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The Mainframe Continues to Lure Wall Street

With the rise of big data, mainframe computers are enjoying a resurgence of sorts. But many experts point out that 'big iron' never really went away in the first place.

"I know that you and Frank were planning to disconnect me, and I'm afraid that's something I cannot allow to happen," HAL 9000, the fictional mission computer, said in "2001: A Space Odyssey." Stanley Kubrick's film may date back more than 40 years, to 1968, but the monolithic intelligent mainframes that IBM first produced in the 1950s are still a mainstay for financial firms -- and fear of disconnecting them may be one of the primary reasons, according to Aite Group senior analyst David O'Connell.

"Mainframes are integrated with so many business processes that no one really wants to touch them," O'Connell explains. There are a lot of devices these days that can do what mainframes do, he acknowledges. But there are very few reasons to migrate off of the mainframe and many reasons not to, he adds.

While mainframes' functions are fairly well documented, like HAL, there is still an air of mystery about them, at least for non-engineers, who are typically reticent to simply switch them to the "off" position. "You never know if it might switch off a trading desk --no one knows exactly how integrated they are," O'Connell relates. "No CIO wants to say, 'Gosh, the reason we have an outage at an entire retail network is because we shut down the mainframe to save $30,000.'"

Fear of Failure

Of course, fear of the consequences of turning off these machines is not the only reason behind their continued popularity. They actually still offer value. Mainframes support huge portions of the data environment at most large enterprises. And as firms search for new ways to sift through and analyze mountains of structured and unstructured data, mainframes still offer one of the best ways of doing this, suggests Ken Muckenhaupt, CTO for the financial services sector, IBM Systems & Technology Group (hardware division). "For all intents and purposes, the financial world runs on this class of computing," Muckenhaupt says, noting that mainframes are used today for traditional and online transaction processing, including generation of reports, account management and core banking operations.

"Firms say, 'I need to have more capacity. We're being swamped,'" Muckenhaupt continues. "Nothing beats the mainframe if the client needs extreme reliability, availability and serviceability. It's second to none. You'd need to go through many more hoops or configurations to come close to what a mainframe would do. It has unlimited scalability in virtual environments, which puts it far above distributed environments."

One area in which mainframes play a critical role is analytics, where mainframes serve as a primary data source for big data capabilities and solutions such as Hadoop, according to Aite's O'Connell. Since these behemoths can easily crunch data in real time relating to the history of account holders and their behavior, mainframes are used to analyze opportunities to create competitive products as well as for fraud mitigation, he adds. Meanwhile, new regulatory reporting requirements generated by Basel III and Dodd-Frank are dialing up the pressure on firms to mine data in near real time, increasing the reliance on mainframes further.

Ameriprise Financial CIO Randy Kupper says his organization, which just signed a multiyear partnership agreement with IBM to incorporate the vendor's technology in its data centers, uses the mainframe for interactions with outside wholesalers and other manufacturers of products that its advisers sell. The mainframe's analytics capabilities are a huge draw. "There's a lot of batch processing and data crunching," he indicates, noting that Ameriprise works with research firm and investment manager Morningstar, a provider of data on more than 385,000 investment offerings, along with real-time global market data on more than 8 million equities, indexes, futures, options, commodities and precious metals.

A Smart, If Not Trendy, Choice

While the mainframe has myriad uses, financial firms' choice to continue using the computers known as "big iron" as opposed to other technologies also is driven by a growing understanding of the economics of technology, notes Howard Rubin, founder of Rubin Worldwide. "The choice of a computing platform is an economic- and service- and risk-based decision. It's not a fashion decision," he says. "You're looking for superior economics for very complex times for the financial services community. They have to drive their margins. So they need performance at the best possible price. That doesn't always mean the mainframe, but it doesn't mean mainframes are out of the game."

IBM's Muckenhaupt reports that 96 of the top 100 banks today use mainframe computers. "The need to streamline their operations to bring workloads back on the mainframe allows them to save costs," he says.

[The Technology Economics of the Mainframe: Mainframe Computing Still Growing in Banking]

Far from being stuck in a time warp, mainframes actually are a highly current -- and constantly updated -- platform. In August, for example, IBM launched its latest mainframe server, the zEnterprise EC12, with a clear focus on boosting security and performance. "With operational analytics and near-real-time workload monitoring and analysis, clients can use the new zEC12 for a variety of workloads, including hybrid clouds that can take advantage of the system's 25 percent more performance per core and 50 percent greater total system capacity than its predecessor as well as the world's fastest chip," IBM said in a release announcing the new server. The new IBM mainframe includes new memory technology called Flash Express that can help boost the performance of data-intensive applications or workloads, according to the computer giant, which says the technology is designed to provide improved availability during bursts of system activity experienced at transitional periods, such as when financial markets open.

And while massive mainframes have historically had a huge footprint in data centers, that too is changing. In 2010, IBM introduced hybrid computing with the launch of the IBM zEnterprise System and the IBM zEnterprise BladeCenter Extension (zBX), allowing firms to deploy and integrate workloads across mainframe, POWER7 and System x servers and manage these diverse resources as a single, virtualized system. Firms can also consolidate thousands of distributed systems using Linux running on the new zEC12 mainframe, lowering the IT operating expenses associated with energy use, floor space and software licensing, IBM notes. "One zEC12 can encompass the capacity of an entire multiplatform data center in a single system," the company said.

For Ameriprise Financial's Kupper, "The mainframe is back to the future." He adds, "It never really went away. Now it has an even more important role: It's a large distributive processor."

Technological devices may be getting smaller, but given the financial industry's need for a reliable, secure way to accumulate and analyze data at a faster rate than ever before, the mainframe appears destined for new life. "Those chunks of old iron aren't getting smaller, but they probably have a special footprint in the data server," says Aite's O'Connell.

Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio

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