I celebrated a birthday this week
so I’ve been pondering the meaning of life vs. the passing of time. I feel like I’m 36—and 36 is the perfect age, in my opinion: old enough to know better, young enough to do it anyway, and financially able to borrow your way out of the trouble you can’t talk your way out of. Actually, I stopped counting at 36.
So what is it with the passing of time? Is everything destined to slide irretrievably into decline, finally to disappear, never more to be seen or heard from? Is that all there is—ashes to ashes and dust to dust? GonzoBankers, it depends on what “it” is. Let’s have a look at some situations where the passing of time means very different things.
Desktop Personal Computers
Is your bank on a three-year refresh cycle for PCs? Moore’s Law, first publicly expressed on April 19, 1965 (and where were you in April 1965?), predicted that the number of transistors on a chip would double every couple of years or so, leading to a corresponding doubling in computing power every two years. Moore’s Law has been around for 40 years now, and it appears this exponential growth in computational ability will continue for a while longer. Accordingly, a PC that is four years old is two generations behind. Granted, if you’re using Citrix or Windows Terminal Services, you can extend the life of your desktops, but I would argue that you’re really supplementing the lives of those boxes by adding technology (the additional servers and software needed to run Citrix, not to mention the technical resources to manage the Citrix environment). So are you really extending the life of those PCs or are you buying additional capacity under a different name?
Consider the advent of blade PCs. Blade servers have been around for a while, so it was inevitable that someone would develop a “blade” PC that allows seven or eight 6” high x 2” wide blade PCs to be inset side-by-side in one row of a typical server-room rack. These desktop PC replacements—each blade is a full PC—deliver tangible benefits for security-conscious high-availability environments like those in a bank. The only thing remaining on a user’s desktop is a small “port” about the size of a VHS tape, along with a monitor, keyboard and mouse. These “port” devices have no moving parts, generate no noise, and create little heat. Blade PCs free up desk space (or teller line space) and make the machines vastly easier to maintain: no more systems administrators roving around installing software on “fat” clients, yet no need for expensive Citrix hardware, software and support.
Security? All the machines are in a data center, maybe the bank’s or maybe hosted remotely. Most importantly, in some configurations multiple users can share a single blade PC—and with today’s typical computing power no one user can strain the capacity of a Pentium 4 with just banking applications. Management software enables IT staff to manage the complete blade PC infrastructure remotely, from any location, including “hot spare” switching, automatic data backup, and dynamic resource allocation. The advent of multi-core PCs—two processing cores on a single CPU chip—will further extend the over-capacity most desktop PCs have in a banking environment. Intel has more than 15 multi-core projects under way, and predictions are that about three-fourths of its processor shipments by the end of next year will be dual-core versions. This trend toward multi-core processors will only further advance the benefits of “sharing” PC capacity by centralizing them in blade configurations. All of this new technology, not really on most bankers’ radar screens, is destined to be big simply because it is efficient.
Is your bank on a three-year refresh cycle for PCs? If you’re not, you should consider it. It’s not that a three-year-old PC is that old, it’s just that the cost of administering an old PC can outweigh the cost of replacing it. And without any doubt your bank should be amortizing the cost of all new PCs over three years or less. Use them longer when it makes financial sense, but technological advance is relentless and the cost of supporting an old PC soon exceeds the cost of replacing it.
Enterprise Software Solutions
How old is the software your bank uses? We recently spent some quality time with the folks from what we’ve come to call “The Company Formerly Known as Systematics.” For those whippersnappers out there who don’t know who I’m talking about, let me just say that this solution has been around since the 1960s—around the time when Moore’s Law was first penned—and this software is still actively in use by numerous banks today. Many are in the upper tiers of the Top 100 banks, but we know of one (albeit unusual) $300 million bank using it. It is clearly mainframe-oriented (read: COBOL and IBM zSeries hardware), and most users have customized it extensively. Few banks run all of the modules. Nonetheless, the software is very rich in feature/functionality and, if you’re large enough, the overhead to support such a legacy software suite is not cost-prohibitive on a per-account basis. This software, nearly 40 years old, is very much alive and kicking. It will be around for many more decades.
