Mainframe as a service
I was in Arizona a couple of weeks ago.
For a conference, and possibly the most stunning sunset you’ve ever seen.
Yeah, yeah. I know. Your heart breaks for me.
I did my keynotes.
Princesses and dinosaurs featured. Obviously. I have a reputation to maintain.
But I also facilitated a panel. On my favourite topic of all time: core banking. Don’t you dare click away! This is not boring. This is exciting stuff!
I had three vendor representatives on stage: two neos and an incumbent. One of the neos was my friend and former colleague Olly from 10x, so I came in for the panel on “Are traditional cores on life support?” very ready to win. Even though I wasn’t actually in the conversation. My views on mainframes are neither ambiguous nor secret, so I didn’t even make an attempt to conceal them.
I didn’t win though, dear readers. The thoughtful and insightful Marvin Foest re-set the questions for us all in a way that led us down a very interesting path. Not entirely unexpected, but also not where any of us started. If that’s not the hallmark of a good conversation I don’t know what is.
The panel was a rare exercise in informed debate and nuance (more of that please) and we determined three things:
- There is room in the market for everyone.
I believed that anyway, to be fair. Maybe not everyone-everyone, but a lot of the players. You can stay. It’s all good.
But having three providers talk about their philosophical differences while not trying to sell anything to anyone absolutely confirmed the belief. There is space for everyone in the market. We serve different segments in a different way, is the message. Choice for customers is a great thing. And customers are becoming better educated and more articulate in this space.
So, the diversity of solutions meets a need.
OK, so I won a little bit.
But the increasing education of the client prompted me to think and ask and reflect on a whole host of ‘therefore’ questions. Because clients who know more about this space ask different questions both when they are buying a new core and when they are dealing with their providers.
The sales process changes, the selection and market positioning considerations shift. The things you need to prove change, but also what happens after selection and go-live changes.
So, the conversation went on to the next obvious consideration.
- Are we thinking about “core” the right way?
Is the language we use helpful? Are the inherited definitions and categories helpful?
My gang on stage didn’t agree on their answers to this question, by the way. There was a lively discussion on why the language may not be helpful and on why actually it is. While they were debating, I discovered I care less about the answer than I thought.
Which is a shock because you know me and language.
But as they were talking, the area they actually agreed on was one I now also passionately agree with. So, I am winning because my thinking has now landed on the double realisation that, no matter how we approach the core space… no matter which solution we choose or which vendor we pick… we should expect more from them, as partners, and less from the core as a box of tricks.
To be fair, I had done a whole presentation (the one with princesses) about how core is utility and one shouldn’t look to the core for innovation. So, I was halfway there.
Half winning, if you’re keeping score.
Let me back up.
The wonderful Kate Drew did some research that found that 80% of banking decision makers feel ready for open banking (which has officially landed in the US of A) and 68% were comfortable with the fact that third parties and particularly their core providers were part of what that readiness looked like. Further, the respondents were excited about BaaS and the money they could make… through their solutions their providers would… provide.
And my whole argument was: don’t do that.
Business strategy is yours and yours alone to determine. Your providers are there to serve that strategy and ambition. Not determine it.
Not least because if you look to the partners for an answer… you will get the same answer as all their other clients are getting. Because they are a utility and that’s what utilities do. You can have whatever you want as long as it’s black.
So, I was already all over the ‘expect less from your core’ argument. I was there.
But I liked the ‘expect more from your provider’ thought as the rest of the same sentence. They are not separate things after all.
We are changing an industry here.
We need to have hard conversations with each other. And we need to face into the things that get in the way together. As we are breaking up monoliths and revising what we do and how we do it and why.
So yeah. Expect less from your core. Expect more of yourself. Own up to the responsibility of coming up with a strategy. But also expect more from your partners. Expect them to actually partner. This is a long and winding road ahead. If they are partners for the journey, expect them to act like it.
- It is a long and winding road.
We know that.
I even used a picture of a long and winding road to close my presentation.
But that’s where the mainframes come in.
I know, it surprised me as well.
I have said a million times already that the direction of travel for digital adoption is set. The regulators are almost aligned – although the regulation itself isn’t as harmonised as we would all like. The economy is digitising steadily and consistently. The pace has been relentless in the last 15 years and it’s not going to slow. This is the way. We all know it. The banks know it. The regulators know it. The core providers know it.
That’s why the neos are growing and the incumbents are developing digital alternatives and pathways there. There is no world where mainframes don’t go the way of the dodo.
The direction of change is set.
But the pace?
The pace of change helps set the direction.
But the pace of adoption is neither set nor singular.
The pace has been slow across FS over the last 15 years. Slow across the board and uneven within the slowness.
Mainframes are alive and well (or I wouldn’t be worried about them following us to Mars). Everyone knows they will have to eventually move off them. When that will happen, though, and how… those are not questions that have the same answer for everyone. And that’s the point.
Traditional cores are not on life support. They are doing the job for as long as the bank decision makers are struggling to make the decision to re-think the job and move off them and towards the direction of travel we all know is inevitable.
That’s not what life support looks like. That’s what partnering your clients during a hard set of decisions looks like.
And bad decisions, if you are still on mainframes.
But that’s not the core’s fault. It’s yours, Mr Bank Decision Maker.
So, if you are a banker, come on now. It’s time.
And if you are a supplier, the job isn’t just to build the future. It’s to build a bridge there. And that bridge starts at the feet of the dreaded mainframe.
No, I don’t like it any more than you do. But unless you look at that reality in the face and find a path forward for your client that is realistic, aligned with their appetite and manageable… then you are not being a good partner.
We have a job to do.
A big job. A hard and important job.
That can’t start until bank decision makers do their job and make the decision already to accept the inevitable and accept that the future they didn’t bet on 10 years ago is today’s present… and this present’s future is approaching fast.
And it’s time.
Leda Glyptis is FinTech Futures’ resident thought provocateur – she leads, writes on, lives and breathes transformation and digital disruption.
She is a recovering banker, lapsed academic and long-term resident of the banking ecosystem.
Leda is also a published author – her first book, Bankers Like Us: Dispatches from an Industry in Transition, is available to order here.
All opinions are her own. You can’t have them – but you are welcome to debate and comment!