BUSINESSWEEK ONLINE : SEPTEMBER 18, 2000 ISSUE
SPECIAL REPORT Building the Anti-J.P. Morgan The business plan was a one-and-a-half-page memo. The company logo was a notion thought up in a shower. The employees regularly pull all-nighters cutting code near cardboard cutouts of Austin Powers and Star Trek's Mr. Spock. In their spare time, they play pool or football in the hallways. But Arrakis, named after a planet in the science fiction novel Dune, is not a fledgling dot-com. It's a 100%-owned subsidiary of stodgy J.P. Morgan & Co. (JPM) When the bank decided just over a year ago to offer financial services online to attract newly minted millionaires, CEO Glenn Smith, a Morgan veteran, had a problem. He determined he wouldn't be able to hire the designers and developers he needed in Manhattan. In fact, Morgan probably wouldn't be able to recruit top talent unless it junked its old-fashioned ways--and its name. QUICK ACTION. So, on the edge of the campus of Massachusetts Institute of Technology in Cambridge, he created a company designed to be as unlike J.P. Morgan as possible. Arrakis has the look and feel of a developers' playpen, with weekly movie nights, a ''napatorium'' for the odd snooze, and a visiting masseuse. ''J.P Morgan is not my scene,'' says developer Philipp Hanes, 30, who walks around the office barefoot wearing his Kennedy Space Center T-shirt and shorts. Arrakis has a difficult mission. Smith wants a quarter of North America's estimated 7 million millionaires to sign up with Morgan Online for $2,500 year. He also wants the service to offer new features to clients every 90 days. The latest version, launched in August, enables investors to set goals and then use scenarios to analyze them. The software can spit out a lifetime's income and spending estimates, crunching everything from executive stock options to municipal bonds, college tuition, and taxes. Trouble is, Morgan's rich clients are an impatient bunch, unwilling to wait more than 15 to 30 seconds for sophisticated tax or portfolio advice to appear on their screens. So any glitches could cost J.P. Morgan its reputation as a trusted adviser. About 100 developers regularly engage in heated debates about issues such as whether Morgan Online can handle another arrow, exclamation point, or even an underline. ''I live and die by making sure everything is right,'' says 28-year-old database architect Chris Cochran. One team, led by Giulio Panzano, has worked until 3 a.m. to perfect fancy effects and eliminate bugs in the latest version. But there's still a problem: Every time one screen crashes, the rest of the client's information becomes inaccessible, too. Panzano sends his developers back to the drawing board. Developer Jiuan Ng finally discovers the problem and screams over about 50 cubicles: ''Who changed my code?'' Many of the employees joined Arrakis because they believe they get the best of two worlds: They can enjoy the fun of a startup without taking the risk of getting burned by working for a true dot-com. There are no plans to spin off Arrakis, because competitors might be able to tap into proprietary software. So instead of receiving stock options, employees get a portion, which the company won't divulge, of Morgan Online's contribution to J.P. Morgan's earnings. So far, Morgan Online has won plaudits. ''It's a great place for the self-directed investor,'' says Shalin Patel, an analyst at Gomez Inc., which rates online financial services. Morgan Online, however, won't have the cybermillionaires to itself much longer. Goldman, Sachs & Co. is expected to come out with a competitive offering in the U.S. this fall. By then, J.P. Morgan hopes to be signing up the new rich in Europe and Japan. By Emily Thornton in Cambridge _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS J.P. Morgan: Dressed for a Deal? TABLE: CEO Warner Wants to Stay Independent... TABLE: ...But J.P. Morgan's Strengths Could Make It a Target... TABLE: ...Though at a Steep Price TABLE: The Bank Is Chasing Growth and Improving Returns CHART: Percent Return of Average Common Equity Building the Anti-J.P. Morgan ONLINE ORIGINAL: "We're Not Transforming Anymore -- We've Transformed" INTERACT E-Mail to Business Week Online

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