| JP Morgan Increases IT Outsourcing expenditure |
IT outsourcing is an already appreciated practice and we should now go past the argument of subcontracting vs. internal development. And the necessity to subcontract your non-core operations goes up in times of economic hardships like the present-day global financial crisis. That’s the path JP Morgan is choosing nowadays, thanks to its acquisition of Bear Sterns and Washington Mutual that have put more pressure to cut expenditure and satisfy shareholders’ anticipations. A March 2009 report in BusinessWeek mentioned that JP Morgan is going to step-up its Indian subcontracting expenditure by 25%.
So, around $400 million will go into outsourcing this year for JP Morgan. At the moment, JP Morgan is spending anywhere between $250-300 million in a year on subcontracting, most of which goes to TCS, Accenture and Cognizant. Guy Chiarello, the Chief Information Office for JP Morgan, wants to make sure that his firm can cut their overall IT expenditure, according to an expert who wanted to stay clear of any media popularity. Although JP Morgan representatives were contacted by reporters, they did not issue any reply so far.
The global fiscal crisis has deeply affected the banking industry and other banks should have adopted similar steps. But so far, there haven’t been any accounts of noteworthy financial institutions spending a lot on IT outsourcing.
The serious problem is that extensive mergers and acquisitions of different financial institutions have called for fundamental modifications to the information architecture now. Past WaMu customers would now control their accounts under JP Morgan so their fundamental records from their previous bank have to be brought in now. Besides, the whole internet and intranet design in these financial institutions have to be consolidated too. So it’s no surprise that banks that have participated in recent amalgamations and acquisitions seek outsourcing to set these computerized data correct at minimum spending; Indian subcontracting service providers already have vast experience in managing offshore US-based customers so that’s where everyone is heading to.
While these are huge banks with huge budgets, the same thing can be executed by small businesses too. Financial institutions and real estate were two sectors where individuals used to put their investments for gains, but both these sectors are in pain now. So it may be a nice time to take a fresh beginning and set up your own business. And hiring overseas staff to take care of your IT needs is an effective way to begin with a low budget at the moment.
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