Was Gene, Gene The Dancing Machine outsourced too?
Posted on 09/16/2005 11:18:32 AM PDT by SirLinksalot
Backsourcing Pain
JPMorgan Chase's decision to first outsource IT and then bring it back in-house stands as a cautionary tale for any CIO considering an outsourcing megadeal.
BY STEPHANIE OVERBY
When David Rosario got the official notice at the end of 2002 that his job would be outsourced to IBM, he was not surprised.
Rumors had been circulating for months at JPMorgan Chase, where he had worked as a network engineer since 2001, that the company would be signing away much of IT to an external services company.
The $5 billion IBM-JPMorgan contract was heralded at the time as the largest outsourcing deal on record, and it received a great deal of publicity in the mainstream and trade press as the wave of the future. JPMorgan itself had trumpeted the deal as a "groundbreaking" partnership that would cut costs, increase innovation and benefit its IT workers.
But Rosario and other employees soon discovered that they would have to reinterview at IBM for their positions. During that process, Rosario was told that his job at IBM would be secure for the foreseeable future. Others, however, were not so lucky. They were told by Big Blue that their jobs would likely be gone within a year or two. As a result, some left as soon as they could.
Rosario stayed.
But his sense of security didn't last. Rosario watched as IBM cut the pay of most of the consultants working for the bank and then eventually let many of them go. And with IBM's well-publicized penchant for sending work offshore, he wondered if—as a full-time employee—he would be next.
On July 1, 2004, JPMorgan completed its merger with Chicago-based Bank One, which itself had canceled a well-publicized outsourcing deal with IBM and AT&T a few years earlier. Two and a half months later, the merged company announced that it would be ending its much-touted deal with IBM early and "backsourcing" its information technology, bringing it back in-house.
However, Rosario wasn't sure how long he could hold on to his regained position at JPMorgan. He knew that there were now Bank One employees doing the same work he was. And sure enough, not long after he began working for JPMorgan again, he found out his job was on the list of 12 positions to be eliminated in his department. Lucky for Rosario, he had become skilled at reading the IT tea leaves, and had already secured a job for himself in another area of the company as an IT architect. But not before all the to-and-fro took its toll on him. "I lost my trust in management a long time ago," he says. "I don't believe anything they say or do. I know they'll put a spin on anything, as long as it allows them to keep retention up for just as long as they need to."
Rosario is just one of thousands of employees affected by JPMorgan's decision to outsource to IBM and its subsequent move to bring the work back in-house. And he is not the only one who suffered such whiplash. In interviews with a number of current and former employees, CIO repeatedly heard stories of diminished morale and decreased productivity over the past several years.
But the bank's decisions have had ramifications even bigger than poor morale or the loss of employee trust. JPMorgan's decision to bring IT back in-house—though applauded by most industry analysts, IT experts and even employees like Rosario as the right thing to do—has been a costly and difficult move, according to analysts and current and former employees. It has eaten up years of management time and attention as managers prepared the organization for the outsourcing and then reorganized again to bring the work back in-house. A number of IT projects were slowed down and some day-to-day tasks did not get done, causing a lot of pent-up demand for IT services, according to several employees. In sum, JPMorgan's experience stands as a cautionary tale for any CIO considering a multibillion-dollar outsourcing deal.
"Bringing outsourced work back in-house can cause such disruption to an organization that most people don't do it," says Ralph Schonenbach, CEO of the Trestle Group, an outsourcing consultancy based in Zurich, Switzerland. "It's a very difficult and painful change for an organization to go through."
For their part, JPMorgan officials deny any such struggle. "This has been a smooth transition because the same people—the IBM employees and contractors supporting the JPMorgan account—were transferred back to JPMorgan. They simply changed employers, not jobs," says JPMorgan spokesperson Charlotte Gilbert-Biro. "In addition, Bank One executives and managers are experienced at transitioning technologists back in-house."
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The reason that outsourcing looks so attractive to senior management is that it’s so difficult to quantify lost productivity that results from the outsourcing. Suddenly, it takes longer to do any project because of needing to negotiate/translate the request with the outsourcer.
Additionally, senior management is typically too isolated in the "ivory tower" to really understand the true impact of outsourcing. I recall working for a company about seven years ago that had outsourced all of their infrastructure support to a large vendor. I joined the company as a senior consultant and had to wait two and a half weeks just to get a network login ID (because of some "process issues"). I found out that was a pretty common experience with new employees. How much "savings" was spent paying me to sit around with largely no ability to work?
In industry today any perceived financial gain obliterates the concept of company loyalty to employees. Workers are no longer trained by the company for the job and no longer valued for prior service. For their part workers have bought into the mercenary cycle too, jumping ship whenever they posssess the hot skill that will pay a dollar more. This viscious circle benefits no one.
