In 2005 it recorded sales of $79.9 billion and employed 168,847 people. In December 2002, the financial services company J.P. Morgan Chase announced a seven-year, $5 billion deal to outsource much of its data processing to the technology giant IBM, both companies bragged that the contract the largest of its kind for IBM would reduce costs, create value and propel innovation at J.P. Morgan. According to JP Morgan Chase management, this agreement would create "significant value" for clients, shareholders, and employees by creating capacity for "efficient growth" while reducing costs and increasing quality. The deal also ranks as IBM's largest outsourcing agreement, eclipsing its seven-year, $4 billion outsourcing arrangement with American Express.
The motivations for outsourcing are growing from a focus on cost reduction to an emerging emphasis on improving business performance. The traditional rationale of vendor economies of scale and specialization is becoming less convincing. Companies such as Dupont, British Petroleum and J.P. Morgan, with well-run, innovative IS departments that are large enough to accrue the same scale and specialization benefits as a vendor, are nevertheless engaged in significant outsourcing deals. Furthermore, as the growing role and importance of information and communications technologies become widely recognized, companies frequently confront a wide disparity between the capabilities and skills necessary to realize the potential of these technologies and the reality of their own in-house technology capabilities and skills. IT outsourcing is playing an increasingly prominent role in strategies designed to fill the space.
Also outsourcing some of the IT Portfolio remains a direction that the majority of companies will continue to invest in as part of their overall strategic sourcing strategy. Clearly the service and support function (Help Desk and Network Administration) of the IT Portfolio along with application development and network operations remain the most popular components to outsource. In the past year alone, almost 50% of the companies that were contracted for outsourcing services have prematurely ended their arrangement.
For JP Morgan Chase there are several business requirements that information technology and information systems strategy in relation to. For example, performance of its products, the appeal of its products to customers, its ability to meet the objectives and needs of clients, its reputation, and its ability to attract and retain its personnel. Improving IT and IS in order to form the meaningful data. So that the company can create efficient growth, reducing cost and increasing quality, other reasons included:
- Increasing the company's image by associate with IBM.
- Create significant value for clients.
- To enable them to establish themselves in the various markets that they were operating in.
When JP Morgan Chase and Bank One merged operations, a central part strategic sourcing analysis was done. In looking at areas within IT in terms