We’re heading to Oracle Open World

This Ed Airey blog explains how the modern enterprise can harness technology and technique to outpace and counter the changing face of completion and achieve sustainable business agility. Ed will be at Oracle Open World discussing this further at his session: Destination Java: Take enterprise apps to JVM and the Cloud so if you’re attending don’t hesitate to find him and chat more…

Into the Future: new tools for the agile enterprise

What is the agile enterprise? Is it an organization ready to respond to new demands or business opportunity, rapid changes in the market or changes in consumer demand?  To survive-it must achieve all these goals and more. This is the new norm for 21st century business – ever increasing flexibility. But how does business obtain and keep that nimble responsiveness to change? Is there a secret ingredient to the recipe of organizations that have done so already?  To be agile is to be adaptable—to flex and shift to meet the challenges of one’s environment. Just as the chameleon adapts to his surroundings shielding itself from predators a business organization must adjust its strategy and approach to counter its competition.  For most enterprise shops this is not an easy feat. Mired in technical debt, most IT leaders struggle to manage their IT backlog alongside new business initiatives.  Addressing both requires new thinking, new tech and a new approach to enterprise modernization.

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The Case for Modernization

For organizations struggling to cope with increasing IT debt and an older enterprise application portfolio, consider the innovative path taken by a very well-known European auto-manufacturer.  For years, this organization maintained a sterling reputation for quality, performance and service.  Its aging IT infrastructure, however, now plagued with stability problems threatened its ability to both service its customers and maintain its industry prestige.

The manufacturer considered a complete replacement of its core application infrastructure but quickly realized this would be both costly and risky to business operations.  In a fiercely competitive auto market, competitive advantage was paramount and this organization couldn’t afford to lose a step to the competition by disregarding its precious intellectual property.

Modern tools and new technology was employed to modernize its core enterprise applications. Using the power of Eclipse, new and existing IT teams could quickly integrate existing enterprise applications with Java, web services and other solutions. Enterprise application deployment to the Java virtual machine (JVM) enabled future flexibility and scale to meet new business requirements and opportunity. Modern tools and a new mindset delivered fast results—all without rewriting valued application code.

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Oracle Open World #OOW16

The key to this strategy—unlock the value of IT investments. This year in San Francisco at the Oracle Open World event come and see the future of enterprise application modernization for yourself.  Explore how to easily take existing enterprise systems to new platforms including Java, the JVM, and Linux.  We’ll examine how this European car manufacturer and other businesses took their enterprise applications to modern environments using new tools, new thinking and Micro Focus’ game changing solution Visual COBOL

If you’re attending please don’t hestitate to come and visit us at our booth at the Networking Station @ Oracle Linux, Virtualization and OpenStack Showcase and please attend my sessionTake Enterprise Apps to Java Virtual Machine and the Cloud’ on Tuesday, Sep 20 at 16:00 -16:20 in the Moscone South Exhibition Hall to discuss modernization options further….

Ed

DevOps – a faster voyage of discovery

Tackling IT change is adversely affected by the complexity of the application landscape. Yet, problems getting up to speed in enterprise IT systems might be a thing of the past, as David Lawrence learns in his first Micro Focus blog

Accelerating delivery starts with automating understanding

Anyone been asked to do less this year? Thought not.

Anyone been able to simplify their IT systems recently? Figured as much…

As IT teams continue their turnover, and the rate of change required to keep decades-old portfolios productive increases, the ability to mobilize and plan for change is coming into sharp relief.

Yet, as the article from CIO magazine describes, the impending shortage of COBOL programmers will complicate efforts to keep these assets productive. Moreover, the increasing IT backlog (referred to by others as “IT Debt,” for example in this 2010 Gartner report) illustrates the urgency of improving the productivity of new developers as quickly as possible. A team that has been in place for decades, and has probably created a significant proportion of the portfolio they are now maintaining, will have an easier time keeping up with the backlog than will a team of individuals who are unfamiliar with the code.

Application discovery is a necessary part of the work of a developer, or programmer, who is new to a project or to a part of the application portfolio they are unfamiliar with. Traditionally, it is a trial and error process consisting of searching through tens or hundreds of source files, deciphering cryptic comments and locating references to significant data elements. And the language of these core systems? More often than not, COBOL.

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A DevOps Approach?

The benefits of replacing error-prone manual tasks with automated tools are well understood and form the bedrock of the rationale for the DevOps initiative.

Understanding of an application is crucial not just to get the new programmer up to speed. It’s also necessary for performing due diligence and following good practice. Compliance and oversight rules in organizations I speak with mandate that the impact of a proposed change to an application in production must be thoroughly understood, and usually documented in the form of an impact analysis, before the change can be deployed to the production environment.

DevOps is about automating as much of the application lifecycle as is feasible, to shorten time to production and reduce errors and resulting delays. This includes the early stages of discovery, analysis, requirements gathering, and so on.

The traditional means of discovery and analysis  of mainframe applications is a manual, and usually unbounded task, difficult to schedule and plan.

Automating the Discovery process

If we take the DevOps perspective of seeing what could be done to eliminate application discovery – usually a laborious, manual effort – it holds that this is an activity that is ripe for automation. What if, instead of chasing through one file after another, the programmer had at his disposal, a means to quickly and accurately visualize the structure and flow of the application? Such a solution could be used to not only reduce the effort of discovery, it could also automate another crucial task: Complete and accurate impact analysis. Application updates have been known to fail in production due to an inadequate understanding of the impact of the update.

