| If you read the article carefully you'll notice that most banks DO NOT maintain their own software! They licence the software, and usually the job of running the system, from a software house. The article is based on an intervjue of the CEO of Auka. Auka is a software house for a peripheral piece of banking software. (read, he's selling software licenses). Try to look at this from the banks point of view. My first job was in one of these software houses for banking and finance(B&F) who made both core system and peripheral software. A bunch of us programmers tried to make the same sell to one of the bankers we had on staff. (You need bankers to do the job of products manager in this business). He looked at us like we're morons, and asked a rather pointed question: "OK, say we rewrite the whole software stack in C++ (this was 1998). What NEW banking products can we make in C++ we CAN'T make in cobol?" Answers is of course; None, zip, nada. Last time you changed bank, did you ask who's banking system is being used and in what language it was written in ? I'm guessing not. So banks go to the software houses to license a core banking system, and they care pretty much about only two things:
1) Is it solid (i.e bug free. Few things evaporate trust in a bank faster than there being questions about the banks ability to do basic math right).
2) price There have been a few cases when a new core banking system have been written from scratch, and most have been failures due to being too buggy when launched. Word get out among the banks and the system is dead. All will wait until it's proven, no one will be the first one out of the gate. The bug free requirement is a show stopper from the getgo. On to price. The development cost of such a system is in the neighborhood of 250 - 500 million USD. The only way to get that down is to strip down the features to a much simple system. The other software houses are just going to sell an existing cobol system, with disabled features to match yours, and underbid you. Bankers, unlike most CS majors, actually understand how to calculate cost of investments! Say 500M USD development cost, a future value calculation will yield that you'll need a return-on-investment (ROI) of 20-50M US EVERY YEAR FROM HERE TO INFINITY to make the investment pay off. (That's PROFITS, not revenue) Core banking systems are so feature stable, and have been so thoroughly debugged over DECADES, that there is very little maintenance to be done. I'd expect that each of these systems have a staff of 10-20 programmers maintaining them (and they spend a lot of time doing other things). How big a staff of maintainer will you new banking system need after launch? Even if it was zero and you assume you pay each maintenance programmer 250k USD, a staff of 20 still only cost 5M USD. The article have a section "what can the banks do" left out a fourth option. Instead of using CS majors to code cobol, you use B&F majors, and give them a 1-2 year education on doing cobol programming. The CS majors need 1-2 years of on the job experience to reach a B&F Bachelor level understanding of what a core banking system need to do anyway. Cost is the same. One last point, say you do write a new system today your choice of language will be either Java or C#. As database there is no viable alternative to SQL. In 30 years no fresh CS major will touch Java or C# with a ten foot pole, and you'll have to do another rewrite to the tune of 100-200M USD (assuming that programming will require less hands). Much cheaper to keep on educating non CS majors to do cobol. |