How old is the core software your bank uses? Don’t worry about it. As long as it’s meeting your needs, leave any worries about its age to the software salesmen. No one else cares.
(One age-related side note: You’ve probably heard that many COBOL programmers are nearing retirement age and COBOL expertise will soon be in short supply. Don’t believe it. One of the beauties of COBOL is that it is not hard to learn—in fact, it was designed to be a “COmmon Business Oriented Language” for use by business people, not technologists. For anyone who can handle C++, COBOL should be a piece of cake. The laws of supply and demand predict that there will be enough COBOL programmers to get the job done. And—food for thought—with just a few notable exceptions, all of the software commonly used in financial institutions was written in either COBOL or RPG, another not-exactly-leading-edge programming language.)
Sorter Transports and Check 21
Now we come to an interesting question. How old is your sorter? Check transports have been around since the 1960s, ever since the advent of MICR processing. Like old soldiers, old sorters don’t die, they just slowly fade away. Old sorters are like airplanes: with proper maintenance, their life can be extended indefinitely—until a fundamental shift in technology. Check 21 is just such a paradigm shift in the check processing world.
The interesting thing about paradigm shifts is that they present both opportunities and problems. Consider the plight of the poor manufacturers of check sorters. As the banking industry moves to the exchange of images and away from the exchange of physical checks, who will need a check sorter? Clearly, checks will have to be scanned once (perhaps by the merchant accepting the check or at the branch location cashing the check), but after that the physical check isn’t needed. All those paper items won’t need to be put into cash letters, sent on to the Fed or a correspondent, and then passed through more sorters several more times. If we assume that the average check is now handled four times after it is first negotiated, then the aggregate sorter capacity required by the banking industry will decline to one fourth of what it was before Check 21. We don’t know how quickly check volume will decline, but we know that it will decline.
That has created both possibilities and hazards. If you are a bank without imaging sorters, clearly you will need to upgrade at some point in the future. If you had enough imaging sorter capacity to meet your needs before Check 21, then you won’t need as much at some point in the future. Even if you have only one sorter, it will be slower and need fewer pockets, reducing operating expenses. At least one manufacturer now has a program that provides higher capacity while check volumes are still high and cost reductions as future volumes decline. This option will be appealing to some organizations. (Note: If you find this option attractive, be sure to perform a rigorous analysis and ensure that your assumptions are well-thought-out under all possible future scenarios—in Cornerstone’s experience this program is probably more to the manufacturer’s advantage than to yours.) Other organizations needing imaging capability are pursuing the used transport route, since sorters have such a long useful life and there are numerous used transports out there looking for new homes. If you are a buyer, there are lots of used image-enabled transports available and the future demand for sorter capacity is declining. If you are a seller, this is probably not such a good time for you!
How old is your check sorter? In this case, age doesn’t matter as much as whether or not a transport has imaging capacity. If it’s relatively new but doesn’t have imaging capability, it’s old before its time. If it has imaging capability, you probably have what you need whether or not it’s “new.”
The Simple Facts of Life
“Age” is really all about the ability to be useful. I drive a 17-year old Honda (it gets about 3,000 miles per year because it sits in the airport parking lot so much) and my office desktop is a five-year-old Dell Pentium III. My PDA is a Palm II first acquired in 1997. They meet my needs admirably and I have no immediate plans to replace any of them. They’re not “old.” But neither are they central to my business model as a consultant, nor are they a hindrance to my productivity. They are inexpensive to maintain and support. Conversely, the laptop I travel with and the cell phone I use are quite current and will probably be upgraded soon anyway because they are central to my ability to be effective. That’s the crucial issue: If something is functional, reliable and cost-effective with respect to maintenance, time isn’t particularly relevant.
Now, if I can just continue to meet my wife’s needs for functionality and reliability… the software and hardware still work well and I don’t require much maintenance. Hopefully the turning of the calendar won’t matter, as time goes by.
You must remember this
A kiss is just a kiss, a sigh is just a sigh.
The fundamental things apply
As time goes by.
Music and words by Herman Hupfeld
© 1931 Warner Bros. Music Corporation, ASCAP