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

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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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