First, let me describe the arena this blog is about:

• "Large banks" include 145 financial institutions (FIs) operating in the U.S. The good people at Highline Data came up with 145, but I reduced it to 122 because I look at corporate entities, not charters.
• The list includes asset sizes of $8 billion to $1.3 trillion.

• Most of the FIs are commercial banks, 13 are savings and loans, 7 are primarily credit card companies, 6 are brokerages that operate banks, and 3 are credit unions.
• Most of these FIs have been using mainframe computers for at least 50 years, which means they are using core software that they themselves built.
• Nineteen have hired an outsource company (FNIS, Fiserv, Metavante or BISYS/Open Solutions Inc.) to do their core processing.
• Some are using vendor-supplied software but mostly for a particular application rather than full core. The most popular example of this is Automated Financial Systems for loan processing. A less popular example is CSC's Hogan System.
• There are some banks (less than 20) in this group that have implemented integrated core systems such as Jack Henry SilverLake, Information Technology, Inc. Premier, Fiserv CBS, Fidelity MISER, Fidelity Horizon, Metavante Bankway, and Trisyn Infopoint.

Now that we understand the players involved, I'd like to express my opinions regarding the "noise" one hears from researchers and pundits who claim large banks are planning for conversions to new core systems. This situation has been a subject of press and research firm activity for at least the past ten years.

• My first offering in this imaginary debate is, it ain't gonna happen.
• Even though large banks realize their legacy systems are old and tired, they don't have options that are risk-free.
• The common characteristic, in one word, that all large banks share is - customization. If one bank found a new system that it liked, it would take 1,000 "Accenturites" or 5,000 "Offshorites" to implement it while preserving the functionality that the legacy system has. What is the cost of that?

• Why are they stuck with legacy systems? Because their present core systems are like roots of a 300-year-old-oak tree. No one knows where they end. The Monday after a core conversion, there could be a meltdown at the bank because testing and reality are never the same. Name a CIO who would like to give up his/her million dollar W-2 for that kind of craps-shoot.

• Interfaces in legacy systems are like fleas on a hound - too many, irritating, and they'll migrate to the new pup. If interfaces continue to reside in new systems, then their overhead will carry the negative baggage of legacy systems to the new platform. Where's the improvement in that?

• The bank tech vendors with advanced architecture are big internationally (i-flex solutions, Infosys and TEMENOS), but they don't have a single large U.S. bank using their complete core system. Is that going to give a CIO the warm fuzzy feeling he/she needs to take the bank to what we all agree is a better platform?

The last time a core conversion was attempted at a large bank(s) was more than ten years ago when Norwest (now Wells Fargo) and Bank One (now Chase) hired EDS to build and implement a new-age core system. The project failed after a few hundred million dollars were invested. Ask Wells Fargo and Chase what their plans are today to replace their legacy systems. I can hear their high-tech clichés now.

-Art Gillis
www.artgillis.com

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