Who Will Talk to The Mainframe Tomorrow?

BY CHARLES KEENAN

Aging programmers' knowledge of Cobol and other computer languages will not be easy to replace. Large banks relying on in-house systems need a succession plan.

| SYNOPSIS | Operating bank mainframe computers requires skill in old computer languages, such as Cobol, assembly and job control. Yet universities no longer teach such skills, preferring to focus on C++ and Java, which can be used with current client/server-based computing systems. To make up for the lack of skilled mainframe programmers, banks are having to either train their own or rely more on outsourcers, who in turn often look offshore for the legacy language skills.

Nancy Linthicum is the type of employee any large bank would cherish. The technical architect for the deposit system at $36 billion-asset First Horizon National Corp. knows the nuances of mainframe computer languages, and oversees the writing of programs to keep things running. Drawing on her more than 25 years of experience, Linthicum manages changes in code, a job that can involve tinkering with any one of 5,000 programs.

Yet the likes of Linthicum are becoming an increasingly rare breed. Linthicum, 50, is one of thousands of programmers versed in older computer languages who will be retiring over the next decade or so, with few replacements available in the market. "We are an aging group," Linthicum says. "Most of us will retire at 62 to 65, especially people that have been at the bank for many years. They have fantastic retirement benefits, so they will be leaving."

Over the next decade, then, banks will need to deal with a shrinking supply of programmers versed in old mainframe languages such as Cobol, assembly and job control, all of which are needed to keep the machines running smoothly. Today, college and technical school students learn languages for the modern client/server environment, such as C++ and Java.

“Because they have been concentrating on those areas, people coming out of school over the last several years don’t have good Cobol skill sets,” says Janie Bolitho, a senior vice president at Fidelity National Information Services Inc., a processing solutions provider headquartered in Jacksonville, Fla. “They don’t understand it.”

To be sure, the shortage is not yet acute. But chief technology officers can see the writing on the wall. “I’m still running 10 million lines of Cobol code,” says Patrick Ruckh, an executive vice president at First Horizon and Linthicum’s boss. “And the reality is that the business rules running this company are still embedded in those Cobol programs.”

What can banks do? Essentially, they face the choice of grooming talent from within, or outsourcing to American solutions providers or rising players overseas, experts say. Either way, they need to start planning for the day when Cobol programmers will be few and far between. “There are a lot of larger institutions that really haven’t put a plan in place and are going to get caught,” Bolitho says. “They are going to have to pull from a shrinking pool of people at a very high price.”

Legacy

Cobol, the primary programming language run on most bank mainframe systems, was created by a consortium of technology companies and government agencies in 1959. It’s still used by the largest banks to help run deposit systems and core processing in areas such as mortgage, consumer and commercial lending. Those systems also require two other older languages unique to the mainframe – assembly, which provides low level commands, and job control, which helps a mainframe tell programs what to do and when.

Not surprisingly, programmers fluent in these older languages tend to have their educational roots in earlier decades. “The developers here have been talking about that for quite some time,” says Dave Montney, an assistant vice president at Detroit-based Comerica Inc. “People coding mainframes here are in their mid 40s, or 50s and 60s.”

Since programmers in their 20s and 30s are typically versed in only modern computer languages, banks are hard-pressed to find young Cobol programmers in the market. Montney’s group, which focuses on maintaining 2 million lines of code for its Hogan deposit system, last hired an entry-level Cobol programmer in 2000.

Large banks have long relied on old programming languages because these are at the heart of their legacy computer systems, which they have been reluctant to replace with modern platforms. For solutions providers’ views on the challenge, see “How Do Banks Work?,”. They use mainframe technology to do the core processing for typically millions of transactions a day. For such tasks, mainframes offer reliability, security and scalability that are hard to match in the client/server environment, experts say.

Ruckh estimates that converting First Horizon’s core deposit system would cost $40 million, excluding the expense of the software itself.

