IBM buys technology service for $5 billion
NEW YORK (AP) – IBM Corp. and investment bank J.P. Morgan Chase & Co. signed a massive $5 billion contract Monday that will transfer the bank’s computing responsibilities – along with 4,000 workers – to the technology giant. The deal had been expected since November, when J.P. Morgan said it was focusing only on Armonk, N.Y.-based IBM for the outsourcing contract.
The seven-year contract, estimated by J.P. Morgan at $5 billion-plus, is one of the largest-ever technology services deals, and the biggest of four IBM outsourcing deals signed in the past month. Together, those contracts are worth close to $9 billion.
In 2000, IBM’s chief services competitor Electronic Data Systems Corp. of Plano, Texas, signed what is believed to be the biggest technology outsourcing contract announced to date, a $6.9 billion deal to run a communications network for the Navy and Marine Corps. As part of the contract announced Monday, J.P. Morgan will leave its computing infrastructure in IBM’s hands while getting its computing power “on demand” from IBM, a business offering the computer giant has touted heavily in recent months. IBM will assume operation of much of J.P. Morgan’s data processing infrastructure, including data centers, help desks and data and voice networks.
New technology will allow IBM to break with past practices and transfer only a small portion of the bank’s computing infrastructure to its own data centers, located in this case in the northeastern United States, said Bob Zapfel, general manager for IBM Global Services’ Americas unit.
The two companies instead will create a virtual pool of computing resources that will be accessed as needed, with most of the machines remaining in J.P. Morgan’s own buildings, Zapfel said.
IBM’s Utility Management Infrastructure software, which IBM Research unveiled this month after developing it under the code name Blue Typhoon, will allow IBM to link the bank’s disparate computing hardware, including different brands of servers and storage devices, Zapfel said.
J.P. Morgan Chase vice chairman Thomas B. Ketchum said the IBM contract “will create capacity for efficient growth and accelerate our pace of innovation, while reducing costs” and increasing quality.