Big plans can bring big surprises, big headaches, and hopes of big payoffs. J.P. Morgan's Pinnacle Alliance-with Computer Sciences Corp. (CSC), Bell Atlantic Network Integration, AT&TSolutions, and Andersen Consulting-is a case in point.

More than a year after the unprecedented roundup of big IT brains into a strategic alliance with the notoriously proprietary bank and shifting 900 employees to alliance member firms, Morgan chief information officer Peter Miller says that "outsourcing" was not the goal. "We started with the premise that we needed to be world class in all areas of IT. You can't buy future technology to support financial services growth; you must create it. You can't internally focus on everything and be world class in everything," he says.

The solution: Marry complementary core competencies. For example, running data centers, putting local area networks in place, running telephone systems, are the purview of technology powerhouses; building derivative analytics systems, equities derivatives systems, derivatives processing systems, and derivatives transactions management are Morgan's forte. "Once we understood that, we went to the marketplace to evaluate alternatives. Pinnacle came back as a set of partners who could focus on these capabilities and match our objectives," says Miller.

Legally, CSC has one contract with Morgan, and three subcontracts between CSC and the partners, a fairly standard practice. But what makes the Pinnacle Alliance different is that the four companies operate as equals with Morgan, under principles defined by all five.

selling the questions

The alliance evolved gradually. For 18 months, Morgan considered a relationship with one or more companies, and put out requests for information about various services-data center operations, applications development and legacy systems maintenance, for example. "It became apparent that they were looking for resources from more than one company. We (realized) that it would be advantageous to talk to companies we had worked with who were drawing that same conclusion," says Pete Boykin, a CSC group president and the lead alliance executive. Stephen G. Racioppo, industry managing partner for financial markets at Andersen, adds that the bank didn't want a typical static, one-to-one prime subcontracting relationship, but to bring together a team.

Miller began by assessing the bank's IT business: its cost competitiveness, skill sets, and ability to focus on the future agenda versus everyday operations. "Senior management through to the chairman understood our questions. We didn't have answers. We sold the questions."

So far, so good. The alliance met its first year objectives (see box). It created 400 metrics for products and services and developed a balanced scorecard for applications development. "While there's a focus on improving productivity, we must meet day-to-day client needs across the firm and re- skill people as technology evolves as well. This set of objectives can be contradictory and has to be continuously re-balanced," says Racioppo.

The alliance also developed products to increase productivity. A swap processing capability that increases capacity to support the bank's client needs will be ready soon. Morgan is expanding equities derivatives capabilities, and providing research advice in fixed income, equities, and foreign exchange on the Internet.

Helping people adjust to the change presented the largest challenge. Morgan needed to assimilate lots of new people, the work to do, how to do the work, their role, and how they work together to build a team. All this was exacerbated by the continuing, unexpected increase in demand because of business growth, Year 2000 and European Monetary Union issues. "You have reorganization, assimilation, changing employee badges, attrition, doing different work, working in a different way, and raised expectations that puts another pressure on staff. Other than that, everything's the same," says Miller.

Employees who prefer a technological environment adjusted immediately. Some took more time. A handful still struggle with it. A few went back to Morgan, some because a good opportunity came up.

Some redeployed staffers have since transferred between alliance companies. "We continue to demonstrate the broadened opportunity for staff with the four companies engaged with Morgan. That helps employees cope with, 'Ah, we worked for J.P. Morgan. Now we don't,'" says Boykin. Each firm has sophisticated employee-oriented programs, a commitment to skill- building and refurbishment of new technologies. That's not easily affordable in a financial institution, adds Racioppo.

Morgan employees were shifted to alliance firms because each firm has a different primary set of objectives. "That brings us together and it's our commitment as a firm to stay at the front end of excellence," says Racioppo. "This difference allows us to align people with their competencies in an environment where they can build careers."

No one expected such monumental change, "a profoundness and ripple effect of change through an enterprise farther and wider than you can think, and reverberations of changes back to you," as Miller describes it. "We made massive changes inside IT at Morgan and fundamentally changed our resource model."

complexity: coaching the team

There were scars along the way, from trying to work out day-to-day interactions necessary to serve one client efficiently, reports Boykin. "Take a simple thing: We give one invoice to Morgan, but that has to come out of four companies' separate billing, labor, payroll, and procurement systems. I was naive about how complex these systems are to bring together, they take a lot of work and effort."

The lesson so far: "When you make strategic moves, make sure you understand your objectives and (that) they are right, because they will be tested constantly," says Miller. "The work is hard. If you shrink from pursuing your objectives because it is hard, you could become incrementalist. You need courage, backbone, fortitude, perseverance, patience, coaching to help human beings through change of this magnitude."

As to what the alliance could have done differently, Miller emphasizes the "people dynamic," being even closer to the 2,000 IT people in the process and the 3,000 people affected in the businesses.

So the next step is coaching, filling in the team. "We have not had one technical issue in a year and a half," says Miller. The alliance also wants to look at the future, at leveraging the power of five firms working to reach Morgan's broader aspirations. Morgan officials remain open-minded about product and service providers that could create strategic advantage. "We will make build versus buy decisions for the rest of our lives," Miller says.

As for the future of the alliance? It might offer similar services to a forward-thinking organization that wants extraordinary results and is willing to take risks. It would form a similar alliance with team members and/or other partners, reports Boykin.

Miller looks at the broader picture. "Would we do it again? The alternative was to do it ourselves. I have less (confidence) doing it myself than with four world-class partners. It's never going to be easy, but I am better off. If it were easy, we'd have other people doing it."


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