“I’ve got 120 systems that interface with that software,” Ruckh says. “And just all the testing and then getting all the products to work on it the way they do today would be a nightmare. Converting deposit systems I compare to doing a heart transplant on somebody who’s running a marathon.”

Mainframe programmers also have a high degree of specialization in specific platforms. Al Hager, 53, is an information technology manager who writes mainframe code for Regions Financial Corp., an $85 billion-asset bank headquartered in Birmingham, Ala. Over his career, Hager has specialized in working with a deposit platform by Hogan Systems, a banking core processing solutions provider owned by Computer Sciences Corp., an information technology company based in El Segundo, Calif. That type of expertise is now scarce, Hager says.

There’s also a salary gap that discourages programmers from learning legacy languages. Entry-level Cobol positions pay relatively well, with an average salary offer of $44,337 nationwide, vs. $41,644 for those versed in C++ and Java platforms, according to Whole Root Economic Research, Inc., based in South Glastonbury, Conn. Yet with 10 years experience, Cobol coders fetch an average of $72,698, vs. $96,430 for C++ and Java programmers.

Linthicum says the market today “has gone full circle” back to the way it was in 1978, when she graduated from college with a major in management information systems. At that time, she had no Cobol experience. But Ruckh, then a manager of the deposits group at a Denver-based bank, hired her on the condition that she take a course in Cobol. “He hired me solely because I had a college degree,” Linthicum says. “If you had a degree back then, that’s why they hired you.”

Later, in the 1980s, technical schools taught languages like Cobol, making it much easier for banks to find programmers. Yet by the early 1990s, most technical schools and universities had dropped all Cobol coursework from their catalogs. Now, similar to in the late 1970s, banks are finding they have to train graduates in Cobol, Linthicum says. “You hire them because you like them and because of their degree.”

Outsourcers Go Offshore

Large core processing solutions providers such as Fidelity are facing the same problem of a growing shortage of mainframe programmers. But the dearth might work to their advantage, as banks leave the specialization up to vendors in the coming years in order to avoid the time and expense of hiring and training new programmers, experts say.

Fidelity, for example, relies on both offshoring and a home-grown approach to find Cobol talent. Fidelity has invested in Covansys Corp., a technology company headquartered in Farmington Hills, Mich., that relies on offshoring. Using Covansys, Fidelity makes changes to its Cobol code with the help of programmers in India. For security reasons, Fidelity then tests the revisions back at its offices in the United States, because doing so requires the use of real customer data, Bolitho says.

Fidelity has also set up recruiting relationships domestically with universities in rural areas. The rationale: Students at rural schools tend to live nearby and will likely stay there after graduation, Bolitho says. The cost of hiring these programmers is expected to be less than hiring from metropolitan areas, since Fidelity lets these employees work remotely. Fidelity executives have also discussed the possibility of extending careers of would-be retirees with 20-hour work weeks, Bolitho says.

To be sure, many banks already outsource the bulk of their processing to skirt the talent shortage. Cherry Hill, N.J.-based Commerce Bancorp over the years has relied on Kirchman Corp. to handle its core deposit system for the bank. Orlando-based Kirchman is now owned by Metavante Corp., a processing subsidiary of Milwaukee-based Marshall & Ilsley Corp.

“We didn’t have to go through the effort of doing the requirements, detail designs or applications ourselves,” says Kent Seinfeld, chief information officer and senior vice president at Commerce.

“With Cobol, that burden is on the vendor. Because we are not the owners of the code, the partnership arrangement is very important to us,” Seinfeld says. “The advantage is that in being able to add additional functionality, we are dealing with a company specializing in just that. They have hundreds of customers.”

Regardless, banks face a potential crisis as they continue to rely on the core processing systems using mainframe technology and the older languages that go with them. “Cobol will be here for a while,” Linthicum says. “It’s not going away anytime soon. It’s not a dying language by any stretch of imagination.”

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