Bank Takes U.S. Bailout, May Ship Integration Work to India

Loraine Lawson

Does anybody know if the U.S. government takes PayPal?


I ask, not for myself, but for my friends at JP Morgan Chase. You probably don't remember it, but JP Morgan was a bit short and borrowed a few dollars - $25 billion, but who's counting? - from the U.S. government recently.


I wouldn't even bring it up, of course, because it's crass to talk about money, but apparently, JP Morgan's savvy CIO has figured out that the bank can save what I'm (conservatively) guestimating to be $30-40 million by outsourcing and/or offshoring more IT functions, and integration in particular, to India this year. Or, at least, that's the rumor, according to this Business Week article proclaiming, right below the headline, "America's second-largest bank plans to spend $400 million on work outsourced to India to streamline its IT operations."


Of course, our buddies at JP Morgan are going to want to pay back Uncle Sam immediately, right? I just thought PayPal might be more convenient for them, that's all.


Actually, to be fair, the article doesn't explicitly state that the bank will be outsourcing the integration work. It just says it will increase outsourcing to India by 25 percent (or about $100-150 million more than in previous years) and also manage from India the integration of acquired companies Washington Mutual and Bear Stearns.


Integration's a tough, expensive job, too, and the <span>banks have a major integration challenge</span> ahead. In fact, Gartner analyst Kristin Moyer has already warned that the deck's stacked against the banks, pointing out that most of these post-merger integration efforts fail miserably.


Although, I have to admit, I'm a bit concerned. The Business Week article notes that JP Morgan has flipped and flopped on this outsourcing issue previously. In 2004, following a merger with Bank One, it fired IBM, canceling a $5 billion outsourcing contract and hiring in-house about 4,000 IT staffers in a new "do-it-yourself" strategy.


All this outsourcing is good news for Indian firms. The Business Week article notes that India's top tech firms, including Infosys, TCS and Cognizant, are bidding for at least three bank-related $100 million-plus contracts.


So, JP Morgan's getting leaner and meaner, India's getting an influx of IT work and probably an increase, or at least no decrease, in India's "offshore captives" (there's an unsettling name for you), and I just know there's going to be a huge payment to the U.S. government from our banking buddies any day now.


Which leaves one last question: Can anybody explain why I've got this nagging, disgruntled-taxpayer feeling?

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Mar 13, 2009 8:00 AM David Kidwell David Kidwell  says:

This really pisses me off. I think that any company taking bailout money from tax payers should be force to contractually agree to not sending more work out of the country and if they do then all of the Corporate Executives should be forced to forfeit their salaries, bonuses, benefits (medical included) and stock options and the company should be forced to pay stiff penalties and interest in repaying this money as well as have a government appointed executive appointed to help reverse these kinds of poor decisions.

Mar 14, 2009 5:33 PM Dr. Zareen Karani Araoz Dr. Zareen Karani Araoz  says:

Globalization is not a process that can or should be reversed. Businesses, for the sake of their shareholders, will and must get the work done where the work is best and most profitable, to responsibly deliver to their shareholders. If a Bank takes government money and fails, it is hurting tax payers much more, than if it uses profitable means, like outsourcing to stabilize its finances again. IF JP Morgan did not outsource and if it could not be profitable, all the thousands of JP Morgan employees would lose their jobs. So it would NOT help the US economy and it would not be a service to tax-payers.

It is short-sighted to insist on "No global sourcing"---it is the way businesses remain profitable and in doing so help their country and its economy. Jobs are outsourced to the US from India. And if India profits from the outsourcing, the money people earn in India is spent often on buying Nike shoes or eating at Mc Donalds! And the US economy profits. To try and turn back the clock and lead a protectionist life is to shoot oneself in the foot.

Instead, the world needs to come together to determine how best countries can collaborate to create the most profitable businesses and raise the world economic situation.

Mar 15, 2009 4:03 PM Loraine Lawson Loraine Lawson  says: in response to Dr. Zareen Karani Araoz

I agree that no global sourcing is an impossible situation, as it should be. But that's not actually the argument, here. The issue is whether someone taking so much money from the U.S. government has a responsibility to taxpayers here to help the economy here. You said:

"Businesses, for the sake of their shareholders, will and must get the work done where the work is best and most profitable, to responsibly deliver to their shareholders."

At this point, $25 billion in, couldn't it be argued that U.S. taxpayers are also stakeholders and they have a responsibility to deliver to us as well?

