While other companies are cutting thousands of jobs to pare costs, Bank One Corp. announced last week that it plans to add 600 IT workers in an effort to speed up and expand internal technology projects.

Insisting that the move isn't a complete shift away from outsourced IT services, CIO Austin Adams said the hirings are intended in part to bring back in-house by 2003 six deposit and online banking platforms now hosted by third-party service providers. Bank One plans to spend US$400 million over the next two years in order to make the conversion.

The move will decrease Bank One's use of outside contractors for application development, a trend that many experts say is growing in the financial services industry.

Chicago-based Bank One plans to boost its 4,000-person technology department by 15 percent over the next three months. The hirings, at its facilities in Chicago and Columbus, Ohio, will include positions such as IT project manager, senior engineering manager, systems architect and Web developer.

"Frankly, we have a higher dependence on outside contractors in terms of application development than I think makes sense in this environment," said Adams, who joined Bank One in March after overseeing IT activities at Charlotte, N.C.-based First Union Corp. for many years. Some of those new hires will replace the 800 to 900 contract IT workers the firm now uses.

Bank One's primary deposit and customer information platform is hosted by a half-dozen service providers. Adams plans to create a single in-house platform with proprietary software that will give customers single-view account information and simplify deposits and money transfers.

The centralization effort is expected to pay for itself within a year by consolidating redundant systems and using full-time IT staffers who are $10 to $30 an hour cheaper than contract workers, said Adams. The new IT employees will also develop a greater historical knowledge of Bank One's IT infrastructure, he added.

A new senior management team at Bank One, which lost $511 million last year, has been working for almost two years on improving the bank's financial situation and assimilating the IT systems of several banks that it has purchased, including the Illinois and Michigan operations of First Chicago NBD Corp., which Bank One acquired in 1995.

Meanwhile, the bank is attempting to renegotiate a massive $1.4 billion outsourcing deal with AT&T Corp. and IBM. Adams declined to say whether the outsourcing agreements have suffered cost overruns, but he did say the contracts with AT&T and IBM won't change "significantly" in the foreseeable future.

Still, Bank One's plans reflect a trend among many financial services firms to bring emerging technologies and customer service platforms back in-house in order to keep IT staffers excited about the work they're doing, while leaving management of legacy systems or data and voice networks to a provider, said Bill Bradway, president of Newton, Mass.-based Meridien Research Inc.

Even with the hirings, Adams said, Bank One expects its IT budget to remain flat next year because of the cost savings related to the platform consolidation and replacement of contract workers. The company, which reported net income of $2.1 billion for the first three quarters of this year, currently spends about $2 billion annually on technology.

Rod Hall, vice president of consulting services at Oak Brook, Ill.-based Compass America Inc., which advises Bank One, said outsourcing agreements are no longer looking as attractive to financial services firms as they once did.

"It feels like a pendulum to me," Hall said. "A large number of financial service organizations that outsourced five or six years ago are now saying, 'It's not what we expected it to be.' What we've seen in the last couple of years is that they've systematically brought those projects back in-house."

Hall pointed to London-based UBS Warburg LLC, which had outsourced most of its IT infrastructure to Dallas-based Perot Systems Corp. and is now bringing systems back under its own control. The problem, he said, is that financial services firms typically don't have a good handle on the size of their IT infrastructures or the rate at which their need for technology resources grows, leading outsourcing firms to boost contract costs once the true requirements become more evident.

Staid Banks Are Hot for IT Talent

Banks that were once considered boring by IT hotshots are now finding there's no time like the present to woo back talented technologists.

Bank One CIO Austin Adams said one of the key forces driving his recent decision to hire 600 IT staffers is the abundance of IT talent on the market. "This is the best time . . . in a decade to be hiring skilled workers in the technology market," Adams said.

Bank One is hiring the additional staff to fill several job titles, including application developer, project manager, senior engineering manager and Web developer.

Bob Landry, vice president of research at TowerGroup in Needham, Mass., said many talented IT professionals who were attracted to consulting firms or dot-coms by visions of innovation or lucrative stock options and better pay now see banks as a stable environment.

Banks aren't abandoning outsourcing altogether. One area where they're tapping third parties is for the maintenance of existing applications, outsourcing that task to service providers who use cheap overseas workers. That "frees up people who really know the institution to do the more interesting things," said Bill Bradway, president of Meridien Research.

Still, now is a good time for banks to pick up some needed technologists.

"Banks had a difficult time finding good people as recently as six months ago," said Jim Van Dyke, an analyst at Jupiter Media Metrix Inc. in New York. "Some of the sharpest people, the ones that knew Java and online security, were in short supply, and banks had to pay dearly for them. Today, it's a buyer's market."