovation and enable it to be more efficient. The news comes only three months after the British Government terminated an £83 million outsourcing contract with ITNET to manage its internet infrastructure.
Analysts rejected suggestions that JP Morgan and Whitehall were the start of a trend to take the management of IT systems in-house.