JP Morgan IT system. The agreement stated that IBM would take over tasks from JP Morgan such as hosting computer centres, running help desks, distributing applications, maintainging data and voice networks as well as hosting trading applications for JP M
Contents
Content Page Number
Front Cover 1
Content 2
Introduction 3
JP Morgan's needs 4
JP Morgan's past system 5
Outsourcing 6
JP Morgan and IBM 7
JP Morgan and Bank One 8
Disadvantages of an Information system 9
Disadvantages of an Information system 10
Types of information systems 11
JP Morgan's IS system 12
Methodology 13
Value Chain 14
Ethics 15
Conclusion 16
Bibliography 17
JP Morgan Chase Case Study
Introduction
JP Morgan is a financial holding company with $1.2 trillion in assets and $106 billion in stockholders equity. It is the second largest financial services firm in the United States with $56.9 billion in revenue and more than 160,000 employees. The firm operates in more than 50 countries. Its principal banking subsidiaries include JP Morgan Chase Bank National Association, which is a national banking associations with locations in 17 states, and chase Bank USA, National Association which issues credit cards for the firm. JP Morgan Chase also operates a principle non-banking subsidiary. JP Morgan Securities inc, which is an investment banking firm in the United States. Currently JP Morgan Chase competes with banks, brokerage firm, investment banking companies, credit card companies and mutual find companies.
JP Morgan has been helping its clients do business for more than 200 years. To describe our firm and our people we can find no better phrase than that of one of our founders: "at all times the idea of doing only first-class business, and that in a first-class way".
In 2002 JP Morgan made a huge strategic decision and struck a deal with IBM (is a multinational computer technology and consulting corporation headquartered in Armonk, New York, USA), to outsource a large part of its IT infrastructure to them. The reason JP Morgan gave for outsiorucing to these Americna giants were that it would create "significant value" for its clients, shareholders and employees by creating capacity fro "efficient growh" while reducing costs and increasing quailty" (JP Morgan Case Study) from this sentence I conclude that JP Morgan chase made this disicion to increase profits. Although his deal did not only create oppertunities for JP Morgan chase but also for IBM as well giving them the opertunity to demonstrate the power of its new ondemand services on a stage provided by a realtionship with a major coroperation.
Agreement with IBM
The agreement stated that IBM would take over tasks from JP Morgan such as hosting computer centres, running help desks, distributing applications, maintainging data and voice networks as well as hosting trading applications for JP Morgan securities. All of these being very important for JP Morgan's day to day running.
JP Morgan's mission is to be the best financial services company in the world. To achieve this goal, we focus relentlessly on carrying out our business principles, which are fundamental to everything we do. They are to:
Aspire to be the best
* Develop a world-class franchise in every business we operate
* Be client-driven, consistently delivering the best products and services in a cost-effective way
* Innovate, test and learn
* Create powerful brands that carry a commitment of quality and integrity
Execute superbly
* Demand and maintain strong financial discipline, building for good times and bad
* Create and maintain a fortress balance sheet
* Design and maintain the best systems and operations
* Eliminate waste and bureaucracy
* Maintain a strong system of internal governance and controls
* Measure performance through a complete and balanced scorecard
Build a great team and a winning culture
* Operate with the highest standards of integrity
* Train and retain great managers
* Be open and honest with ourselves, our colleagues, our shareholders and our communities
* Get incentives right
* Foster an environment of respect and inclusiveness
* Give back to our communities
Being a first-class firm also means doing "good", not just doing well. JP Morgan has a proud tradition of being a good corporate citizen around the world.
JP Morgan's Needs
Therefore JP Morgan Chase needs to have an excellent system that is secure in place. This means JP Morgan Chase would need a large scale computer and sever system in place this will allow the company to connect and relay information at anytime. Therefore whether you were in marketing to accounts you can access the information. They would also need internal telephones, which allow people in the entire organisation to access each other. Although JP Morgan would need to have IT support to support these systems these would include the Internet and the intranet.
JP Morgan's past system
The Information strategy that resulted from the decision to outsource was based around the on-demand aspect of the relationship between the two companies, which was prompted from what was being called a "virtual pool of computing resources" (JP Morgan Case Study). The resources were supplied by both companies and were made available for when required. The Utility Management Infrastructure (UMI) was set up by IBM to refer to the technology that supported the resources supplied (JP Morgan Case Study).
