Rivals Band Together to Integrate Banking Firm
J.P. Morgan has hired a cadre of infotech consulting companies for a $2 billion contract
The global finance market is about to get a major injection of infotech consulting.
Last week, a consortium of some of the most powerful systems integrators banded together to help expand banking firm J.P. Morgan's technology infrastructure. Computer Sciences Corp., Andersen Consulting, AT&T Solutions and Bell Atlantic Network Integration are calling themselves "The Pinnacle Alliance."
Such a deal is not only unusual because it brings together so many rivals, but because it carries an enormous value -- more than $2 billion over seven years.
"Technology is critical to J.P. Morgan's success; so critical and on so many specialized, fast-developing fronts that no one firm can be a leader in all of them," said Douglas A. Warner III, chairman of J.P. Morgan. "Teaming up with these firms will put us at the forefront of creative, flexible management of technology -- increasing our ability to exploit new technologies, manage costs and create competitive advantage.
The Pinnacle Alliance will manage J.P. Morgan's data centers in New York, London and Delaware. It will also manage Morgan's distributed computing operations in New York, Delaware, London and Paris; and internal corporate applications in the United States and Europe. Specifically, the alliance will work to update and improve mainframe and midrange computers that are designed to handle the sale and trading of securities, local area networks, desktop work stations, network connections, voice and data services, telephone systems and video teleconferencing. Those activities involve one-third of J.P. Morgan's annual $1 billion in technology spending.
Morgan employees in those areas -- approximately 900 people -- will now work for one of the four firms in the alliance.
The alliance will not be responsible for technology strategy, vendor management or technology support for Morgan's private banking and investment management operations.
John M. Mickel, lead executive of the Pinnacle Alliance and president of CSC's consulting group, said Morgan expects to save 15 percent of estimated technology costs over the seven years.
However, he also predicts there will be an initial $100 million transition expense covering technology equipment, training and personnel expenses.
The deal is made official through a service contract between J.P. Morgan and Computer Sciences Corp. CSC will now draw up individual contracts with the other members of the team that will detail their roles. An "Alliance Operating Team" will then be formed with representatives of each of the companies. "The formation of a management team made up of key executives from all the companies is a first for a technology services agreement," said Mickel.
The final agreement will be negotiated in the next few months, according to Morgan.
RESPONSIBILITIES IN THE PINNACLE ALLIANCE
J.P. MorganResponsible for setting the strategic direction for the alliance
Computer Sciences Corp. Lead company in the alliance with overall responsibility for data centers and mainframe, midrange and distributed operations worldwide
Andersen ConsultingResponsible for applications development and maintenance support
AT&T SolutionsResponsible for global network operations management
Bell Atlantic Network IntegrationResponsible for supporting distributed computing services in the U.S. such as desktops, local area networks and servers