Ultimately, said the IT consultant, Chinese banks will only manage to kill off IOE systems if products made by Chinese suppliers can provide comparable security and capacity levels, and if the new hardware and software are compatible. It’s hard to estimate how high the costs will be.” “De-IOE will lead to transforming personnel and management. “The basic technology networks for an IOE system and a ‘De-IOE’ system are totally different,” said another source a state bank. They cannot afford to be hasty because replacing one part of a network can affect others.Īnd replacement costs can be astronomical. “Getting rid of IOE means that all of the software must be moved and made compatible to domestic server systems, which seems to be a mission impossible,” said the consultant.īig banks are thus moving cautiously, said the BOC employee, because they want to protect their huge customer and transaction databases. An IT consultant who advises banks said IBM, for example, is so entrenched that China’s banks would likely need about 20 years to replace all IOE systems. Offer customers integrated solutions that make it difficult to replace individual pieces of equipment or software. Moreover, he said, political friction between China and other countries, such as the United States, could affect contracts with IOE suppliers.Īdditional changes will not happen overnight, partly because the IOE companies as well as America’s Microsoft Corp. What security risks are posed by IOE systems? According to an official at the People’s Bank of China, one risk is that IT employees at a Chinese bank might fail to detect technical problems in a product that is made by a foreign company. An increasing number of bankers decided to follow these guidelines by reducing their reliance on IOE systems. Banks then picked up the pace after the State Council, China’s cabinet, issued guidelines for protecting sensitive data in the name of national security. Homegrown servers were slowly introduced over the next five years. In 2007, according to a survey that year by the National Development and Reform Commission (NDRC) and Ministry of Finance, less than 2% of the IT equipment operating at major financial institutions nationwide had been supplied by Chinese companies. A source at a state bank noted, however, that basic computing for customer accounts still relies on IOE systems. The rise of Internet banking is spurring major banks to explore new IT options and cut back on IOE systems.
IOE systems have been commonly used in Chinese banks since the late 1990s, and are at the heart of the IT networks driving 70% of the world’s banks and other financial institutions. “It’s not easy for major banks to change their core systems, due to high replacement costs,” said the employee, who asked not to be named. The e-commerce company also built a database management-system of its own with an open-source structure, and started storing data on an internal cloud-storage system. In such a system, several PCs with X86 microprocessors inside can be linked in a chain to function as a server, replacing a mainframe server.
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Wang decided to revamp Alibaba’s network by replacing its Unix-based servers with less expensive, X86-based PC servers running on the open-source Linux operating system. Wang dubbed his campaign the “De-IOE Movement.” What Wang wanted to get rid of most was the so-called IOE system, an acronym for an IT network based on the names of three suppliers: IBM, whose servers are packaged with the Unix operating system Oracle, which supplies database-management systems and EMC, the maker of data-storage hardware. The movement dates to 2008, when Alibaba’s computer-network department director Wang Jian proposed cutting back on foreign suppliers and replacing their wares with equipment and technology developed almost entirely in-house. Some companies, such as e-commerce giant Alibaba Group, have been building internal computer networks with open-source software and commonly available hardware.
Domestic rivals of these companies such as Huawei Technology Co.Īre winning contracts from state company and bank IT departments at an accelerating rate.
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