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IBM wins $5 billion outsourcing deal

J.P. Morgan Chase says it will transfer approximately 4,000 employees and contractors, along with some resources and systems, to IBM in the first half of 2003.

J.P. Morgan Chase on Monday announced a seven-year, $5 billion outsourcing deal with IBM.

Under the agreement, which J.P. Morgan Chase said would "transform its technology infrastructure," the financial services company will transfer approximately 4,000 employees and contractors, along with some resources and systems, to IBM in the first half of 2003.

The deal underscores a fledgling trend among technology companies to promote computing as a utility, with businesses tapping IT resources only as necessary. IBM has been a leading proponent of what it calls "computing on demand."

The two companies will tap into a collection of IBM applications called Utility Management Infrastructure, also known by the catchier name of Blue Typhoon, which ties together disparate brands of servers, storage devices and other systems, while using existing applications.

J.P. Morgan Chase plans to keep most of its application development, application delivery and desktop support in-house.

The deal was driven by budgetary considerations, the company said. The move from a traditional fixed-cost approach to one with increased capacity and cost variability will let it respond more quickly to changing market conditions, it said.

"IBM's global strength and computing capabilities, delivered 'on demand,' will help us create significant value for our clients, shareholders and employees," Thomas B. Ketchum, vice chairman of J.P. Morgan Chase, said in a statement.

The J.P. Morgan Chase deal doubles the monetary size of a 10-year outsourcing agreement IBM reached earlier in the month with Deutsche Bank.

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