Why J.P. Morgan Techies Went For The Exits -- Outsourcing Threat And Change Of Internet Guard

More news has emerged shedding light on a recent series of I.T. staff departures at J.P. Morgan & Co. While firm officials decline to comment on whether any larger reasons lay behind the staffers' exits, in interviews with numerous sources, at least two such themes have come into relief. A number of the departures in the firm's distributed computing infrastructure group were due in large part to concerns about J.P. Morgan's impending plans to outsource some of its information technology functions. At the same time, the departures of a group of Internet technology-oriented staff appear to be part of a domino effect triggered some months ago by David Spector's relinquishment of that group's helm.

While the spread of Internet-access software on Morgan's trading floor (TST, Nov. 27) may be the sexier story, the dark cloud of outsourcing will likely have a larger impact on any future brain-drain the firm may endure. Sources say the number of personnel quitting on account of Morgan's impending outsourcing contracts will likely increase after Jan. 1, at which time staff will have qualified for their 1995 profit-sharing payouts.

Morgan issued a request for proposal this summer to outsource a trio of information technology functions -- desktop support, applications delivery and data centers (TST, Oct. 30). Since then, a number of I.T. personnel -- primarily involved in distributed computing infrastructure -- have left the firm.

"The firm has been fairly upfront about the fact that it is going into RFPs to outsource most stuff," a source says. "In situations like that, people get pretty tense. Very often, the best talent says, 'Why should I stay?' So you're exposed to having your best people stolen by your competitors. That's what's happening."

Vincent Minerva, who was a vice president heading up corporate business support at J.P. Morgan, left this summer for Cantor Fitzgerald L.P., where he is director of systems support: Says Minerva: "The reason I left the firm was because I wasn't clear on the direction of where my career was going to go based on the fact that they were going to do this outsourcing." Three of Minerva's reports -- Ken Lehrer, Vincent Corbo and Tom Papadopoulos -- have left the firm since his departure.

Another source notes Morgan employees are not concerned about becoming unemployed, but more particularly about the possibility of ending up working for whatever outsourcing firm Morgan brings in. "People feel their career is at Morgan; working for J.P. Morgan is a pretty prestigious thing. Working for General Motors [which owns Electronic Data Systems Corp.] or DEC or whoever is not the same. There is also the question of profit sharing."

This source says that J.P. Morgan is growing increasingly concerned about the departures of its I.T. staff. "It makes it harder to outsource because the outsourcing people don't have people to fill these spots," this source says. "When they want to outsource ... there have to be people at Morgan to become employees of the outsource company."

Says this source: "I think people just have the feeling that now is not a bad time to move." The consultants retained the firm, and not just Morgan's full-time employees, are also increasingly unhappy, the source says. "Because the employees are in turmoil, it kind of gets passed down. Morale among the employees is very bad."

Sources also cite other factors including cost-cutting as adding to employees' dissatisfaction. Says the first source: "The cost-cutting done throughout the year makes it less fun for a lot of people." What's more, a lot of big projects have been completed. The second source says the turmoil began in February when the firm downsized. "I don't think things ever fully recovered [from that], or as soon as people recovered from that, they started talking about the outsourcing," the source says.

Recent departures at J.P. Morgan include Minerva; Vincent Corbo, who was responsible for Sybase Inc. database administrators; Barry Silverman, vice president responsible for Microsoft Corp. Windows; Peter Kaufman, a consultant who was responsible for the Macintosh platform; Brian Solie, a consultant working in fault-tolerant systems hardware; Ken Lehrer, an associate in the networking group; and Thomas Papadopoulos, an associate who managed a small systems administrations group.

Meanwhile, six other Morgan employees involved in the firm's Internet group have also departed. They include vice president David Spector, associate Lisa Ezrol, technology auditor Elisa Licata, and three consultants who worked with Spector. The latter group includes Joel Scotkin, who worked with Netscape, Communications Corp.'s Navigator; Chuck Yerkes, who was responsible for the firm's e-mail system; and Steve Jones, who was responsible for firewalls. The three former Morgan employees are moving to Citibank to work on Internet-related technologies.

Spector developed Morgan's capabilities on the Internet, which sources say are very strong. "We were the first financial institution on the Internet," says the first source, echoing comments of many at the firm.

Sources say that this summer, Morgan "institutionalized" the previously "experimental" Internet group and moved Spector, who had been heading the effort, off the project. The firm named Lisa Ezrol to replace him, they say. Spector was moved to the technology research area.

These sources say Spector had raised hackles with his advocacy of Netscape because Lotus Development Corp.'s Lotus Notes had already been installed at the firm. "Politically, David was seen as a big Netscape advocate. The bank had already made a big commitment to Notes," says the second source. "So push came to shove and he lost, basically," A third source says: "The decision [to support Lotus Notes] was made at a very high level and to contradict, to be a naysayer, is not politically correct."

But a source close to Spector's group says the Internet group's work was done and that it made sense for Spector to move on to something else. This source says that after the Internet work was finished, Spector was given responsibility to create and run a middleware group at Morgan and that his colleagues from the Internet group would join him once he established a plan. "Now the Internet is mainstream," says the source close to Spector's group. "They need to bring it into solid support. [Spector's group was] not really that group."

The second source calls Spector's group "Young Turks [who] turned the place upside down," and says that Spector was taken off the Internet assignment because of "his robust advocacy of the Internet versus Lotus Notes," or, as the source says Spector would put it, "of open systems rather than proprietary, single-vendor solutions." The source says that while the Internet group had accomplished a lot -- the firewalls were done and Netscape was being rolled out (TST, Nov. 27), there still were issues that needed to be addressed. Spector declines to comment.

A spokesperson for J.P. Morgan says, "We respect the confidentiality of our people" and declines to comment further.

Separately, Jean-Louis Bravard, the J.P. Morgan head of fixed-income research who has served as one of the firm's uppermost technology executives, has left Morgan to become a managing director of Vicor Corp., a Palo Alto, Calif.-based firm that provides consulting, reengineering and systems engineering to a variety of firms including financial institutions. The firm focuses on emerging technologies early in their lifecycles, Bravard says. One of the principals of Vicor is Gerry Burnett, a former senior officer of Teknekron Corp., the former parent of Teknekron Software Systems Inc.

Bravard says he left Morgan because he "was not having as much fun as I was before," when he was on the technology side. Also, he says, opportunities for financial rewards in the technology area "today may be greater than on Wall Street." Bravard, who will be based in New York, will help Vicor expand its East Coast presence "and better cover investment banking and trading aspects with clients."