As J.P. Morgan considers outsourcing portions of its operations, some managers are worried about losing staff members who would rather not work for an outsourcing company, according to a source at the bank.
The blue-chip bank is evaluating bids from three vendors - EDS Corp., Computer Sciences Corp., and Integrated Systems Solutions Corp., a unit of International Business Machines Corp., according to a source at the bank.
Though declining to comment on the status of negotiations, bank officials said they expect to decide by spring whether to strike a deal.
With a yearly technology budget of about $645 million - excluding salaries - Morgan is one of the biggest systems spenders in the banking industry. Though the scope of a deal is still under discussion, it could include data centers, some applications, and desktop computer support.
Already the company has shed transaction processing businesses, such as global custody, and outsourced others, like check processing. It has also outsourced telecommunications, desktop support in Tokyo, and its data center in Singapore.
"Morgan is realigning its spending priorities to be more in tune with the corporate shift to investment banking, trading, and capital markets," said Lawrence A. Willis, a principal at the First Manhattan Consulting Group.
But Morgan officials said they are weighing a more comprehensive outsourcing arrangement.
"Outsourcing could give us access to world-class expertise wherever it is, so we can apply it to our business needs," said George Shakespear, a spokesman for the bank.
Some operational areas, such as trading analytics and risk management, are not being considered for outsourcing, Mr. Shakespear said.
He added that many employees are enthused by the prospect of an outsourcing deal.
However, the realignment has made some employees nervous enough about their future to consider leaving the bank before an outsourcing deal turns them into employees of a technology company.
In the past, the J.P. Morgan was viewed as a lifetime employer where managers would oversee an employee's career, helping to locate opportunities in other parts of the bank.
"Morgan has been the institution most oriented toward retooling its employees," said Lee Pomeroy, a personnel consultant at Egon Zehnder International.
"Up until a few years ago, if your unit was sold or closed, it would disrupt your life, but not your career."
In the early 1990s, Morgan reorganized its technology area in order to speed the development of new products and streamline operations.
Implementing the recommendations of a companywide efficiency study conducted in conjunction with McKinsey & Co., the bank established technology standards for business units, and redeployed employees from the central information systems division into business lines.
Now, Mr. Pomeroy said, new hires are told that Morgan cannot guarantee a career, even if the employees become top performers.
Even so, some employees may have been surprised when the banking company sold its global custody business to Bank of New York, say some observers.
Bank of New York said it would retain a little more than half of Morgan's 1,000 custody services employees after the sale was completed.
"Because of outsourcing, and the overall lack of success banks have had with their investments in technology, people don't know what the future will bring," said Charles Delman, a partner in the financial services group at Korn/Ferry International.
In part, employees may have concerns about working for an outsourcing company rather than a banking company, bank and industry sources said.
For example, "Morgan would be perceived as a different type of employer than EDS," said Diane Glossman, a securities analyst at Salomon Brothers.
In the late 1980s to early 1990s, EDS had the reputation of being a tough employer that worked employees "to death," according to a recent Yankee Group study of the Dallas-based outsourcing firm.
However, more recently, the study reports that EDS has changed its reputation and that most technology employees of client companies have no preference between IBM, EDS, or Computer Sciences.