JP Morgan in the past has adopted a system where its internal environment is more important. Therefore I feel the system they have adopted in the past is an enterprise system, this system deals with the organisations associates and the building of he company. Evidence of this can be seen in the case study. "The appeal of its products to customers, its ability to meet the objectives and the needs of clients, its reputation and the ability to attract and retain its personnel"
Although by signing the contract with IBM JP Morgan seem to have changed its ...
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JP Morgan in the past has adopted a system where its internal environment is more important. Therefore I feel the system they have adopted in the past is an enterprise system, this system deals with the organisations associates and the building of he company. Evidence of this can be seen in the case study. "The appeal of its products to customers, its ability to meet the objectives and the needs of clients, its reputation and the ability to attract and retain its personnel"
Although by signing the contract with IBM JP Morgan seem to have changed its strategy to looking outside the organisation although still concentrating on the internal environment therefore I would point out that they may have changed there cross functional system to a supply chain management as they are now looking at the external environment. Please see below a diagram of an enterprise system.
Source: http://docs.sun.com/source/8175764/images/sys_infrastruc2.gif
Although by outsourcing there IT department to IBM, JP Morgan have changed their strategy slightly towards a more supply chain management view, this is still customer focused but links them to another company. An example of a chain management system is one below.
Source:www.compiere.org/functionality/images/SupplyChainManagement.gif
Outsourcing
Unfortunatly outsourcing can be very risky but if works the benefits can be high as it reduces costs. Outsourcing in general can be defined as passing of service provision or production to another internal or external party. The chief reason of outsourcing is to reduce capital expenditure over a business process. Also management gets more time to concentrate over core competencies. This also reduces the dependency upon internal resources and increases the flexibility to meet the changing business and commercial conditions.
Even though several other reasons can be listed up in favour of outsourcing, one must not overlook the disadvantages of it.
By outsourcing a business process, we tend to loose the managerial control. This happens because it is harder to manage the outsourcing service provider as compare to managing one's own employees.
Also because we generally tend to skip (or miss to calculate) the potential hidden costs of outsourcing which includes legal costs of putting together a contract between companies and time spent on coordinating the contracts, we feel that outsourcing reduces the overall expenditure of a business process, one of the major reasons why a company goes for outsourcing.
This hidden and missed out costs of outsourcing is hard to predict causing overall costs to be underestimated.
Another disadvantage is that outsourcing can also prove to be a threat to the security and confidentiality of issues of a company. If your company is outsourcing business process such as payroll, the outsourcing service provider will know confidential information such as salary. Therefore one must be very careful in choosing which business process to outsource and which one not.
Outsourcing may also result into the possible loss of flexibility in reacting to changing business conditions, lack of internal and external customer focus and sharing cost savings. Loss of internally generated talent is yet another problem associated with the outsourcing as it may hamper the growth of an employee by depriving him from the experience he would have gained by handling the business issue himself then by passing it over to some other external party.
Outsourcing can also cause staff morale to dip which happened to JP Morgan Chase, they transferred 4,000 employees onto IBM's payroll, retaining a few of its IT functions, including application delivery and development, desktop support, and other core functions. This left many employees having to re-interview for their own job, with further reductions being made in the next 12 months. This meant productivity for JP Morgan fell.
Thus before a company decides to outsource its business process, it must examine all the factors carefully. It may not happen that outsourcing becomes a reason for company to regret later. Which is the mistake that JP Morgan made, and they did regret it later.
How JP Morgan and IBM worked together
Although JP Morgan did make the decision to outsource and we do need to consider how JP Morgan and IBM could work together especially since they are in such different sectors of business. In order to overcome this problem JP Morgan and IBM came up with a solution, which was to come up with an information system, which allowed the two businesses to seem closer together than, they actually were. This they named a virtual pool, this technology used open architecture standards that enabled different components such as storage devices and servers to work together. This process eliminated the need for writing new applications for each system that the client required to run its business. In return for the major deal JP Morgan expected a smooth transition between the two companies, productivity to go up and profits to rise. Although this did not happen JP Morgan did not plan the outsourcing very well and did not look in depth at its decision. "IBM caused tremendous headaches for JP Morgan and the company's infrastructure, nickel-and-diming to control their own costs. Things that used to get done no longer got done"(JP Morgan Case Study). In hindsight I do not think JP Morgan would not have signed the deal to outsource if they knew how much the loss of productivity would cost, or the fact that outsourcing coat additional expenses from investments in consultants who assisted in the outsourcing strategy and re-engineering.