Application Discovery Benefits

Solutions from Micro Focus and other vendors help automate discovery by automatically creating a visual representation of the application. By revealing artifacts like control flow and data references in an IDE instead of through the ISPF editor, the new programmer’s task of familiarizing himself with a new application is simplified. At the same time, the capability to automatically create impact analysis reports helps move your organization further along the path to DevOps.

Better yet, the same analysis information can be provided not only at the stage of initial examination (potentially scoping out a task for others), but also at the point of change, when the developer needs to know what to change, where and why, and what impacts this will have.

Figure 1Automated analysis at the point of change
Figure 1Automated analysis at the point of change

Conclusion – Automating the Journey

The demographic trends in the IT world are helping to exacerbate the IT backlog issue. People who know these systems may have moved on. Or the task of maintenance has been sub-contracted out to a team of staff who have no familiarity with the system. The increasing velocity of business and new models of customer interaction are additional factors in adding to the workload of COBOL programmers. A solution that speeds up development activities and reduces the risk through elimination or reduction of manual steps, makes a lot of sense. Moving the organization closer to their own DevOps objectives involves automating as much as possible – starting with knowing the systems being changed, using technology such as Micro Focus Enterprise Analyzer, should be seriously considered.

David Lawrence

Global Sales Enablement Specialist

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Start over, or with what you know?

Derek Britton’s last blog looked at the appetite for change in IT. This time, he looks at real-world tactics for implementing large-scale change, and assesses the risks involved.

Introduction

In my recent blog I drew upon overwhelming market evidence to conclude that today’s IT leadership faces unprecedented demand for change in an age of bewildering complexity. That “change”, however, can arrive in many shapes and forms, and the choice of strategy may differ according to a whole range of criteria – technical investments to date, available skills, organizational strategy, customer preference, marketing strategy, cost of implementation, and many more besides. This blog explores and contrasts a couple of the options IT leaders have.

Starting Over?

Ever felt like just starting over? The difficulty of changing complex back-end IT systems, when staffing is so tight, where the pressure to change is so high, with an ever-growing backlog – there is point at which the temptation to swap out the hulking, seething old system with something new, functional and modern, will arrive.

Sizing Up the Task

We’re sometimes asked by senior managers in enterprise development shops, how they should assess whether to rewrite or replace a system versus keeping it going and modernizing it. They sense there is danger in replacing the current system, but can’t quantify to other stakeholders why what is.

Of course, it is impossible to give a simple answer for every case, but there are some very common pitfalls in embarking on a major system overhaul. These can include:

  • High Risk and High Cost involved
  • Lost business opportunity while embarking on this project
  • Little ‘new’ value in what is fundamentally a replacement activity

This sounds a rather unpleasant list. Not only is it unpleasant, but the ramifications in the industry are all too stark. These are just a few randomly-selected examples of high profile “project failures” where major organizations have attempted a major IT overhaul project.

  • State of Washington pulled the plug on their $40M LAMP project. It was six times more expensive than original system
  • HCA ended their MARS project, taking a $110M-$130M charge as a result
  • State of California abandoned a $2 billion court management system (a five-year, $27 million plan to develop a system for keeping track of the state’s 31 million drivers’ licenses and 38 million vehicle registrations)
  • The U.S. Navy spent $1 Billion on a failed ERP project

Exceptional Stuff?

OK, so there have been some high-profile mistakes. But might they be merely the exception rather than the rule? Another source of truth are those who spend their time following and reporting on the IT industry. And two such organizations, Gartner and Standish, have reported more than one about the frequency of failed overhaul projects. A variety of studies over the years keeps coming back to the risks involved. Anything up to a 70% failure is cited in analyst studies when talking about rewriting core systems.

Building a case for a rewrite

Either way, many IT leaders will want specific projections for their own business, not abstract or vague examples from elsewhere.

Using as an example a rewrite project[1] – where in this case a new system is built from scratch, by hand (as opposed to automatically generated) in another language such as Java. Let’s allow some improvement in performance because we’re using a new, modern tool to build the new system (by the way, COBOL works in this modern environment too, but let’s just ignore that for now).

Let’s calculate the cost – conceptually

Rewrite Cost = (application size) x (80% efficiency from modern frameworks) x (developer cost per day) / speed of writing

The constants being used in this case were as follows –

  • The size of the application, a very modest system, was roughly 2 Million lines of code, written in COBOL
  • The per-day developer cost was $410/day
  • The assumed throughput of building new applications was estimated at 100 lines of code per day, which is a very generous daily rate.

Calculated, this is a cost of $6.5M. Or, in days’ effort, about 16,000.

Considerations worth stating:

  • This is purely to build the new application. Not to test it in any way. You would need, of course, rigorous QA and end-user acceptance testing.
  • This is purely to pay for this rewrite. In 10 years when this system gets outmoded, or the appetite for another technology is high, or if there are concerns over IT skills, do you earmark similar budget?
  • This assumes a lot about whether the new application could replicate the very unique business rules captured in the COBOL code – but which are unlikely to be well understood or documented today.

A well-trodden path to modernization

Another client, one of the world’s largest retailers, looked at a variety of options for change, among them modernizing, and rewriting. They concluded the rewrite would be at least 4 times more expensive to build, and would take 7 or 8 times longer to deliver, than modernizing what they had. They opted to modernize.

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Elsewhere, other clients have drawn the same conclusions.

“Because of the flexibility and choice within [Micro Focus] COBOL, we were able to realize an eight month ROI on this project – which allowed us to go to market much faster than planned.”

