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Computer industry

IBM's $5 Billion Outsourcing Deal Falls Apart

Strategic Insights

— 1 min read

In a major blow to IBM's outsourcing strategy, JP Morgan Chase has canceled its $5 billion, seven-year contract with the technology giant. The deal, signed in 2002, was the largest outsourcing agreement IBM had ever secured and was a key component of CEO Sam Palmisano's growth plan. JP Morgan Chase cited its acquisition of Bank One and the desire to manage its own technology infrastructure as the reason for canceling the contract, which will result in IBM losing 4,000 employees and contractors. The cancellation will likely boost IBM's earnings per share next year, but raises questions about the impact of consolidation on IBM's outsourcing pitch and the future of service-oriented architecture (SOA).

Key Takeaways:

  • JP Morgan Chase has canceled its $5 billion, seven-year outsourcing contract with IBM, citing its acquisition of Bank One and the desire to manage its own technology infrastructure.
  • The cancellation of the contract will result in IBM losing 4,000 employees and contractors who have been supporting JP Morgan Chase's account.
  • IBM was set to benefit from the deal, with projected increased earnings per share next year.
  • The deal was signed in December 2002 and was the largest outsourcing agreement IBM had ever secured under CEO Sam Palmisano's growth strategy.
  • JP Morgan Chase's decision to cancel the contract may impact IBM's outsourcing pitch and the future of service-oriented architecture (SOA).
  • The deal's cancellation includes bringing data centers, help desks, distributed computing, data networks, and voice networks back in-house.

Statistics:

  • $5 billion: The value of the outsourcing contract canceled by JP Morgan Chase.
  • 7 years: The duration of the outsourcing contract.
  • 4,000: The number of IBM employees and contractors who will be transferred to JP Morgan Chase.
  • December 2002: The month and year the outsourcing deal was announced.
  • $5 billion over 7 years was the estimated cost breakup.
  • 1,571: The number of miles from New York, where JP Morgan Chase is based, to IBM's headquarters in New York.

Sources:

  • "JP Morgan Cancels IBM Deal; IBM Faces Loss of $5 bln Contract" by R. Shankar, ZDNet, 2004.
  • "IBM's $5 bln outsourcing deal with JP Morgan Chase canceled", news article, December 8, 2004.

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