After IBM making a disaster of outsourcing and it being obvious that it was not working for either business, IBM lost one of its most high profile clients, meaning that the message was sent out that IBM could not cope. JP Morgan decided to "back source" its information technology department which triggered a merger with Bank One in July 2004.
JP Morgan's deal with Bank One
This deal meant that JP Morgan acquired a larger retail banking presence and an increased capacity to manage its technology infrastructure. Bank One had an IT strategy that was based on consolidation, cost cutting and self-sufficiency. This was completely different to the approach that JP Morgan had taken with IBM where JP Morgan were not taking a do-it- yourself approach but a pass it onto someone else approach.
Bank one had also had dealings with IBM in the past and after coming out of an outsourcing deal with IBM adopted this new do-it-yourself strategy. The new merger seemed to be having a positive effect as between 2000 and 2003; Bank One cut staff by 12 per cent and raised its revenue by 17 per cent (for the same period JP Morgan cut staff by 6 per cent and raised revenue by 1%). As well as this change the average salary for Bank One and JP Morgan staff also rose by almost double what they were being paid before. Overall the idea of bringing IT back in-house from IBM was to fix the poor economics of JP Morgan. However even with the strength of a recognised consolidation expert as Bank One back sourcing was not a guaranteed success.
What is an information system
An information system can be defined technically as a set of interrelated components that collect (or retrieve), process, store, and distribute information to support decision making and control in an organisation. In addition to supporting decision-making, co-ordination, and control, information systems may also help managers and worker analyse problems, visualize complex subjects, and create new products.
Information systems contain information about significant people, places and things within the organisation or in the environment surrounding it (see figure 1.2). By information I mean data hat has been shaped into a form that is meaningful and useful to human beings. Data in contrast are streams of raw facts representing events occurring in the organisation or the physical environment before they have be organised into a form that people can understand and use. Three activities in an information system produce the information that organisation need for making decisions, controlling operations, analysing problems, and creating new products or services. These activities are input, processing, and output. Input captures or collects raw data from within the organisation or from the external environment. Processing converts raw input into a more meaningful form. Output transfers the processed information to the people or activities where it will be used. Information system also requires feedback, which is output that is returned to appropriate members of the organisation to help them evaluate or correct the input stage.
Advantages of an Information System
Modern information systems are sophisticated data management tools and powerful user interfaces integrated into conventional data centres. These information systems offer an online, flexible and fast access to the ever-increasing amount of data. To create and operate information systems, special knowledge about storage of data is necessary. This knowledge is concentrated in accessible Meta data. Meta data are descriptions and documentations about data, covering the internal data structure and relations as well as the availability of data.
Disadvantages of an Information System
Unemployment - While information systems may have streamlined the business process it has also crated job redundancies, downsizing and outsourcing. This means that a lot of lower and middle level jobs have been done away with causing more people to become unemployed.
Privacy - Though information systems may have made communication quicker, easier and more convenient, it has also bought along privacy issues.
Lack of job security - Industry experts believe that information systems has made job security a big issue as since technology keeps on changing with each day. This means that one has to be in a constant learning mode, if he or she wishes for their job to be secure.
Dominant culture - While information systems may have made the world a global village, it has also contributed to one culture dominating another weaker one.
Types of Information Systems
There are four key types of information systems these are as follows:
* Operational level systems
* Knowledge level systems
* Management level systems
* Strategic level systems
An operational system is there to support operational managers by keeping track of the elementary activities and transactions of the organisation. The principle purpose of systems at this level is to answer routine questions and track the flow of transactions through the organisation. This covers things like sales, receipts, cash deposits, payroll, credit decisions and flow of materials.
The operational level system normally uses a transaction processing system (TPS). This is a very basic business system; it performs daily routine transactions necessary for the business function. Generally there are five categories to this type of system as shown in the table below.