— Mauro Cancellieri,  Manager. Ramao Calcados

“Some of our competitors have written their applications in Java, and they’ve proven not to be as stable, fast or scalable as our systems. Our COBOL-based [banking solution] however, has proved very robust under high workloads and deliver a speed that can’t be matched by Java applications.”

— Dean Mathieson, Product Development Manager, FNS / TCS

Our Recommendation

Core business systems define the organization; they – in many cases – are the organization. The applications that provide mortgage decisions, make insurance calculations, confirm holiday bookings, manage the production lines at car manufacturers, process and track parcel deliveries, they offer priceless value. Protecting their value and embracing the future needs a pragmatic, low-risk approach that leverages the valued IT assets that already work, delivers innovation and an ROI faster than other approaches, and is considerably less expensive.

If you are looking at IT strategic change, talk to us, and we’d love to discuss our approach.



[1] We can’t speculate on the costs involved with package replacement projects – it wouldn’t be fair for us to estimate the price of an ERP or CRM package, for example.

Enterprise DevOps is different: here’s why

Many of the world’s largest enterprises are looking at DevOps. But, as many are discovering, implementing it is not without its pitfalls. In his first Micro Focus blog, software industry guru Kevin Parker outlines what DevOps means at the enterprise scale.

Introduction

The DevOps movement evolved to allow organizations to innovate fast and reduce risk. DevOps rethinks how software development and delivery occurs and it reshapes how IT is organized and how IT delivers value to the business. However, some “pure” DevOps ideas are difficult to implement in highly regulated, large enterprises.

A question of scale

When the organization is required to meet strict government audit and compliance standards, when you have optimized IT delivery around a monolithic, centralized infrastructure and when you have specialist teams to manage discreet technologies, it is very difficult to relax those controls and remove the barriers in order to adopt a shared-ownership model called DevOps. Yet implementing DevOps is exactly what over a quarter of the largest global IT teams are doing today.

So how do highly regulated, large enterprises benefit and succeed with DevOps?

Preparing for Change

Enterprise scale adoption requires enterprise-wide change. As Derek Britton said in a recent perspective on the cultural impact of DevOps, “[it is] those who preside over larger systems, [where] that chaos will be most keenly felt.”

There has to be acceptance that changes to practices, processes, policies, procedures and plans will occur as the ownership of responsibility and accountability moves to more logical places in the lifecycle. Trust must be freely given. Every action taken must have transparent verification through common access to project data. This will be disruptive so there must be strong leadership and commitment through the chaos that will occur.

Not just for the Purists

In the table below some of the differences that exist between “pure” DevOps and DevOps as implemented in highly regulated, large enterprises:

“Pure” DevOps Enterprise DevOps
Pure Agile teams Variable speed IT with waterfall, agile and hybrid development and deployment
Multidisciplinary team members with shared ownership and accountability Team maintains strict Separation of Duties (SoD) with clear boundaries and concentrations of technical specialists
Drawn primarily from Dev and Ops teams Drawn primarily from Change and Release teams
Limited variability in platforms, technologies, methodologies and a generally a standardized toolset – often Open Source Solutions (OSS) Wide variances in platforms, technology, methodologies and toolsets with many so-called legacy, and often competing, solutions – occasionally  Open Source Solutions (OSS)
Generally collocated small teams Generally geographically dispersed large teams
Frequent micro-sourcing and contingent workforce Frequent outsourcing inshore and offshore
Light compliance culture Strong compliance culture
Limited cross-project dependencies Complex cross-project dependencies
Architecture of application strongly influenced by microservices approach Architecture bound by legacy systems steadily being replaced by encircling with newer ones
Experimental, A-B testing, Fail-Fast culture Innovate Fast And Reduce Risk culture
Team developing the app runs the app Team developing the app kept separate from team executing the app

The key takeaway is this – an enterprise-scale adoption requires some very smart planning and consideration.

Automate to Accelerate

The key to successful DevOps adoption comes down to automation. Whether your DevOps initiative starts as a grassroots movement from the project teams in a line a business or from an executive mandate across the corporation, bringing automation to as much of the lifecycle as is practicable is what ensures the success of the transformation. Only through automation is it possible to cement the changes necessary to effect lasting improvements in behavior and culture.

Through automation, we can achieve transparency into the development and delivery process and identify where bottlenecks and errors occur. With the telemetry thrown off by automation we are able to track, audit and measure the velocity, volume and value of the changes flowing through the system, constantly optimize, and improve the process. With this comes the ability to identify success and head off failure allowing for everyone to share in the continuous improvement in software delivery.

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The Time is Now

Nothing is more important in IT than the timely delivery of working software safely into production. The last decade has seen astonishing growth in the complexity of releases and the consequences of failure and astounding change in the volume and velocity of change. As each market, technology and methodology shift has occurred, it has become ever more critical for Dev and Ops to execute software changes flawlessly.

With the extraordinary synergies between the Micro Focus and newly-acquired Serena solutions it is now possible to create and end-to-end automated software development and delivery lifecycle from the mainframe to mobile and beyond and to affect your DevOps transformation in a successful and sustained manner. Read more here.

Kevin Parker

Vice President – Worldwide Marketing, Serena Software

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COBOL – fuelling the FinTech explosion

How – and why – is COBOL, a decades-old technology, fuelling explosive growth in a new area? Our new blogger, Henning Luebberding, shares his thoughts….

