IBM, Bankers at Odds Over OS/2 Migration Path

Vendor advises OS/2 users to switch to Linux, but ATM makers are leading push to Windows

IBM, which will end support of its aging OS/2 operating system after 2006, is recommending that OS/2 customers migrate to Linux instead of Windows.

But there's little likelihood that IBM's advice will be widely heeded. The last bastion of OS/2 computing, branch banking, is locked into a Windows migration strategy because the major manufacturers of automated teller machines are going the OS/2-to-Windows route.

Wells Fargo & Co. began its migration from OS/2 to Windows three years ago, said Jonathan Velline, senior vice president of ATM banking at the San Francisco-based bank. That move was prompted by the expectation that IBM would drop OS/2 support, as well as by the need to upgrade data encryption methods , support electronic check-image processing and provide audio services for visually impaired users, Velline said.

"It's easier for us if we're trying to deliver customer information through our teller systems with Windows," he said. The bank has so far replaced 3,800 of its 6,200 ATMs with Windows-based systems and expects to complete the migration by 2005. Web-enabled ATMs could eventually enable customers to perform online transactions such as purchasing sports and concert tickets, experts said.

David Kerr, director of industry solutions development in IBM's WebSphere division, argued against installing Windows on bank teller workstations, electronic bank kiosks and ATMs, claiming that it's a proprietary approach that stifles competition.

"Banks, being frugal with cash, would prefer to purchase from a competitive marketplace so they don't get tied to a certain vendor. That certain company has demonstrated the pricing power it has by [suddenly] changing it's licensing model before," Kerr said, referring to Microsoft Corp.

"I'm not saying this because I don't want Microsoft to be successful," he said. "We don't believe a proprietary product is in the best long-term interest of our customers."

Kerr said IBM customers who choose Linux over Windows as a replacement for OS/2 will have functionality that's comparable to that of Windows-based systems. He noted that Sun Microsystems Inc.'s Java 2 Enterprise Edition can be used to integrate Linux systems with existing back-end systems.

Dan Vermeire, chief technology officer at Huntington Bancshares Inc. in Columbus, Ohio, said he's keeping an open mind while seeking requests for proposals to replace or upgrade approximately 900 ATMs. But he expects to deploy Windows. "Linux does have a lot of attractions. Price, flexibility, the support IBM and other Tier 1 providers are giving to it make it a serious contender," Vermeire said. But in branch banking, what matters is the operating system ATMs run on, he noted.

The two largest ATM vendors—Dayton, Ohio-based NCR Corp. and North Canton, Ohio-based Diebold Inc.—have both adopted Windows as their OS/2 migration paths.

"Financial institutions that buy ATMs have indicated Windows is the direction they'd like us to go, and in fact our competitors are all on Windows," said Phil Kasper, assistant vice president for marketing at NCR.

Kasper said NCR is making a "drastic" changeover to Windows this year and will completely phase out OS/2 by 2005. Keith Lewis, senior marketing manager at Diebold, said his company still installs OS/2. He couldn't say when Diebold would be able to completely move off the operating system.

OS/2 was adopted widely in the financial services sector early on because of its reputation for dependability. And banks are traditionally squeamish about moving off of any system because of concerns about losing customer data.

"It's very reliable, and you want it to be reliable and stable. OS/2 is doing what we want," said Ron Ferri, a technology relationship consultant at FleetBoston Financial Corp. "You could run with that for a while, until vendors moved off it."

Ferri said that as part of a pilot program, Fleet has replaced about 100 out of 3,400 ATMs that have been running OS/2. The Windows-enabled ATMs have high-bandwidth links to back-end servers to provide customers who use Fleet's online banking service with the ability to pay bills using Web-enabled ATMs, he said.


Farewell, OS/2

Retirement of OS/2-based ATMs is being spurred by:

IBM's decision to drop support of OS/2 in 2006.

Requirements for machine upgrades from single Data Encryption Standard (DES) to triple DES.

The Americans with Disabilities Act, which requires audio assistance on machines.

The Check Clearing for the 21st Century Act, also known as Check 21, which allows checks to be imaged upon deposit.

Copyright © 2003 IDG Communications, Inc.

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