JP Morgan Gets Set for Storage Challenge

There's plenty to do in the aftermath of the $236M Bear Stearns acquisition

March 19, 2008

4 Min Read
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After spending $236 million to acquire struggling investment giant Bear Stearns this week, JP Morgan Chase now faces a major technology challenge -- combining the two firms' sprawling storage and server infrastructures.

Both companies' directors approved the rescue deal on Sunday, just days after Bear Stearns received emergency funds from the Federal Reserve of New York in an attempt to keep the troubled firm afloat.

When the dust finally settles on the merger, the two companies' IT teams will face the unenviable task of merging their IT infrastructures, which are reputed to be very different.

JP Morgan, for example, has more than 14 Pbytes of active storage in a rapidly growing infrastructure regarded as one of the world's largest SANs. The bank also sent shockwaves through the financial community four years ago when it ended a massive, $5 billion, seven-year outsourcing deal with IBM, preferring to bring its systems back in-house.

The bank has also earned a reputation as a technology trailblazer, deploying InfiniBand as its technology backbone in 2005, and working with Sun's Solaris 10 operating system to build virtual data centers and compute-intensive grids.In contrast, there are scant details on Bear Stearns' storage and compute infrastructure, although one vendor with knowledge of the company, who asked not to be named, told Byte & Switch that it is hardly state-of-the-art.

"In my view, the Bear Stearns IT infrastructure is close to what came off the Ark -- its [a] very heavily mainframe-based kit," he said. "They do use a lot of NetApp [storage] but their approach to virtualization has been very incremental, particularly if you view them against someone like Goldman Sachs or Credit Suisse."

Bear Stearns did not respond to Byte and Switch's requests for comment today, although the publicity-shy vendor says that the firm, like many on Wall Street, uses a mixture of both SAN and NAS.

"They buy conservatively," he added. "The Bear Stearns infrastructure is always 'IT as a necessity' -- they are more focused on innovation in their products and their banking."

Bear Stearns also appears to have more faith in offshoring, outsourcing its software development and maintenance work to Indian firm Satyam. This must now be worked somehow into JP Morgan's strategy, which favors insourcing over outsourcing.There is also a question mark hanging over JP Morgan's retention plans for the most skilled IT workers within Bear Stearns' 16,000-strong workforce.

"The issue -- always with legacy systems -- is one around skills, so [JP Morgan] will have to keep a lot of people in place," says Ian Brown, senior analyst for IT services at Datamonitor. "It's not a trivial matter -- there's always going to be human resources issues."

Consolidating the firms' storage infrastructures is likely to be one of the first challenges that needs to be addressed, according to the analyst.

"There will undoubtedly be issues around that -- they will be looking at some sort of virtualization," he explained. "They need to bring things under one umbrella and have some degree of consistent management across all their systems."

Another form of technology that could prove vital is a Service Oriented Architecture (SOA), which lets users deploy Web-based services."Assuming that [Bear Stearns has a] mainframe-type structure, then they will be looking at using middleware like IBM WebSphere and BEA WebLogic to build interfaces to that," says Brown. "It's kind of a 'surround strategy' -- trying to surround the mainframe with your open systems."

At least JP Morgan has some background in this type of integration work. "They should have quite a lot of expertise with this type of thing from their experiences with Bank One," adds Brown, referring to JP Morgan's $58 billion acquisition in 2004.

JP Morgan refused to reveal any of its integration plans for Bear Stearns today. "It's too early for us to comment on this now," said a spokeswoman.

Have a comment on this story? Please click "Discuss" below. If you'd like to contact Byte and Switch's editors directly, send us a message.

  • BEA Systems Inc. (Nasdaq: BEAS)

  • Bear Stearns & Co. Inc.

  • Credit Suisse

  • Datamonitor

  • Goldman Sachs & Co.

  • IBM Corp. (NYSE: IBM)

  • JP.MorganChase

  • NetApp Inc. (Nasdaq: NTAP)

  • Satyam Computer Services Ltd. (NYSE: SAY)

  • Sun Microsystems Inc.

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