Banks may have other plans for their core systems rather than relying on aging developers to maintain their legacy code. "Banks are coming up on a new generation of spending around core systems," says Mark Greene, GM, global banking industry, IBM (Armonk, N.Y.). "These are systems that are, in many cases, 20 to 25 years old. They're increasingly difficult to maintain because they're written in antiquated programming languages like COBOL, and the skills needed to maintain them are harder and harder to come by."
Although it's highly unlikely that all of the COBOL programmers will retire at the same time, the situation invites comparisons to Y2K. "This has some parallels in the sense that it's a pervasive problem that affects most every bank," says Greene. "I'd rank it at a similar scale of importance and also a similar size of investment requirement."
IBM has responded with a solution called Core System Transformation (CST), "a substantially enhanced set of software and services that provides the platform for the next generation of core banking systems," explains Greene. The CST solution represents a $140 million investment, according to the company.
IBM has reworked its WebSphere middleware product to provide faster performance, batch-processing capabilities and performance monitoring, in order to accommodate the needs of transaction processing in the back office. The CST solution also encompasses a modular business transformation methodology and support for leading core banking vendors.
The initial launch, in partnership with Fidelity Information Services (Jacksonville, Fla.), will be deployed at Suruga Bank (Shizuoka, Japan), targeting Japan's rapidly transforming banking market. The solution uses a rewritten version of Fidelity's core banking system based on the Java programming language. "They have re-architected their application and optimized it for WebSphere," notes Greene.
Within months, IBM expects to extend the core banking transformation initiative to other regions, in conjunction with Fidelity and its other core banking system partners. In addition, IBM's Business Consulting Services division will take part in the core systems push by providing strategic assessments of banks' back-office environments. "This is arguably our most strategic investment, within IBM, with respect to the financial services industry," says Greene.