Kookmin Bank dumps IBM mainframe

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Kookmin Bank dumps IBM mainframe

디지털데일리 발행일 2013-11-22 11:52:49

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-IBM Korea failed to prevent its biggest client of mainframe system

By Paik Ji-young jyp@ddaily.co.kr

The Digital Daily

Kookmin Bank(NYSE: KB) that Korea\'s largest banking institution has finally decided to desert its IBM mainframe-based banking system, bringing shame to IBM’s recent claim that its mainframe clients are coming back. As KB is one of the largest clients of IBM Korea, the decision of KB is likely to bring big repercussions.

Plural sources inside the bank said on Nov. 20 that KB has recently decided to adopt and implement the “Smart Sizing” project, which the bank had examined for some time for substitution of its existing IBM mainframe-based computing system.

“Smart Sizing” is a re-hosting project for replacing the IBM mainframe-based main banking system with a Unix system, while minimizing the development of new business applications. To review its feasibility, KB had consulted experts and conducted a POC (proof of concept)test twice since the end of last year, through which it has concluded that there would be no problem in switching to a Unix system.

◆Breakaway of IBM Korea’s biggest client of mainframe system:
KB signed an Open Infrastructure Offering (OIO) contract with IBM in December, 2008, to build the “Next-Generation Banking System (NGBS).” Under the contract, IBM was to offer integrate services of hardware, software and other services to the bank for seven years.

OIO of IBM is a customized contract, under which IBM provides the entire collection of computing hardware, software and services on a long-term basis while offering a flexible payment plan that fits the financial situation of the client. The 210 billion won contract is to expire in June, 2015.

KB’s main banking system has a total capacity of 200,000 MIPS (millions of instructions per second), including those for the card sector, which make the bank one of the top five clients of IBM in terms of capacity. For this reason, the KB system has been regarded as a meaningful reference even by the IBM head office.

Under pressure to cut down IT cost since last year, however, KB demanded IBM present in advance a guideline of the cost which is expected to occur when the bank renews the contract, which expires in June, 2015. But IBM failed to respond properly, which has led to the current situation.
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Shirley Yu-Tsui, a Chinese, joined IBM Korea as new CEO early this year amid people’s expectation that she might present a solution. But she also failed to prevent KB, the biggest mainframe client in Korea, from breaking off with IBM.

KB’s decision to downsize to a Unix system is likely to deal a serious blow to IBM Korea. IBM’s mainframe business in Korea has remained stagnant for years. Industry sources forecast that by losing its biggest client in Korea, the mainframe business of IBM may get a critical blow that may not be easily recovered.

In addition to KB, Woori Bank, the Bank of Korea, Standard Chartered Bank and City Bank have adopted mainframe-based banking system but Woori Bank reportedly is also considering downsizing to a Unix platform. It is worth watching how the KB case would affect the decision of Woori Bank.

◆Cheering Unix companies ... Three-way battle among IBM, HP and Oracle:
Sellers of the Unix operating system, such as HP and Oracle, are hailing the KB’s decision. It is almost the same as a streak of light to these companies for large-scale projects are virtually nonexistent in the Korean market these days.

Of course, IBM Korea’s Unix Division is also exerting its utmost effort to win the new project, regarding it as a matter of life and death, since a failure would mean a serious blow to the entire hardware business of the company.

The present database management system (DBMS) of KB, operated by its main system, adopts IBM’s DB2. Based on this fact, IBM officials claim that the database will better perform under its hardware platform IBM Power Systems, than under those by HP or Oracle.

But the KB project is not something that HP Korea and Oracle Korea can easily give up. At present, IBM Korea has a 50 percent share in the Unix server market in Korea, which is followed by HP Korea with 35-40 percent and Oracle Korea with 15-18 percent. As much as the KB project could be a golden chance for HP and Oracle to expand their market shares, the tripartite competition is likely to be a battle of life.

For HP Korea, whose business is somewhat slowing down, it is a battle of pride with a rival. To Oracle Korea, which is expanding its market share with an engineered system, it offers a lifesaving opportunity.

When the card sector is included, the project’s size is expected to reach as much as 100 billion won, which will inevitably bring about a cutthroat competition. KB will begin benchmark tests (BMTs) for these companies in full scale next year.