M&A Success Assumes Tech Interdependence

The recently announced JP Morgan Chase (New York)/ Bank One (Chicago) merger raises questions about IT. Will the investment bank and its retail partner marry their IT strategies? Or will the new organization be forced to start from scratch?

The decisions won't be all about job cuts (estimated at 10,000 out of a combined 140,000 workers) or cost savings (the banks are projecting $2.2 billion over the next three years). Ideally, the combination will help both institutions learn from each other's technology strategies, according to industry experts. At press time, neither bank was available to comment specifically on its technology strategies.

Merge, Purge and Converge

Based on what has occurred in previous big bank mergers, notes Susan Landry, vice president and research director of Gartner, Inc. (Stamford, Conn.), the merger will be more a conversion of IT strategies, rather than one big integration plan. "Everyone talks about integration and in fact there is very little technology integrating that occurs," she says. "That's not to say there isn't a huge technical task. The technologies are integrated, but it is much more about converting customers from one type of technology to another."

According to Landry, the creation of the new institution, which will be New York-based and called JP Morgan Chase & Co., with total assets of about $1.1 trillion, is JPMC's way of expanding into retail banking. "Retail is a very small element of the JP Morgan Chase family, whereas Bank One is almost exclusively a retail bank," says Landry. "Chase is acquiring a national retail franchise."

As straightforward as that sounds, it is clear that the IT conversion/consolidation process will not be simple. There are many details that had not been revealed at press time, such as resolution of possible conflicts regarding Bank One's relationship with Visa and JPMC's affiliation with MasterCard (JPMC is the third-largest issuer of the card).

Also, there are still questions about who will be running the show, from an IT perspective. At press time JPMC's Donald H. Layton had been named vice chairman for finance, risk and technology. Under Layton and co-vice chairman David Coulter is a sizeable management team that includes several tech-related executives from both institutions, including Austin Adams (Bank One) and John Schmidlin (JPMC), the respective CIOs of the two banks.

Another example of differing strategies that will have to be reconciled are the banks' approaches to outsourcing, Landry says (see related article on page 23). Overall, she notes, "I would classify JPMC's IT culture as more focused on innovation and achieving differentiation as a result of technology in certain things. Conversely, Bank One's culture is more about achieving operational effectiveness and efficiency. My guess is that the new company will not blend those two or pick one over the other, but rather will have the IT strategy and culture aligned with the major lines of business, because it is a complex organization."

An example of Bank One's focus on process efficiency is a recent initiative to upgrade some of its line-of-business systems, according to Michael Smaney, industry marketing manager, FileNet (Costa Mesa, Calif.). Bank One, a FileNet customer, "has redone all it's lending solutions, moving it into an enterprise content management platform. On the J.P. Morgan side they are ready to move to next-generation technology."