FinTech investments more than doubled in 2015 and there are currently around 5000 to 6000 FinTech companies competing for market share – and billions of venture capital funding. Financial Technology is also a hypercompetitive, B2C marketplace set in a difficult, highly-regulated landscape with zero room for error.

Sensibly, most start-ups delegate managing the complex IT back-end to a more experienced partner in the banking sector. They concentrate on finding customers – and funding – while utilizing the power of their partner’s COBOL applications for the ‘heavy lifting’ of back-end IT.

Examples include Number26, who partner with Wirecard, while Fairr.de rely on Sutor Bank for IT support. So what’s in it for the more established banks? Plenty. Because unlike the unruly intrusion of challenger banks, this partnership enables older banks to become stakeholders in the disruptive innovation sweeping their marketplace.

But to meet their end of the bargain – to deliver the services FinTech start-ups need – banks must up their IT game. Arguably the definition of ‘fit for purpose’ banking technology must now include modern functionality, such as APIs for mobile and web applications, as standard.

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The challenge

This article predicts bank spending on new technologies in North America to reach $19.9 billion in 2017. Current IT must evolve. But ‘older’ COBOL is ubiquitous in this sector; the simple ‘00’ syntax was created for number crunching and COBOL has been the language of banking for 50 years.

COBOL is here for good. As recently as February of last year, COBOL’s durability, prevalence and reliability established it in the top 20 of the TIOBE Index and it continues to grow. But banks and other FS clients don’t need graphs. They want real-world answers to the business challenges their customers are giving them.

Some currently host their COBOL applications on mainframes, a technology never created for this level of flexibility. Others use distributed platforms. Few have a great appetite for the risks of rewrite or replacement. So how can the behemoths of banking offer the innovation that the more nimble FinTech start-ups demand?

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The solutions

Micro Focus enabling technologies regularly achieve modern flexibility for our financial services (FS) customers and other owners of mature COBOL and PL/I applications.

Mainframe clients exploit the contemporary Eclipse or Visual Studio technology of Enterprise Developer, a powerful integrated development environment (IDE) while Visual COBOL offers the same benefits on distributed platforms.

Visual COBOL, Enterprise Developer – and the Micro Focus Enterprise suite of application modernization tools – enable FS customers to realise a corporate FinTech strategy. They protect their IT infrastructure investments while improving application development to create the products their end-users – the bank customers – and partners demand.

Because as we noted in our recent blog on challenger banks. “Customers are trusting banks who possess good technology. And IT could well be the next major battlefield between established and challenger banks in a rapidly changing market.”

So whether banks are start-ups or just looking to keep going, a failure to innovate means being left behind…….

Share your thoughts in the comment section below

PL/I – 50 years young….

Relying on PL/I-based applications to tackle today’s challenges doesn’t have to be challenging. Amie Johnson checks out how the Micro Focus approach to modernization enables PL/I shops to get the most out of the rich and valuable business logic embedded in PL/I applications and support innovation.

50 years pl1

Did you know IBM shipped the first Pl/I compiler in 1966? Contemplating PL/I’s fifty-year anniversary made me wonder what fifty computer years feels like. Turning fifty in human years usually induces fear and anxiety because we’re forced to reckon with the fact that, according to today’s calculated life expectancy, we’ve lived more than half of our life. That’s intense. But, turning fifty in computer years seems dramatically more intense. Especially imagining if I were the CIO of a business relying on fifty year-old PL/I applications to compete in today’s world where the speed at which you can deliver services matters in fractions of a percentage point. Cue some uncertainty…..

As you can imagine, a fifty year old IT estate is an unwieldy array of disparate, heterogeneous systems, often woven together by a delicate fabric of dependencies and relationships. But the Intellectual Property captured within these estates contains nuggets of genuine gold. For example PL/I has boasting rights to some pretty remarkable accomplishments – from space travel to laying the foundation for the instant-price-quote economy that drives fierce competition in industries like insurance and travel.

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The truth is, there is still a sizable group of industry leading businesses using the differentiators delivered by their PL/I-based systems to compete and win today. And IBM has shipped new enhancements every year since 1999 including providing modernization capabilities that enable business-critical applications to interoperate with Java, process inbound and outbound XML documents, and work with Web services and the latest middleware.

Micro Focus too continues to invest in helping our PL/I customers by continuing to cultivate a team of PL/I talent that is unrivaled in the industry. Additionally, the latest update to the Enterprise Product Suite boasts an array of PL/I enhancements geared toward making the work of the PL/I teams more integrated.

Enterprise Developer support for PL/I now enables users to create projects on remote UNIX/Linux machines from the Eclipse IDE so developers can remotely edit, compile and debug their PL/I applications on the target machine from within the IDE running on Windows. This makes the use of development tools more consistent and the results from testing more relevant as the applications are running on the target environment.

Visual Studio-specific improvements include support for squiggles, IntelliSense, margins and error checking when editing, which improves developer productivity by making code development and problem determination easier.

And for organizations that need to consider a multi-platform environment or want to modernize their applications to take advantage of 64-bit server architecture, Enterprise Server offers improved functionality and greater language compatibility, making it easier to deploy PL/I workloads wherever the business needs them to be.

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CIOs today have to contend with plenty of challenges, like addressing the IT Backlog and meeting tough compliance targets while delivering new web, mobile and cloud-based services quickly. Relying on PL/I-based applications to tackle these challenges doesn’t have to be be challenging. Check out how our approach to modernization enables you to get the most from the rich and valuable business logic embedded in your PL/I applications, so you can support the business as it looks to innovate.

