JPMorgan Chase (New York, $1.2 trillion in assets) will consolidate its domestic general ledgers using software from SAP (Walldorf, Germany), giving the software vendor a marquee name to support its expansionary plans in the United States.
For JPMorgan Chase, the immediate goal is to generate cost savings in the organization following the Bank One merger. "Consolidating all of our domestic ledgers onto a single platform simplifies our operating model and reduces our expenses," said Scott Pankoff, chief technology officer of Global Finance Technology, JPMorgan Chase, in a statement. The bank declined to go into detail about the implementation.
In at least one branch of the JPMorgan Chase family tree, SAP goes back a long way. SAP consolidated the general ledgers of First Chicago Bank, which then merged with National Bank of Detroit, and then with Bank One, according to Mark Melillo, a New York-based vice president, financial services industries, at SAP America, Inc. "The single-instance general ledger, which is very significant in the industry, was a good proof point, an indication that they should continue to do business with SAP," he says.
The potential savings from consolidation are significant. "When you look at JPMorgan now, you have an institution with over 20 general ledgers," says Melillo. "They know they can take some real costs out by supporting one system versus several."
What's more, with Sarbanes-Oxley requiring CEOs and CFOs to certify financial results, accurate and efficient accounting systems have become a management necessity. "How does the CFO get a good picture of what's going on?" asks Melillo. "Having [general ledgers] consolidated obviously adds a great deal for them being able to report quickly," he says.
For the deployment, SAP has provided senior consultants to assist JPMorgan's internal IT staff. "JPMorgan unquestionably has a strong group of people who understand the application," says Melillo. "It's a highly configurable application. It really allows them to create unique differentiation and customize it to their specific requirements."
The SAP partnership may extend to areas outside of the accounting function. "We're talking to a lot of different groups about a lot of different solutions," says Melillo. "There are already discussions about profitability analysis and analytics. Bank One utilizes a piece of our profitability system today."
"There are some interesting things that we're doing with JPMorgan to try to expand our presence and help them in any way we can," Melillo adds. "They have NetWeaver, and they have many other components of the financial solution that they can take advantage of."
NetWeaver, SAP's integration platform, acts as the foundation for all of SAP's application services and solutions. "We are driving and positioning ourselves around this service orientation," says Thomas Balgheim, senior vice president, financial services, SAP AG. "It's not a big core bank replacement. It's more to go in bits and pieces, but through the services architecture at the same time."
"This kind of open and flexible system is what customers want and need," Balgheim adds.
Now that JPMorgan Chase has access to the NetWeaver integration platform, SAP has become a viable contender for any of the areas in which it offers financial services applications that compete with point solutions. "In certain application functions, we're competing with general vendors in that area," says Balgheim. "On the platform layer, we compete on technology and expertise."
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