Did an Indian replace her on The Gong Show?
Truer words were never spoken. I was part of a group that proposed to implement a system for a large company that shall not be named, well screw it why not - McKesson. We would have built this for their in house IT Dept. in less than a year for around $900,000. They outsourced it and after 3 years and $7 million had nothing to show for it and canceled it. Heh, but then the saloon are full of people with "war stories" like this.
And then the upper management will moan about the lack of loyalty in the world.
So many of my friends have been victims of this crap from AT&T. Some are lucky and can go back to do the same job as a contractor, but most aren't.
"This viscious circle benefits no one."
On the contrary, it benefits the worker. Was there ever a time that a company valued the worker other than as someone to do the best work at the cheapest wage? Not in my life time. Some have made attempts, such as when Henry Ford paid his workers more than the other auto manufacturers, but usually those decisions were made with hopes of profitting from it.
The individual worker has always been a self-employed worker, whether he works for a company or is a contractor.
The benefit is that people now realize the truth that they are only as valuable as they make a company money.
Was Gene, Gene The Dancing Machine outsourced too?
I now do contract IT work.
I have had clients who mis-treated me and in response, I raised my fees.
One client I initially charged $35 per hour because they were church based. Then, the CIO blamed the failure of a project I was working on, on me, when in actuality it was his inability to make a decision. His inability has only been rivalled by the recent inaction of Nagin and Blanco.
So, I told him, "If I am to take the hit for your ineptitude, you will pay for it." I then charged $55 per hour.
Then, a few weeks later, he once again blamed me for his inability. I was let go. No problem.
I took off a week to relax. I got hired back a week later. But, then I charged $75 per hour.
I had no problems after that up through the completion of the project.
There is more to it than meets the eye: look at the final paragraph for details.
Full Disclosure: CMM - level 5 just means managers know how to administer a process, it does NOT protect you from poor IT infrastructure, design flaws, or spaghetti code "under the hood" of an application or system.
Cheers!
"The reason that outsourcing looks so attractive to senior management is that it’s so difficult to quantify lost productivity that results from the outsourcing."
Where I work, when network is down, the project you are working absorbs the downtime. We've asked to have downtime tracked separately, but the refuse because it makes some people look bad. So yes, the true cost of productivity losses is impossible to quantify and it adds time to the project that you're working on.
Or perhaps this approach to life is simply very common, and not just in the business world.
At some point, we as a society will have to ask ourselves what trade policies result in NET benefit to everyone.
Lets face it folks, people are going to BENEFIT and be HURT by outsourcing. Those who gain jobs ( like Indians and Filipinos ) are going to be happy, and those who lose their jobs ( like the technicians in the above article ) are going to be angry and hurt.
When Henry Ford invented the Model T, thousands of people lost their jobs in the horse and buggy business and many more in the pony express, not to mention those who worked in the railroads. However, millions more were re-trained to work in the automobile industry.
Same principle applies with switchboard operators, slide-rule makers, etc. Those who do not adopt, get hurt.
OUTSOURCING is the same principle. Millions will be hurt, but millions of others will benefit.
The poor in thr 3rd world get to lift up their lot in life because of outsourcing, but the richer workers whose jobs are affected will be devastated.
AS for individuals companies like JP Morgan or IBM, whether it benefits their bottom line and stock holders or not is a decision only THEY can make AFTER they do all the profit/loss calculations.
In the end, whether outsourcing results in NET GOOD for everyone in this country and the world at large can only be answered in HINDSIGHT. WE DON'T KNOW WHAT THE NET EFFECTS WILL BE AT THIS POINT IN TIME.
"My observation was that the in-house IT people were all tied up with "management intitiatives", diversity training, charity events, reorganizations, and meetings upon meetings upon meetings."
Oh man, you hit the nail on the head with that comment.
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took off a week to relax. I got hired back a week later. But, then I charged $75 per hour.
I had no problems after that up through the completion of the project.
>>>>
You must possess some special skill that is hard to find and higly valued. Wanna share with us what it is ?
I'm currently working for a an energy co. here in Houston and we're literally in the process of outsourcing most of our IT dept. overseas. I'm expecting to be outta here around the end of the year, but with a severance package...
Yes, I am a decent VB programmer and I have the incredible skill of knowing how to sell myself as God's gift to computer technology.
Actually, my skill is that I can easily translate common speak into computer code. Most programmers have no ability to think outside of codespeak.
Throw is SAS70, Sarbanes-Oxley and ISO and it's amazing any project ever gets done in my shop.
I'm not familiar with SAS70, but am very familiar with Sarbanes-Oxley and ISO along with a myriad of other standards orgs.
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