BRAXXON News - More bad press for outsourcing as JP Morgan goes retro.

During October the breaking news was that JP Morgan Chase's much heralded $5 billion outsourcing deal with IBM had come to an end without completing the first two years of the contract.  The JP Morgan Chase merger with Bank One clearly had a profound impact in that the latter'srecent technology investment put the merged banks in a position where the new organisation felt that it could run its business-supporting IT systems more effectively and efficiently in-house to the long-term benefit of the company. Additionally, almost 4,000 staff will be brought back in-house.  The good news for IBM is that they will still provide hardware and technical support services, so co-operation will continue.

Despite this depressing news for the outsourcing fraternity, BRAXXON knows that many financial institutions are actively considering a move to outsourcing to reduce operational spend and move to a variable cost structure for both IT and Operations.  Significantly, there is a definite trend developing where start-up firms, particularly hedge funds, are moving directly to an outsourced IT and operational environment and maybe, given a fresh start, this path might be preferred by a number of well-established organisations.  But we recognise that the majority of financial institutions still prefer to retain direct control over IT  and operations and are probably driven away from even evaluating the outsourcing option  by the continual bad press.

The fact is that outsourcing can be immensely beneficial but it's not a solution for all cultures and circumstances. It is obvious, though, that it offers some organisations the freedom to concentrate on their core business activities and reduce/ manage costs whilst limiting capital expenditure on the replacement of ageing technology.  BRAXXON believes the reality is that for outsourcing to be successful thorough research and preparation are key.  It is vital to know what is wanted and expected from an outsourcing deal.  Importantly, it is vital to make sure the provider is tied down to deliver a level of services where performance is measurable.  Such marriages can work where expectations are fulfilled and promises kept.

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