Out with the Old, in with the New?

By Calsin, John B., Jr. | Independent Banker, December 1994 | Go to article overview

Out with the Old, in with the New?

Calsin, John B., Jr., Independent Banker

As the use of personal computers continues to rapidly growamong community banks, the question becomes: How quickly do you throw away the mainframe? While the PC can readily position a bank's technology for the future, you may want to think twice before hauling the old mainframe to the trash bin.

The fact is that the mainframe computer still has a place in the community bank, even in a bank where PCs are popping up on everyone's desk.

Computer networking has become the technological rage in business these days. And the same is true for small banks, which are implementing PCs at a rapid pace. A survey by American Banker and the Tower Group earlier this year found that community banks have increased their use of PCs 13 percent in the last year. The banking industry as a whole increased its use of PCs only 9 percent.

Banks are implementing client/serve technology, where clusters of PCs are tied together to form networks. The networks allow bankers to share information. The PC networks give front-line personnel access to complete, up-to-date marketing information when dealing with customers.

As banking consultant Thomas A. Donofrio says, "Client/server technology allows you to take all that information from your bureau or your backroom and put it at everyone's fingertips."

Maintaining a Mainframe Role

And while PC networking offers pronounced advantages, there's still a place for mainframe computers in small banks. The mainframe can still perform functions--albeit differently than in the past--that PCs cannot match.

"It's the old curmudgeon idea that this is old, therefore this is no good," says Thomas Egan, executive director for the Study of Connectivity and Databases at West Chester University, West Chester, Pennsylvania. "The newer technologies offer a lot of advantages. But they are not a panacea."

Egan cites several reasons why bankers who are moving to a network environment may not want to discard their mainframe computers yet. One reason is the application software used on the mainframe. If the software is satisfactory and accomplishes its purposes, stay with it. "The hardware is secondary," Egan says.

The capability to move a bank's legacy, enterprise software from the mainframe to a network is still in the development stage. Moving mainframe software to a network environment can be a difficult if not impossible transition.

For the banker who owns a mainframe, but realizes the advantages of a network environment and wants to move in that direction, Egan offers a suggestion: "Do that with caution. In other words, first try to bring the network up and take advantages of it before abandoning the mainframe."

Some banks that are converting to network environments are relying on their mainframes to be the server in their new client/server environment.

That's the case at The First National Bank of West Chester, Pennsylvania, which has been computerized since 1967. Today, the bank is moving to a network environment, but it is still using its mainframe.

"Our mainframe, an IBM 4381, is a giant server," says First National Senior Vice President James D. Gruver. "We have three local area networks (LANs), and we are putting in four more."

First National's LANs are in accounting, trust and administration. The branches are future network targets and currently use the mainframe for customer-based information queries through dumb terminals.

Gruver does not believe the PC-network environment will be adequate to handle the night throughput of transactions for their more than 30,000 customers, as well as the peripherals, fast disk drives and the cassette tape drives. The mainframe will continue to serve as the database.

The Flexibility of Software

For First National's networks, which will become wide area networks (WANs) once the branches come on line, much of the software is not proprietary.

The openness of software in the network environment contrasts that of the mainframe. In the past, mainframe hardware, application software, communications, operating systems and maintenance were proprietary, provided by one vendor. "You are hooked into that bundle, and there is no way to unbundle it," Egan says.

On the other hand, networking should be an open environment, allowing easy use of off-the-shelf software. "Bankers can take the economies that competition provides [for software]," Egan says. He believes that there is no longer any reason to be locked into vendor proprietary relationships with the corresponding limitations and costs.

Bankers should also give consideration to maintenance and repair when implementing a network environment. In a network, there are many more places where hardware or software problems could occur. There should be redundancy built into the system so if a piece of equipment fails, the bank--a department or an office--is not shut down.

Egan says bankers can save money in networking by obtaining site licenses for software. Rather than paying for 10 copies of a piece of software for every PC on the network if only four people will be using it at a time, buy a license that permits multiple users. The server acts as an electronic traffic cop, allowing a program to be used to its maximum user number, but no more.

John H. Morrison, president and CEO of the $165 million-asset First Commercial Bank of Asheville, North Carolina, began looking at implementing a PC network in his bank about two years ago. At that time, a mainframe environment existed in the eight-office bank. Miscellaneous PCs were scattered throughout the different offices and used a variety of software for various purposes.