Mar 15, 2009 4:10 PM David Kidwell David Kidwell  says: in response to Karey

When a manufacturing company has customers all over the globe they outsource part of the jobs for their products to the countries where the products are also sold. Take Boeing as an example.  So in the case where a bank has shareholders globally they have a global responsibility to each shareholder. However, if this country is buying a major stake in company and preventing it from failing then each of the shareholders owes this country and it makes sense that since it is this country that has saved the bank or banks then those banks owe this country those jobs much like a manufacturer make similar concessions globally to the countries with whom they have customers buying into them.  The American Tax payer just became a huge customer and I believe concessions are due to them.

Mar 15, 2009 7:32 PM Karey Karey  says: in response to Loraine Lawson

I couldn't agree more. The term "stakeholder" takes on new meaning in our current economy. The American taxpayer has become the primary stakeholder in this nationalistic approach. I agree that globalization is here to stay, but organizations are "acting nationally" when they want money to continue their agenda and "acting globally" in operations; you can't have your cake and eat it too...

My recommendation: If organizations want to continue acting global, in terms of operations, then let all the countries (based on percentages) support the cause. My main issue is my great grand children are "flipping the bill" for this effort...

Mar 17, 2009 5:52 PM BrootSoft BrootSoft  says:

Have a look at BrootSoft as PMI for IT specialists with over 20 years in the industry. They have recently partnered with Capco to form a PMI powerhouse.

They have case studies showing that they can complete an integration assignment in half the industry standard timeframe resulting in significant ROI.

IT should be one of the major considerations as so much of the synergy between the two entities is derived from IT.

Great post.

Mar 19, 2009 10:04 AM Rohit Malik Rohit Malik  says: in response to BrootSoft

If JP Morgan is more profitable, does it not automatically benefit all stakeholders including US Government and all taxpayers thereof? I do not see any reason for concern.

Mar 22, 2009 8:08 AM mahesh parab mahesh parab  says:

Biggest challenge is not work getting outsourced to India/China. Its not even H1B visa holders challenging for positions in the US. for one finger that we point in that way we have to remember there are four fingers pointing our way. All the nationalistic talks doesn't make any sense when not backed by "work". We need to ask hard questions to ourselves why is it that Indian and Chinese Students are ready to toil hard in our Universities, and Phd Programs. Why H1B workers are ready to work extra hours when we can't compromise on our "Vacation Plans" and "Dinners Dates". Why is it that our Patriotism limited only to success of teams at Ball games and our troops in foreign lands. Why doesn't it convert to working hard as parents to make our kids study science and maths, encourage them to pursue Higher Education, for every American Youth dropping out of Education, there are 10 stories of Indian & Chinese Immigrant families toiling hard for further education of kids. And all we and our media do is poke fun of Indian kids winning Spelling Bee contests. Till we give up attitude of entitlement, no amount of protectionism is going to save us short term or long term

Mar 22, 2009 8:16 AM mahesh parab mahesh parab  says: in response to Karey

Karey for statistics - every dollar that goes out to China/India as an outsourced job, American Corporations are make 1.25$ thanks to Consumers in those Country spending on American Brands. Where does that money go? Its the American Multinational Corporations that are pocketing those profits. At Dawn of Globalization, these American Corporation went to Countries Like China/India Forced the Governments there to take safety nets from their Industries, Preached them to give up protectionism, retirement benefits, health care to employees that was late 80's and 90's.If only they had hardened the bellies of their own people back home, We would have been more prepared to face the truth and it wouldn't have come as a sudden blow

Mar 27, 2009 6:26 PM David David  says: in response to mahesh parab

If all of this rhetoric was really this simple. In my now 10 years of American experience dealing with IT outsourcing to both India and China I know there are so many factors that must be weighed to determine if there is an ROI at all on this investment, let alone one that justifies the action.

I have watched projects where we thought the savings in hourly rates would pay off only to discover that the amount of documentation required to get the offsource worker to understand our requirements and the rework required to correct faulty understanding so that the project worked doubled the cost. On the whole it was actually more expensive to outsource.

Some areas of IT are easier than others to outsource. Some require we fly the Indian workers here to do the job, adjust our contracts to handle their housing costs and fly them home at the end, only to end up with a three wheeled wagon for all our efforts.

Outsourcing and doing it successfully is complex and filled with potholes. I wonder, if at the end of the day, if it wouldn't have been better long term to simply work closely with unversities to use Americna students to achieve the same end. At the end of those projects we could have hired them to stay on without the pains of setting up international infrastructures and dealing with US Immigration.  And we know those workers would be putting their dolloars back into the American economy building our infrastructure so that their kids had eductation, healthcare, employment and the means to retire.


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