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Taking an interest – the rise of the challenger bank

Recent reputational damage among market leaders has coincided with the arrival of so-called Challenger Banks. Derek Britton takes a look at the impact of IT and other factors on the competitive landscape.

Introduction

Most of us stay with the same bank forever. Business banking also follows a model of brand loyalty. It is almost diametrically different to the insurance market where, by comparison, the expectation is that the customer will proactively look for the “best” supplier at each annual renewal date. Yet somehow a market dominated for so long by major incumbents is being gradually eroded by new entrants. Indeed, high streets in the UK are greeting a brand new banking brand, Metro Bank, opening new branches.

A lot has changed in a short space of time. Building on from Challenger banks: on the lawns of retail banking?, this blog takes the Challenger Bank discussion further by examining this seismic shift in the banking sector and asks if this change is here to stay.

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Market Interest

Big players in the banking market enjoy significant market share. In the UK, the “Big Five” (HSBC, Barclays, Lloyds, RBS and Santander) account for 85% of the market, while in the US the much more fragmented marketplace still has big names, where “the largest five banks in the U.S. now control nearly 45 percent of the industry’s total assets.”

Yet retail banking is far from a static market. The banking crisis saw unprecedented levels of consolidation and attrition in the market during which household names such as Wachovia (formerly First Union), Merrill Lynch, Northern Rock, Alliance and Leicester and over two dozen Spanish banks ceased to exist. In 2009 alone, 140 US banking brands ceased trading.

But when there is ebb, there is flow. When Metro Bank opened in 2010, it was the first new company to be granted a banking licence in 150 years. Atom Bank followed suit, joined by other new entrants. “Challenger Banks” – as they are now often termed – comprise both established retail organizations that have moved into banking (e.g Tesco, M&S), and new banking start-ups.

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A Cutting Edge

What are these new banks offering that makes them attractive?

New UK banking start-ups including Atom and Starling offer an online-only service, and are passing on some of that cost efficiency with offer lower interest rates on loans and higher rates on savings.

Their focus on mobile apps and strong user experience, they are aiming to attract the growing demographic of technically savvy, online banking customers. The number of people using mobile banking, for example, is set to double in the next 4 years. And it seems to be working. Growth figures are outperforming the bigger banks and lending volumes have increased significantly.

Additionally, offering a “voice” to the customer community is part of the challenger proposition. German digital bank Fidor, which launched in the UK in September 2015, bases its banking model around its online community, offering customers a voice – through its social media platform – in how the bank is run.

Furthermore, the new brands have sustained none of the reputational damage[1] suffered by the major players in the wake of the banking crisis, including brand-damaging scandals around IT crashes, LIBOR, FOREX and PPI mis-selling, insider trading and data breaches. As recently as April 2015, an industry steering group implored banks to “raise their game” to improve their reputation. Yet regulatory violations are reported, and fines continue up to the present day.

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Too Big To Fail?

Surely the incumbent giants of retail banking have a response ready?

The first witness for the defence is, paradoxically perhaps, the issue of trust. Compared with a known banking brand, does a customer trust a bank with little or no experience? Despite a couple of banking giants losing the trust of some customers, others are still trusted more than newer entrants in terms of expertise and capability. People know what to expect from the long-established retail bank branch.

Related to this, was the issue of whether the bank could provide appropriate – by that read reliable – technology. Brand loyalty, according to research, hinges on banks providing good technology, said an overwhelming 80% of respondents to one survey. Whether for challengers it is too early to tell how good that technology is, is an interesting question.

The next issue concerns regulatory readiness in terms of funding. Chief executive of the British Banker’s association, Anthony Browne, commented:

“Challenger banks are obliged to hold more capital than more established banks, which have data stretching back decades, allowing them to show … they are less risky. Challengers do not have that track record. This can mean that…a challenger is obliged to hold eight times’ as much capital as a larger bank.

There is also a question of technology. And it is a big question. Customers might  see the mobile app as the face of the bank, but the core processing takes place away from the user’s screen, which requires a reliable, resilient infrastructure: a bank’s IT system is its business. By running long-standing reliable systems, retail banks possess both trusted technologies and are evolving quickly. For instance, the mobile banking apps on our phones are invariable supported by typically COBOL applications written many decades ago, and still running today, on mainframe machinery. This is technology which has a heritage of investment, value and uniqueness at the larger banks, but which clearly does not exist in the same way in the back office of the Challengers.

Finally there the thorny issue of the branch network. Despite significant closures, the established banks’ branch network far outnumbers[2] new incumbents. And while the question of the value of the branch itself in terms of day-to-day consume banking, the attitude to branches remains benign. According to the 2014 UK YouGov Poll for the British Banking Association “57% of banking customers themselves believe access to a branch is important, even if they choose not to use branches”.

Adding it all up

In the UK, the most disrupted banking market, those Challenger banks still only account for a small proportion of the market. Some way to go perhaps before a major dent appears.

Yet the changes are afoot.  The comprehensive banking results review published by KPMG in 2015 stated “The Challengers are outperforming the Big Five in terms of growth (compound annual growth rate 8.2% between 2012 and 2014 compared to a reduction of 2.9% for the Big Five).” While barely noticeable from a distance, the market continues to shift. A former Chief Executive of one major bank predicted branch numbers and employees in the sector “may decline by as much as 50% over the next ten years” in response to Challenger threats and the new digital economy. It is no great surprise that a significant investment in one Challenger Bank, Atom, was recently made by a major EMEA Banking giant, BBVA.

