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Sun Microsystems has convinced 80 banks to port their core banking applications from IBM hardware to Sun servers.

Sun Microsystems convinces 80 banks to defect from IBM

Muscling in on IBM's turf, Sun Microsystems has convinced some 80 banks to trade in their big iron for Sun's Unix-based processors. Lured by savings of up to 70 percent in operating costs, the banks have ported their core banking applications to the Sun platform with barely a nod toward the admonition, "Nobody ever lost their job by choosing IBM."

The banks, either on their own or through a service bureau, are porting Kirchman's Bankway system to Sun servers running the Solaris operating system. Kirchman, a Florida-based core banking provider, is among the first independent software vendors, or ISVs, to take advantage of Sun's "rehosting" solution, which allows banks or their service bureaus to run programs written for the mainframe on a Sun server.

The banks, most of them under $1 billion in assets, have in the past been enticed by Sun and other vendors of Unix-based systems with offers of lower MIPS costs, but were put off by the high costs of rewriting their mainframe-based applications. By eliminating the need to rewrite code, the Sun rehosting solution has made the switch from IBM hassle-free.

The defection of 80 banks from IBM is unprecedented. "This is rather significant for Sun," said Bob Hunt, a research analyst at TowerGroup. "Banks using IBM mainframes have an opportunity to move to a Sun processor and reduce their operating costs, yet avoid the cost of replacing their core applications."

One of the banks, TowneBank, a $750 million institution based in Portsmouth, Va., expects to save $500,000 in the first year after switching to Sun, and $1 million per year by 2007, mainly through eliminating its service bureau and bringing operations in-house, said Keith Horton, executive vice president at TowneBank.

The bank, which had wanted to bring Bankway in-house since last year, considered Sun along with three mid-range platforms from IBM. It concluded that Sun offered the highest savings. "If I had to move in-house to IBM, the total cost of ownership would be significantly higher," said Horton. He cited the scalability and lower cost of operation of Sun's V880, a rack-mounted, deskside server containing two to eight processors, an integrated fiber channel disk subsystem, and up to 64 GB of RAM.

Other banks that have deployed the Sun/Kirchman platform include Pennsylvania-based Mars National Bank, Farmers Bank (Lincoln, Neb.), Missouri-based Community Bank and Missouri-based Landrum Holding Company.

For banks, the Sun solution promises to eliminate the high fixed costs embedded in a data center, most of which are related to software rather than hardware.

"It's not so much the hardware. The bank may already own the hardware," said Hunt. "But there's a lot of savings on the operating systems software."

By switching to Unix, he said, banks eliminate both the IBM operating system and the data center infrastructure that goes along with it, such as tapes, disks, job streams, etc. "It's much less expensive on a Unix platform."

In seeking to open up a market-the hardware platforms that run core banking applications-dominated by IBM, Sun is aiming initially at smaller banks (under $5 billion in assets), which make up the vast number of U.S. institutions. Unlike the largest banks, where IBM's mainframes still rule, these firms have migrated in recent years to smaller platforms such as IBM's iSeries, and hence are likely to be more open toward a switch to Sun.

"I like the market they're going after-community banks that have grown through acquisitions and have kept their iSeries platforms," said Hunt. Some of them, he noted, have grown large enough to comprise the lower rungs of the top 100 banks.

Among its largest customers, however, IBM appears invulnerable. "Large banks are almost totally mainframe-based," Hunt said. "I could see Sun moving up over time, but I don't see this as getting into the top 50."

Similarly, large service bureaus that depend on mainframes might be disinclined to switch.

"It would be more complicated for them," said Hunt. "But I could see them investigating it. They're very sensitive to costs."

Core systems is just one of several banking markets where Sun is looking to displace IBM. In Internet banking, for example, a substantial number of transactions are hosted on Sun servers. And in retail banking, Sun is seeking to replace the IBM-based platforms used by many of the world's branches with its own Unix-based systems.

"Around 45 percent of those branches run OS/2," said Dave Moore, global banking manager at Sun. "Now that OS/2 is 'decommited' from the marketplace, that technology is going to have to be refreshed."

The strategy extends right down to the desktop. Sun has come out with a thin-client appliance, Sun Ray, which boasts no memory or operating system, is activated by a smart card, and retrieves data and software from a network server, yet "provides all the functionality of the desktop," said Moore. "We are the only vendor that offers a non-Wintel client for the branch."

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