Sales/Marketing Systems
Manufacturing production system
Finance accounting system
Human Resource System
Major functions system
Sales management
Market research
Promotion
Pricing
New products
Scheduling
Purchasing
Shipping/Receiving
Engendering
Operations
Budgeting
General Ledger
Billing
Cost accounting
Personal records
Benefits
Compensation
Labour relations
Training
Major application system
Sales order information system
Market research system
Pricing system
Materials resource planning system
Purchase order control system
Engineering system
Quality control system
General Ledger
Accounts receivable/payable
Budgeting
Funds management system
Payroll
Employee records
Benefit system
Career path system
Source: Laudon, 2005
Knowledge level system is used to support data workers in the organisation. The purpose of these systems is to help the organisation discover, organise and integrate new and existing knowledge into the business, and to help control the flow of paperwork. These systems, specifically in the form of collaboration tools, workstations, and office systems, are the fastest growing applications in business today. This type of system is run by an office automation system (OAS). It is targeted at meeting the knowledge needs of data workers within the organisation. Data worker tend to process rather than create information. They are primarily involved in data use, manipulation or dissemination. This system is typically used to handle and manage documents, scheduling and communication. Under the same heading of knowledge level system there is also the knowledge work system (KWS), which is targeted at meeting the knowledge needs of the knowledge workers within the organisation. In general, knowledge workers hold degree professional qualifications and their jobs consist mainly in crating new information and knowledge.
Management level systems are designed to serve the monitoring, controlling, decision-making and administrative activities of middle managers. These typically provide periodic reports rather than instant information on operations. Some of these systems support non-routine decision-making, focusing on less structured decisions for which information requirements are not always clear. This will often require information from without the organisation as well as from normal operational level data. MIS systems provide managers with reports and, in some cases, on-line access to organisations current performance and historical records. Typically these systems focus entirely on internal events, providing the information for short-term planning and decision-making. MIS summarise and report on the basic operations of the organisation, dependant on the underlying TPS for their data.
Strategic level systems are designed to help senior managers tackle and address strategic issues and long-term trends, both within the organisation and in the external environment. Principle concern is matching organisational capability to changes, and opportunities, occurring in the medium to long term (i.e. 5-10 years) in the external environment. As MIS these serve the needs of the management level of the organisation. It is focused on helping manager make semi-structured, unique or rapidly changing and not easily specified in advance decisions. I uses the internal information form a TPS and MIS system but also gathers information from external sources. It has greater analytical power over the other systems and supports what if scenarios, which would have been helpful for JP Morgan.
JP Morgan's IS System
Typically an organisation may have operational knowledge, management and strategic level systems for each functional area within an organisation. This means that each part of the organisation has its own system and they are not run all on the same one. This has higher security as if someone was to try and get into the system who weren't meant to they could only access the information on that system, it also means that each department can only access the information they need, rather than the whole organisations.
This is based on a management model (figure 1.3) adopted by the organisation, so, while he most commonly adopted system structure would simply follow the standard functional model, structures reflecting beaurocratic, product and matrix models are also available. This means that this type of system would suit the organisation and the user as it is based on a management model adopted by the organisation. This system is controllable as well as it is not based on the whole organisation but each system is run individually therefore easier to control. The thing that makes this a good system is that it is controllable, secure and helps the business run on a day-to-day business activity. It suits the user and the organisation, and therefore can only make the way the organisation is run more effective. I feel this system is very good although I do feel that the JP Morgan could have been helped by the TPS or MIS system which would have helped them forecast into what would happen if they outsourced and therefore would have saved them millions of dollars.
Source: nurseweb.ucsf.edu/www/rcsm-mod2.gif
This framework supports understanding of how different aspects of cognition (intuition, feeling, thinking and sensing) relate the business activities, on a time basis (from a vision of the future, through motivation, planning, action, evaluation, satisfaction to realisation).
Reference: Hurst, D.K., Rush, J.C. and White, R.E. (1991)
Methodology
"A methodology is a collection of procedures, techniques, tools and documentation aids....will consist of phases, themselves consisting of sub-phases. But a methodology is more than merely a collection of these things. It is usually based on some philosophical view, otherwise it is merely a method, like a recipe" Avison and Fitzgerald.
Soft Systems Methodology (SSM) is an approach to organisational process modelling and it can be used both for general problem solving and in the management of change. It was developed in England by academics at the University of Lancaster Systems Department through a ten year Action Research programme.
