In September 2004, less than three months after its $58 billion acquisition of Bank One, JPMorgan Chase & Co. announced that it would be scrapping a seven-year, $5 billion IT outsourcing contract with IBM Corp. having decided instead to bring the technology back in-house. The reaction from the press was predictable: an explosion of stories declaring the end of outsourcing as we know it. Austin Adams, the new corporate CIO of the now $1.1 trillion JPMorgan Chase, was cast as the protagonist in a battle against the dangerous offshoring craze that has been robbing America of its precious IT jobs. But Adams, as it turns out, is greatly misunderstood. "I am clearly an advocate of offshoring," he says without hesitation.
Adams, a soft-spoken 33-year veteran of the banking industry, believes in using technology as a competitive advantage. In fact, his early career success was built on his ability to integrate bank mergers quicklyhe has been involved in no fewer than 90 mergers over the course of his careerand make the merged entity more competitive through its use of technology. But Adams's decision to rein in outsourcing contractsa move he also made as CIO of Bank Onehas nothing to do with some patriotic ambition to keep tech jobs in the U.S.: By the end of 2005, Adams will preside over roughly 3,000 offshore employees in India who will perform call center, basic operations and accounting functions, and he promises many more to come.
Instead, Adams's penchant for pulling outsourced IT back in-house developed over time, as the banks he worked for gradually merged, creating massive economies of scale, and, now, a $7 billion tech budget at JPMorgan Chase that no outsourcer could match. CIO Insight Executive Editor Dan Briody sat down with Adams in his office in midtown Manhattan to get his thoughts on outsourcing, offshoring and combining two of the world's biggest banks.
CIO INSIGHT: What impact, if any, will offshoring have on our economy?
ADAMS: I am clearly an advocate of offshoring. I just spent a couple of days in Mumbai, India, where we have a large captive site. I'm not the best person to quote the economic impact of offshoring, but I do believe it has been blown out of perspective. I mean, who's the biggest beneficiary in the world of offshoring? It's the U.S.
But the impact it has on us and our industry is that it forces all of us to look at what's the right resource strategy for us. In other words, it's not just about offshoring. We spend a lot of time talking about where the skill sets are domesticallythe people who have experience, the relative cost, the proximity of people being located in Houston or Chicago, Columbus, Ohio or Wilmington, Del., or New York City, wherever it may be. But when you see the attitudes and the ambition and the work ethic of our employees in India, I think that challenges all of us to question whether we are at that standard, and we're not.
Didn't JPMorgan Chase CEO Jamie Dimon once say he opposed offshoring because "no one ever washes a rented car?"
No, no, he didn't say offshoring. He said outsourcing. Coincidentally, Jamie's in Mumbai this week, and I got e-mails the last couple of nights from him saying that he thinks Mumbai is terrific.
Jamie and I are philosophically aligned. We both believe that outsourcing major parts of mission-critical technology to a third party is not the best solution for a large firm. At Bank One we brought back major outsourcing contracts from AT&T and IBM, and then subsequently did the same thing here. But our captive site in India is not technology development or support. It is, or will be, by the end of this year, roughly 3,000 people doing operational functions, accounting functions, call center, those kinds of things.
Since you brought the $5 billion IBM deal back in-house, people have held you out as a champion of insourcing. Is that inaccurate?
Very much, yeah.
You're not anti-outsourcing?
Not at all.