The Lesson of RBS: Invest in legacy, Invest in the mainframe

Successful, profitable businesses run largely on legacy production systems. Many of these systems are mainframe-based. Take the legacy away and any business based on transactions will suddenly disappear. As someone that hopefully understands the reality of enterprise computing, having spent 17 years in the business, I find a lot of industry bullshit about innovation vs maintenance spend pretty wearing. Hundreds of vendors have pitched me to explain that we’re all doing it wrong. Gartner Group says 90% of IT spend is maintenance which is a bad thing. McKinsey argues organisations should only spend 40-60% of their budget on maintenance. The figures then get repeated ad infinitum, with the subtext being the maintenance is bad and new app spend is good. Its kind of weird, but mirrors the wider culture’s cult of youth, where female newsreaders are not allowed to have wrinkles, and our most feted CEOs are seemingly all under 30. Yet the part of the business making the money is dismissed. It was extremely welcome therefore to see the CEO of RBS admit that the recent massive outage at the the bank, and its subsidiaries NatWest and Ulster Bank, was because of a failure to invest sufficiently in legacy. “RBS has seen a big mushrooming in spending on technology. With hindsight maybe a bit more of that increase in spend should have been in the core, taken-for-granted systems that work every day. Turns out that new systems of engagement are important, but you neglect existing systems of record at your peril. Talking of peril, the issue of IT-related bank outages has now come to the attention of the Financial Services Authority, with the Financial Times reporting that maintenance is now a regulatory issue. Now let me be clear here. I am not saying legacy is always good. On the contrary legacy is only valuable if you continue to invest in it. You need to pay down your down technical debt. Investments in legacy are not investments in nothing, they are investing in the walls, floors and roof of your business. If you live in a house and never invest in maintenance, or have a car and never go to the garage, your investment will fall apart expensively and potentially catastrophically. The FT story goes onto say that “IT specialists say many smaller lenders and those operating in emerging markets are leapfrogging established western rivals in technology performance as they build new, unified systems.” Aha – the bullshit arrives. Who are these “IT specialists”, or as Computerworld calls them “analysts”? What- they were afraid to be named? Lazy journalism I fear. The truth is Asia has been a strong growth market for IBM’s mainframe business, precisely because of the scale challenges of providing transactional services to countries with massive populations – I call it Scaling the Great Wall of China. Asia, which is rather less youth obsessed, wants to run its banks on the same systems we use, rather than betting on something untried. Mainframe shops that invest in getting current with operating systems and software can run mainframes at lower cost than those that don’t. Investing in legacy is, and can be, a competitive advantage. Is legacy always better than new application build-out on new hardware systems? Certainly not. But neither is migrating to the newest cool shiny thing a guarantee of lower cost of management and operations. Mainframe shops running current hardware and software can take advantage of lower cost subsystems for running Linux, data and Java workloads for example. Bottom line- not investing in legacy is a false economy. Read more: http://redmonk.com/jgovernor/2012/07/31/the-lesson-of-rbs-invest-in-legacy-invest-in-the-mainframe/#ixzz22kUUBVVi http://redmonk.com/jgovernor/2012/07/31/the-lesson-of-rbs-invest-in-legacy-invest-in-the-mainframe/