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ONLINE FILE W2.5
FLEXIBLE IT ARCHITECTURE
AT
CHASE MANHATTAN BANK
FIN
Chase Manhattan Bank and Chemical Bank merged in 1996, creating the thenlargest bank in the United States. (It has since merged with J.P. Morgan, and now is
J.P. Morgan Chase Company, jpmorganchase.com.) The unified Chase Manhattan
Bank had to process 16 million checks daily across 700 locations in 58 countries. It
also had to serve 25 million retail customers and thousands more institutional customers, with the customer base expected to grow by 6 to 10 percent a year. The
problem was how to merge the different information systems of the two banks and
create an IT architecture that would support the new bank’s activities, including its
future growth and additional planned acquisitions.
Previous mergers and acquisitions involving both Chase and Chemical had
resulted in many problems in developing the IT architecture.“We needed to blueprint
an architectural platform that provided operational excellence and customer privacy,”
says Dennis O’Leary, CEO and executive vice president of the new bank. “The platform also had to be functional and have the ability to integrate business at the retail,
national, and global enterprise levels.” One problem was the worldwide connectivity
among more than 60,000 desktop computers, 14 large mainframes, 300 minicomputers, 1,100 T1 telecommunication lines, and more than 1,500 core applications.
The new architecture was constructed incorporating the Internet and intranets.
(Specifically, the new architecture was based on the TCP/IP model, as described in
Technology Guide 5.) An innovative three-layer system was designed. First was a
global infrastructure; second were distribution networks that routed traffic among
business units; and third were numerous access networks. This flexible structure
allowed the addition of networks whenever needed. The global infrastructure was a
network built on wide area networks (WANs), satellites, and related technologies.
The architectural plan included several security devices, including firewalls, mainly
in the distribution network layer. The access networks were the internal networks of
the different business units, now reformulated as intranets. The system also had
many client/server applications as well as mainframes. All the desktops were managed on Windows NT. The bank also uses data and voice communications services
to streamline business operations.
In order to reduce costs associated with information technology, J.P. Morgan
Chase is outsourcing part of its IT infrastructure to its outsourcing partners. For
example, it signed a 5-year agreement with Aurum Technology in October 2002 to
provide the bank with check-imaging services. It has also outsourced its data center
to IBM Global Services (IGS) since February 2003. Under terms of the JPM Chase
deal, 4,000 IT employees will join IGS, where they will continue to run the bank’s
data-center operations. IGS will assume ownership of the bank’s systems, but the
bank’s IT management will still control the infrastructure deployed. This arrangement allows the bank to reduce its annual spending in IT, yet guarantees that the
transition does not affect its daily operations.
In 1998/99 Chase Manhattan embarked on a major e-banking initiative, based
on improved architecture. By 2003 the bank offered a wide range of online services
such as Chase Online Plus for managing multiple accounts, extensive online shopping, online deep-discount investment services, an online service for small businesses, and a special online payroll system (called PowerPay). In addition, the bank
offered services to large businesses and partners. Mobile banking was introduced in
2004. All of these initiatives are easily scalable, so accommodating more acquisitions
and mergers, like the one with J.P. Morgan, creates no problems.
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All of this massive networking has one goal: giving customers extensive realtime access to accounts and a view of their assets.
As a nice bonus, J.P. Morgan Chase Company won the Computerworld Honors
Medal of Achievement 2004, presented annually for visionary use of information
technology, for a financial-derivatives modeling system that enables the bank to
increase competitiveness and market response.
Sources: Condensed from J. Schwartz, “Banking on Outsourcing: Jumbo Deals with Outsourcers Are
Enabling Major Banks to Save on Costs,” VARbusiness, February 24, 2003; S. Bills, “In Brief: Aurum to
Do Imaging for JPM Chase Unit,” American Banker, 167(210), October 22, 2002; and from miscellaneous
Chase Manhattan and J.P. Morgan Chase press releases in 2002 and 2003.
For Further Exploration: What competitive advantage is provided by networks?
What are the advantages of moving to e-business? What types of support systems
discussed in this chapter may be appropriate here? Does the new architecture provide for agility?