While the Challengers have some advantage – they can adapt to change quickly, enjoy a fairly benign reputation so far, and have fewer overheads, the major incumbents possess the systems, the skills and the deeper pockets, not to mention the major market share, to navigate the choppy waters of market change. The situation seems finely poised.

Many clients in the financial services sector choose Micro Focus to support their important enterprise application modernization strategy. Take Standard Chartered Bank, China for instance. As well as helping it meet regulatory requirements, Micro Focus technology improved performance and response times, reducing a 3 hour job to just 3 minutes, cutting time to market of new services by 25%.

Customers are trusting banks who possess good technology. And IT could well be the next major battlefield between established and challenger banks in a rapidly changing market.

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[1] A poll carried out by YouGov in April 2013 for the Public Trust in Banking symposium, found that 73% of respondents believed the reputation of banking was bad.

[2] According to the KPMG Report “The Game Changers”, 2015, the average branch network size for the “big 5” UK banks is over 1,400. The average branch network for smaller Challenger Banks (e.g. Metro. OneSavings) is 37.

Development technologies and strategies – meeting the skills challenge – Part I

Neil Fowler, Micro Focus Development Director, looks at the challenges of aligning skills requirements to IT business priorities, and suggests some strategies for overcoming the issues.

The Development Director challenge is simple enough; he or she must attract and maintain sufficient and appropriate development skills within the organisation to support the IT strategy and identify new solutions to improve productivity. However, the issues are more nuanced. The challenge of application complexity continues to grow. Documentation is limited, as is knowledge of the business systems. The availability of technically skilled staff is limited.

The very resilience of many organizations’ mature COBOL and PL/I applications presents Development Directors with an almost enviable challenge – to maintain systems whose longevity few had predicted. However, that is the reality.

Godfrey

These applications continue to provide intrinsic business-critical value and are effectively the lifeblood of the organizations who are looking to expose the business functions these applications provide to meet the pace of change. Keeping them up-to-date and fully maintained is therefore an operational imperative and often forms the cornerstone of technical strategy.

Decades of changing business demands will have meant extensive and ongoing application maintenance and evolution. Similarly, business and resourcing plans must evolve to reflect changing dynamics and operational requirements. Skills and resource management is integral to this.

Within IT organizations it is the Development Director who must find the specialist skills needed to develop and maintain their mainframe COBOL applications and ensure that the knowledge of these Subject Matter Experts (SME) stays in house. Because the older the application, the more likely it is that precious documentation goes astray – and maintaining this application is a major business imperative.

While recent Vanson Bourne research suggests that more than half of respondents have no difficulty finding IT workers with mainframe application skills, to ensure the long-term success and value of these core applications going forward, Development Directors must ensure an appropriate future supply of application expertise.

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Strategic approaches

  1. Check your delivery processes: Smart thinking would suggest modernizing the application delivery process through the intelligent deployment of appropriate tooling. This represents an opportunity for new skills to contribute to an improved application development stream that incorporates the build, deployment and ultimately the ongoing support that underpin your improved process.  Enterprise tooling is available to enable a new generation of enterprise developers to meet the future needs of the business and resolve any resource challenge
  • Enterprise Analyzer aaccelerates development and modernization projects by more than 40%. Current and new staff will benefit from faster COBOL maintenance knowledge transfer, application analysis and documentation environment.
  • Our staff-enabling technologies include a more cost-effective and efficient environment that enable current staff to support key mainframe application maintenance, development and test activities.
  • Deploying more inclusive and contemporary mainframe development and testing environments will enable a new generation of developers to skill up and support core COBOL systems. This more powerful IDE also delivers tangible benefits – a 40% productivity boost is just one.
  • Many successful Development Directors have recognized the benefit of a more cost-effective and efficient testing environment for enabling current staff to support application maintenance and development activities. Many of our customers do.
  • The current industry talk is around DevOps, and our technology certainly fits this narrative. Because Micro Focus have been advocating the appropriate combination of technology and processes to racially improve software development and delivery for many years. Continuous Integration, Agile, Unit testing– these will all be familiar concepts to new joiners and supporting these processes with our tooling can breathe new life into application development and maintenance work for many enterprises.

In my next blog, I will take a look at how additional strategies such as workforce flexibility and upskilling – aligned with the latest in development and testing tech – can help organizations address their skills challenges.

Visit: www.microfocus.com/skills

NeilFowler

Challenger bank or retail bank?

Challenger banks introduce competition to the world of the retail bank. Focusing on the challenger bank and its online/mobile appeal, this blog series explores the pros and cons of both bank types.

The challenger bank and its fresh appeal

Showing interest

When it comes to banks, the customer community has many questions. As well as the obvious things like, which bank offers the lowest interest rates, direct customers and institutions will want to know which one has the most user-friendly mobile app and whether any of them offer customer service that stands out. In addition, reputation and long-term health of a bank can be an important factor in how the market chooses a banking partner.

Initially it seems as if we have a catch-22 situation. While challenger banks like Atom Bank may offer an online-only service with a focus on keeping up with the latest technologies, retail banks such as Barclays have years of experience behind them of what works and what doesn’t work.

Taking inspiration from Challenger banks: on the lawns of retail banking?, this 2-part blog explores the pros and cons of challenger banks and retail banks.

The challenger bank: Bring on the competition

There’s nothing like a bit of healthy competition. Up until now customers have only really had the option to hop around from retail bank to retail bank, basically to get the same kind of services, in different colours and slightly different ways. Seeing big banks like RBS suffering downtime probably doesn’t instil much confidence in the customer, and branches still seem to follow the Bank Holiday ‘tradition’ from 1871. Online banking solves this for at least some of its customers.