When first considering a networking move, Morrison began by talking to vendors and going to trade shows. He and his chief financial officer also participated in peer-group discussions and exchanged ideas with other bankers.

When the decision was finally made to move to a network environment, Morrison hired an outside consultant who surveyed the bank's computer capabilities. The consultant did a skills inventory of bank employees to learn their computer capabilities. The consultant then presented the bank with a list of suggestions.

Morrison, pleased with the survey results, began to follow the consultant's suggestions. Five "quality" vendors were contacted. One entire day was set aside for all of the vendors to make their presentations, according to parameters set up with the consultant's help.

Then a vendor was chosen. Work began on installing a network environment. Morrison continued to follow the consultant's suggestions. Since most of the previous hardware and software were randomly purchased, Morrison says the bank decided to start fresh. Much of the old hardware and software was discarded. Proper licensing arrangements were made to use the products in a professional manner.

'From the Top Down'

For community bankers considering a switch to a network environment, Morrison has some advice. "It's got to be the from the top down or it's not going to work," he says, emphasizing the importance of bank management's commitment to technology.

As an example to other bank staffers of his commitment, Morrison early on used a PC and a laptop computer throughout his workday.

Morrison also points to the importance of proper computer training for bank staffers. More than a year before the network was installed, First Commercial instituted an Educational Advancement Program. The bank helped pay for employees' computer training at a local technical school. Also, once an employee is scheduled to receive a PC, he or she is scheduled for eight hours of training.

In addition, the bank made available loans of up to $1,800 for employees wanting to purchase their own home-computer system. The loan could be paid back over a 2 1/2 year period. And under a licensing agreement, some of the software purchased by the bank could be used at home so that employees could become familiar with it.

The bank is in the final phase of its networking project and Morrison is pleased with the results. "The people adopted it so fast. They wanted to have a PC. I am amazed at some of the people I'm getting E-mail messages from, people I never thought would use a computer. Even the chit chat in the break room is positive. Instead of talk about yesterday's soaps, they are talking the network and PCs," he says.

There is even a network users group that meets monthly.

While Morrison's from-the-top-down attitude is critical, not all important decisions move in that direction. Some are initiated at the employee level and move upward.

That was the course for migration to a network environment at Stearns County National Bank, St. Cloud, Minnesota. At the $110 million-asset Stearns County National, two employees saw the advantages of networking and went to work convincing senior management of the same.

Stearns County National President Mike McNeil says he initially listened "kind of skeptically" about networking but did not close the door to the idea of advancing the bank technologically. He says he finally decided to learn for himself about computer networking and contacted computer experts at a local university.

For Stearns County National, the move to a network environment has required a learning process for all staffers involved, but in the end the process has been well worth it.

A Checklist for Network Wannabes

Staffers at Stearns County National Bank, St. Cloud, Minnesota, offer some tips for community bankers considering a move to a PC-network environment:

* Research the costs and benefits of a PC network vs. a standalone system.

* Review existing and internal technology needs. Discuss internal computer needs with management and primary users.

* Choose technology that meets the majority of existing and future needs. This includes potential hardware, network software and software applications. (Note: If a function cannot be handled on a network due to hardware or software limitations, but can be performed on a stand-alone PC, your equipment and software needs must reflect this.)

* Discussed networking with knowledgeable vendors and computer-industry consultants.

* Do not buy underpowered PCs, i.e. processor speed and amount of random access memory (RAM).

* Plan the location of network components (server, hubs, printers and work stations). When deciding where to wire "drops" (network jacks), plan for future expansion.

* Choose your potential bidders carefully. Hardware installation, support and warranties are very important. Wiring and testing of the wiring are critical. The wiring is critical because all data will flow between work stations and server and printer. Poor wiring will result in poor and problematic network performance. Getting references on the installers on similar installations is highly recommended.

* Screen the bids. Make sure the bids are comparable in amount, quality and type of equipment and service.

* Organize your user groups carefully. This allows you to limit access to programs, etc.

* Test all hardware and software while vendor is in the bank.

* Training on how to use the network and the software is critical.

John B. Calsin Jr. is a West Chester, Pennsylvania-based free-lance writer.

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