The methodology was developed from earlier systems engineering approaches, primarily by Professor Peter Checkland and colleagues such as Dr Brian Wilson. The primary use of SSM is in the analysis of complex situations where there are divergent views about the definition of the problem - "soft problems" (e.g. How to improve health services delivery; How to manage disaster planning; When should mentally disordered offenders be diverted from custody? What to do about homelessness amongst young people?). In such situations even the actual problem to be addressed may not be easy to agree. To intervene in such situations the soft systems approach uses the notion of a "system" as an interrogative device that will enable debate amongst concerned parties. In its 'classic' form the methodology consists of seven steps, with initial appreciation of the problem situation leading to the modelling of several human activity systems that might be thought relevant to the problem situation. By discussions and exploration of these the decision makers will arrive at consensus over what changes may be systemically desirable and situationally feasible. Later explanations of the ideas give a more sophisticated view of this systemic method, and do give more attention to locating the methodology in respect to its philosophical underpinnings. It is though the earlier classical view which is most widely used in practice.
There are several hundred documented examples of the successful use of SSM in many different fields, ranging from ecology, business and military logistics. It has been adopted by many organisations and incorporated into other approaches: in the 1990s for example it was the recommended planning tool for the UK government's SSADM systems development methodology.
The general applicability of the approach has led to some criticisms that it is functionalist, non-emancipatory or supports the status quo and existing power structures; this is a claim that users would deny, arguing that the methodology itself can be none of these, it is the user of the methodology that may choose to employ it in such a way. The methodology has been described in several books and many academic articles.
SSM remains the most widely used and practical application of systems thinking, and other systems approaches such as Critical Systems Thinking.
Value Chain
The value chain model highlights specific activities in the business where competitive strategies can be best applied (Porter, 1985) and where information systems are most likely to have a strategic impact. The value chain model can supplement the competitive forces model by identifying specific, critical leverage points where a firm can user information technology most effectively to enhance its competitive position. See figure 1.4 below.
Source: www.themanager.org/.../image002.gif
Ethics
Ethics refers to the principles of right and wrong individuals acting as free moral agents to make choices to guide their behaviour can use that. Information technology and information systems raise new ethical questions for both individuals and societies distributions of power, money, rights, and obligations. Like other technologies, such as telephone information technology can be used to achieve social progress, but it can also be used to commit crimes and threaten cherished social values. The development of information technology and systems will produce benefits for many, and costs for others.
What an information system must be
An information system must be user and organisational friendly; this means that the information system must meet all the needs of the organisation and the user. Having the user involved in the designing and operation of information systems means that they have more opportunities to mould the system according to their priorities and business requirements. In addition, they are more likely to react positively to the completed system because they have been active participants in the change process.
Communication problems between end users and designers are a major reason why user requirements are not properly incorporated.
Safety of the user
Not only is it important that the information system suits the user and the organisation it is also important that the system and the product such as computers that the user uses to work the system are safe and that they comply with all the relevant safety regulations. Injuries can include
* Repetitive Strain Injury (RSI)- results from performing repetitive movements, e.g. using the mouse, for a long period of time.
* Strained Eyes Working for long periods of time on the computer can strain your eyes or can worsen existing eye conditions
* Stress Computer work can be stressful
* Epilepsy- Although this is a small risk, epileptic seizures can be triggered by computer work
Source: Kenneth Laudon, 2007
It is the employers responsibility to ensure that there employees are safe and well, this has benefits for the business as staff would be taking less sick days and therefore would be more productive.
Conclusion
In conclusion JP Morgan made a very costly mistake by outsourcing to IBM, but managed to retrieve themselves by making a deal with Bank One and then adopting there values. I have looked in depth at different types of information systems and how they affect an organisation and user. The problems with Information systems and the advantages of information's systems
Bibliography
JP Morgan Case Study
Bocij, Paul, Business information systems :technology, development and management for the e-business, 3rd edition, Harlow :: Financial Times Prentice Hall, 2006
Laudon, Kenneth C, Essentials of business information systems, 7th edition, Upper Saddle River, N.J. :: Pearson Prentice Hall, 2007
Porter, Michael E, Competitive advantage :creating and sustaining superior performance, First Free Press export edition, New York [etc.] :: Free Press, 2004
http://docs.sun.com/source/8175764/images/sys_infrastruc2.gif
www.compiere.org/functionality/images/SupplyChainManagement.gif
www.themanager.org/.../image002.gif
nurseweb.ucsf.edu/www/rcsm-mod2.gif