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Challenger banks are introducing some long overdue competition, giving people the opportunity to try something different. When Metro Bank opened in 2010, it was the first new company to be granted a banking licence in 150 years.

Other new banks have followed suit and are now rocking the retail banking boat with a whole new world of options, such as online-only banking.

Online banking pays off?

The advantage of this is that there are no branch networks or call centers which cost a little extra to run. New start-ups including Atom and Starling offer an online-only service, which means as well as sustaining low operating costs, they are choosing to offer lower interest rates on loans and higher rates on savings. Online-only means no complex IT platforms needing constant attention. The influx in mobile banking suggests that mobile banking is the way to go, with the number of people using it set to double in the next 4 years.

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What you want is what you get?

Other digital-only banks bring social media to the mix. German digital bank Fidor, which launched in the UK in September 2015, bases its banking model around its online community, offering customers a voice in how the bank is run. Seen by some as a challenger bank to the challenger banks, this ‘disruptive innovator’ which prides itself on this modern banking technique uses its own propriety technology called Fidor Operating System, which is free of older source code and build. With newer, less familiar technologies, the proof of the pudding is in the eating, which is great if you don’t mind a little risk.

So despite all these intriguing new challengers dangling carrots before our eyes, the ‘Big Four’ remain largely unflustered. And, like the corner shop versus the supermarket, challenger banks have very big shoes to fill if they’re going to stand against the retail banks. Why? Let’s investigate.

Is mobile a temporary influx?

The question is, ‘do customers trust a bank with little or no experience as a bank?’ Only if they have good technology, 80% of Brits say. The online-only bank’s service relies entirely on the quality of its app. And if the Big Banks can get it wrong, others can get it wrong too. As well as this, what happens when a bank’s site goes down? The convenience of an online-only banking service may turn into an inconvenience when the customer least wants it. With access to money being so reliant on Wi-Fi or mobile network signal, customers could get into difficulties quite easily. With this in mind, could challenger banks be proof of Britain’s banking system mess?

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Are we giving more credit than the digital challenger bank deserves?

While many of us take to new technology like a mathematician takes to numbers, there are also some technophobes among us. Around 89% of the UK uses the internet, which means 11% don’t. The percentage is lower in the USA with 87% using the internet. What’s more, only 53% of the UK accessed their bank accounts online last year. In this case online-only banks have a limited audience of only those with online access, which is barely more than half of the UK.

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Dear RBS: invest in better systems. Not adjectives.

Ho hum. Another day, another example of RBS presenting IT system neglect as a ‘glitch’…

Analysts, industry commentators and – most importantly – frustrated RBS, Ulster Bank and NatWest customers took to Twitter, keen to remind RBS that their latest IT-based debacle is by no means their first offence.

Analysts, industry commentators and – most importantly – frustrated RBS, Ulster Bank and NatWest customers took to Twitter, keen to remind RBS that their latest IT-based debacle is by no means their first offence. Their most recent attempt to stretch the definition of the word ‘glitch’ was predictable to those of us familiar with their IT infrastructure and deeply irritating for those trying to access their own cash.

And as wearily familiar as the story itself – a host IT failure inconveniencing customers – were the excuses. Perhaps the RBS public relations machine has seen more investment than the IT running their banking operations, because it seems more than half a million HMRC payments had, apparently, not ‘disappeared’ at all, but were merely “delayed.” And although the problem had been “fixed”, customers would be denied access to their child or working tax credits for at least another 48 hours. Remember – these are benefits payments. Two days is a long time to wait for food.

After the comments, the reality

The footnote of an online story is rarely a repository of reasoned argument. Indeed, if you want sensational journalism and conspiracy theories then the comments section of the Mail Online usually has what you need. But the ‘Related Stories’ section after this Finextra blog is more interesting. Note how every other story relates to a meltdown, or the fine that follows it.

That’s because anyone who understand mainframes and COBOL won’t buy the legacy technology/glitch excuse. With proper investment, older mainframes running COBOL applications run just fine. As this blog points out, the DWP make 2.5m benefit payments every single day without a problem. Indeed, some high-profile organizations are using similar tech to defend whole countries and launch rockets: the US Navy is at the forefront of technological breakthroughs and NASA is helping to push back the boundaries of human understanding. No glitches there.

Our own Andy King didn’t buy the glitch angle when RBS tried it last time. Iain Chidgey of data management company Delphix, points the finger at insufficient testing. A distinctly unimpressed Vince Cable suspected “skimping on large-scale investment” is NATS systems when thousands of airline customers were left grounded by a similar computer schism. There are so many more examples.

More examples - click the image for details
More examples – click the image for details

After RBS let their customers down on – of all times – Cyber Monday, Group Chief Executive Ross McEwan described the failure as “unacceptable” and issued a heartfelt mea culpa: “For decades, RBS failed to invest properly in its systems. It will take time, but we are investing heavily in building IT systems our customers can rely on.” All good, but that was in 2013 and two glitches ago. And despite a £750m improvement programme, we seem to be no further forward. Where exactly is this “heavy investment” going?

To be fair, there has been work. But nothing beyond a low-level and inevitable ‘consolidation’ exercise that any large organisation would do to as a by-the-numbers efficiency drive or cost-cutting exercise. No-one is suggesting that these systems are not old. Clearly they are. But properly supported, older technology helps NASA send probes to Mars. And customers of other banks access their cash.

