• Chris O’Malley, CEO at Compuware


• 09.12.2015 11:41 am

Consumer behaviours have been completely revolutionised by the march of technology and the banking industry has transformed to keep pace. From internet banking through to mobile payments, the way that banking services are delivered and consumed is driving digital innovation. According to accounting firm KPMG, mobile is already the largest banking channel for the majority of banks by volume of transactions and “mobile banking has evolved from ‘pull’ based SMS services to high end personalised offerings, such as wearable devices and bio metric apps”.

The speed at which banks have changed is impressive, particularly when you consider the age of these institutions. HSBC was established in 1865, Barclays in 1690; one of the reasons they have endured is because they have adapted and innovated and moved with the times. Yet it is also due to the fact they have proved themselves to be stable, reliable and secure.

The same is true of the mainframe. While it may be considered a mere toddler by banking standards, at fifty years old the mainframe is the godfather of computing. It has sat at the heart of the banking world ever since the first wave of innovation hit, and continues to do so today. In fact, a recent survey revealed that most CIOs (89%) believe the mainframe will be a key business asset for the next ten years at least. This endurance can be linked to the fact that, much like the banks that rely on them, mainframes have successfully realigned for a digital age.

Supporting future innovation

The longevity of banking institutions has enabled them to gather intelligence and hone their craft, building trust and customer relationships. As such, the intellectual property intertwined into business processes and operations has built up over the years, making it extremely valuable. Similarly, the code that lives at the heart of mainframe applications that are still in use today were developed, tweaked and perfected over decades: an overwhelming majority of banking CIOs (93%) see mainframe code as valuable corporate intellectual property.

This makes these applications irreplaceable and unique: no two banks will have the same mainframe banking application. These applications act as a repository for incalculable financial, human and intellectual capital that has been accrued over many years. It is therefore no wonder that instead of diminishing over time or being phased out, mainframe usage within banks is actually increasing thanks to digital innovation. Why fix what isn’t broken?

Research shows that 86% of banking CIOs have reported that their mainframes are continuing to evolve, running more new and different workloads than they did five years ago. Added to this, 80% see the mainframe as a key enabler of innovation in the years to come. For example, 81% see the scalability of the mainframe provides the perfect infrastructure for Big Data, with 61% already using it for this purpose. Yet in order for banks to protect their existing mainframe IP investments, and advance this IP to provide a strong platform for ongoing innovation, the mainframe needs to be nurtured and invested in.

Mainframes and misconceptions

Despite seeing the value and benefits of the technology, when looking at CIOs’ mainframe investment priorities IP advancement falls to the bottom of the list. Part of the reason for this is that many vendors have done a great job of talking down the benefits of the mainframe, trying to persuade banks that they would be better off on newer platforms. However, this can often be a false economy.

While there are certain business processes that can be carried out using packaged applications delivered through the cloud – Salesforce, for example – this does not hold true for all business functions. Bank infrastructure environments are complex, having evolved over a number of years, which means that any new application introduced has to undergo customisation to ensure it works with the existing infrastructure.

When assessing new technologies it is easy to be lured by promises of short-term cost savings, without considering the longer term total cost of ownership. The mainframe is often more cost-effective to run due to its incredibly low marginal costs: you can increase the workload of the mainframe by 50% without having to add any more staff to manage it. Added to this, the cost of moving applications from the mainframe to an alternative platform is costly, and risky. In fact, 70% of CIOs reported that they have been surprised by how much additional work and money is required to ensure new platforms and applications match the security provided by the mainframe.

Passing on the reins of success

The other perceived challenge to the future of the mainframe is the fact that many of the baby boomer generation are now retiring, threatening to leave a gaping skills shortage behind them. Younger developers shrink away at the thought of having to revert back to green screen technology. They want to work in an agile environment, use common coding languages such as Java and .net and experiment with new ways of doing things. The world of mainframe has therefore seemed unappealing.

However, there are many ways in which banks can bridge this generational void, passing the reins to the next generation so they can energise the mainframe and increase its value. You can code using java on the mainframe; you can use a modern interface; you can capture the knowledge of baby boomer mainframe developers to plug any knowledge gaps; and you can apply agile working methodologies, just as you would in a distributed environment. The great mystery around the mainframe really is that there is no mystery. It can work just like any other environment, but as with any other technology set that provides a vital function it needs resources to help it achieve its full potential.

For banks to realise the full value of their mainframe investments, they need to have a better understanding of how the technology works and the people that operate these environments. Next generation IT leaders must therefore find ways to bridge the gaps between their development teams, ensuring that the culture of excellence is protected, while still encouraging innovation. Banks can gain a competitive advantage if they can ensure their existing staff have access to the right tools and guidance to further their mainframe skills. Our advice to those who have not started on this journey is to start now, as the cost to reputation, productivity and lost revenues will be acute if a successful transition is not applied.