For the past year and a half Bank One Corp. has made no secret of its aversion to technology outsourcing and its fervent belief that virtually all operations can be handled better in-house.
Now, for the first time, Bank One is giving details on what that shift means in terms of its head count. Over the past 16 months it has added 1,900 technology workers, bringing its staffing in the area to 5,700, or around 8% of its total workforce. Simultaneously, it has brought nearly all of its systems back in-house.
The Chicago company says the hires include project managers, systems engineers, developers, and telecommunication analysts. All of them are expected to not only reduce outsourcing expenses but foster a sense of accountability companywide.
Nine hundred of the hires filled positions created by the decision to take back most of the operations that had been outsourced; the rest were other workforce additions or replacements for departing workers, said Tom Kelly, a Bank One spokesman.
Though in November 2001 it announced that it would hire 600 technology people, "we've accelerated our pace" since then, because efforts to outsource less have picked up, he said. Bank One had 73,685 employees at yearend, virtually flat from a year earlier but a good deal less than the 80,778 it employed two years earlier.
Today it is "continuing to hire technology workers" but not in great numbers, Mr. Kelly said. It is done hiring to fill positions formerly handled by outsourcers, and employment levels should be relatively flat for the remainder of the year, he said.
Now is a good time to be hiring, he said. "We are a big enough company that we can attract the best people, and the current state of the technology job market is tremendously helpful to us. Three years ago we were struggling as a company, and the dot-coms were the blowing the roof off," but now "the timing couldn't be better for us."
Bank One's position is that "technology can be a competitive advantage … and one way to do that is to have the expertise in-house," Mr. Kelly said. In saying that, he was echoing the sentiments of the company's chairman and chief executive officer, James Dimon.
In a letter to shareholders this month, Mr. Dimon reiterated his distaste for hiring outside vendors. "We don't believe our technology accomplishments would have been possible if we had continued to rely on outsourced systems," he wrote. "We are also insourcing and upgrading our data processing capabilities by building two state of-the-art, secure, fully mirrored facilities that offer real-time backup.
"We do not believe we are sacrificing any economies of scale or capability by managing the technology ourselves. In fact, we are seeing evidence to the contrary," the letter said.
Howard Rubin, an executive vice president and director at Meta Group Inc., a Stamford, Conn., information technology consultancy, said that banks have historically had 7% to 10% of their workforce concentrated in IT but that such percentages are less common these days, because of outsourcing and changing priorities.
"Financial services and banks have been the sector hardest hit by not being able to compress their IT budgets in rough market conditions," he said. The "old percentage benchmark was useful in up-market economic times, when there was not a global IT market," but banks should now focus on strategic resource management by "controlling and engineering" a mix of in-house and offshore contractors.
A large part of Bank One's efforts on the technology front have been devoted to acquisition-related system conversions.
"We've done four conversions in the last two years," Mr. Kelly said. "We went from seven systems [deposit platforms] at the start of 2001 and are down to two today." The final conversion, involving 27 branches in West Virginia, is slated for this year.
The conversions mean fewer upgrades when a product is introduced, he said. "Before you had to do it [upgrade] six times. Now we have to do it once."
Last year Bank One spent about $1.7 billion on information technology, and it expects to spend less - about $1.65 billion - this year. Some of the reduction will come from improved efficiencies as a result of the conversions, Mr. Kelly said.
Of last year's IT expenditure, roughly $110 million was devoted to upgrades and other discretionary improvements, while it cost about $1.59 billion to "run the place," Mr. Kelly said. IT costs this year are expected to be $1.39 billion, which means overall spending will still decline even while discretionary IT spending is allowed to climb to $260 million, he said.