Mainframes – tomorrow’s tech?

Perhaps the issue is that RBS think they are, like many other mainframe owners, fighting fires on too many fronts to enable the innovation that could help their systems deliver modern performance from an older footprint. Banking is heavily regulated, so meeting compliance targets are a challenge. Every organization with an IT function has an IT Backlog. So there’s another. Perhaps their investment is being swallowed up by these activities that do little more than keep the lights on.

RBS recently announced better than expected financial results with pre-tax profits expected to double to £2.65bn. So the money is there. Well, let’s hope so. Imagine if the funding they had committed to application modernization and innovation was to be “delayed”? In a world where a business reputation can be destroyed in the time it takes to tweet, it makes sense to invest in core systems rather than PR. Micro Focus Mainframe solutions can enable long-established enterprise applications with modern functionality. Find me on Twitter if you want to talk more….

Low-risk Modernization – an Insurers best policy?

Big business faces big challenges and embracing future needs and customer demand is no easy thing, especially with so much complexity within IT. A recent article in the insurance industry press introduced the possibility that organizations should consider abandoning current core IT systems and starting again. Derek Britton on the risks and alternatives.

Information Week’s Insurance and Technology ezine carries “The Rocky Road of Modernization” a thought-provoking piece from Kelly Sheridan which discusses some important considerations around systems renewal or modernization in the insurance sector. Sheridan’s view of customer focus and operational efficiency doubtlessly represent the cornerstone elements of an effective, modern IT strategy for many insurance firms.

The article then attempts to outline possible IT strategies for effective change, including the assertion that “systems produced today” are “better able to handle the modern … environment”. This is unsurprising, as old IT systems are much derided. After all, how can decades-old systems serve today’s organizational needs? Even the taxonomy “legacy systems” is viewed within IT as a largely pejorative term. When organizations set out to replace their so-called legacy applications, removing a decades-old working system can be difficult. Even if the effort succeeds, a lot of money is being spent for very little in return. What replaces it is – fundamentally – merely a like-for-like equivalent. Yet extensive budget, resource and upheaval is consumed on this venture.

Replacement: Too risky for insurance companies?

And in reality, the viability of system-wide replacement carries considerable risks. Swapping out one system for another compels the organization to cope with significant changes, including functional equivalence, data integrity, user acceptance, training, hardware and software commissioning, among others.

The new system is untested, the system being replaced is undocumented – and the possibilities for error are huge. Studies undertaken by industry commentators and analysts talk about “failure” rates of between 40% and 70%, depending on the nature of the project, where implementations are excessively late, over budget or just never delivered. The IT press is littered with examples – just Google the words “IT failure”. The vast majority of these are new implementations.

Furthermore, a question arises around the article’s assertion that older systems are “expensive to operate” and rely on “outdated” skills, such as COBOL programming. This attempts to capture a nuanced argument in a general statement and should be challenged. Core systems such as COBOL are, from a maintenance perspective, easier to understand and manage than more equivalent languages. In terms of available skills, interestingly most developers in 2014, with their knowledge of IDEs such as Eclipse or Visual Studio, can easily pick up COBOL, the latest versions of which also work within these environments.

Keep it COBOL

Any concerns around the availability of current, incumbent skills, are also worth closer scrutiny. COBOL, the building block of most insurance applications, has gained an undeserved reputation as uncool and outdated relative to where high-paying developer jobs are trending – a perception that might explain why only 27 percent of Universities teach COBOL.

However, demand creates supply and greater dialogue between employers and academia can help correct the issue. Furthermore, Micro Focus is working with over 300 universities and colleges today to provide up-to-date COBOL training and technology to support both industry and universities alike and give tomorrow’s developers a future-proof career. After all, who else will maintain the applications that underpin the insurance houses’ core processes?

Another assertion made here that systems produced today are “less expensive to maintain” is, again, not necessarily the case. Take Java, for example. While it performs well for mobility requirements, it can lead to higher “technical debt” – the Gartner-coined term that defines the eventual consequences of poor system design, software architecture, or software development within a codebase. That’s a lot more than COBOL. According to CAST Software’s CRASH report, the estimated technical debt of Java is $5.42 per line of code, compared to $1.26 per line of COBOL.

Anyone planning to implement a modernization project should assess risk, cost, competitive advantage and time to implement as key considerations. Reusing current, working, trusted systems, then defining appropriate strategies to modify them, requires lower-scale change which delivers value improvements quickly but without undue risk. Interestingly, the same reuse strategy helps tackle issues around compliance and IT Backlog, concerns which also beset the insurance sector.

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Many well-known insurance brands, including Nationwide, Aviva, Allianz, HCL, SCFBMIC and United Life have successfully repurposed older systems and interfaces by reusing core COBOL applications, saving time and effort which can then be devoted to other customer-facing initiatives. Meanwhile, similarly risk-averse organizations in the banking sector have also recently chosen Micro Focus technology to support their core IT modernization strategies.

In conclusion

The market expects insurers be cost-efficient and – naturally – risk-averse. Embarking on a modernization strategy based on reuse is a low-risk route to better customer service and operational efficiency. Sticking with the programming language that has successfully underpinned the core application since it was created is not “outdated”, but common sense.

As we have discussed, with a little fine-tuning, these applications can deliver the future innovation required to meet the requirements of tomorrow without compromising what is there today. Micro Focus technology protects the intellectual property of core applications, and enables the system transformation needed to embrace new technology and meet new market requirements. We believe that for our insurance clients it really is the best policy.

 

Godfrey