Transcript of the third in a series of sponsored BriefingsDirect podcasts on the rationale and strategies for application transformation.

1. Technical, Economic Incentives Mount Around Seeking
Alternatives to Mainframe Applications
Transcript of the third in a series of sponsored BriefingsDirect podcasts on the rationale and
strategies for application transformation.
Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Learn
more. Sponsor: Hewlett-Packard.
Gain more insights into "Application Transformation: Getting to the Bottom Line" via a series of HP virtual
conferences. For more on Application Transformation, and to get real time answers to your questions,
register to access the virtual conferences for your region:
Register here to access the Asia Pacific event.
Register here to access the EMEA event.
Register here to access the Americas event.
Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you’re
listening to BriefingsDirect.
Today, we present a sponsored podcast discussion on why it's time to exploit alternatives to
mainframe computing applications and systems. As enterprises seek to cut their total IT costs,
they need to examine alternatives to hard to change and manage legacy systems. There are a
growing number of technical and economic incentives for modernizing and
transforming applications and the data center infrastructure that support them.
Today, we'll examine some case studies that demonstrate how costs can be cut
significantly, while productivity and agility are boosted by replacing aging
systems with newer, more efficient standards-based architectures.
This podcast is the third and final episode in a series that examines "Application Transformation:
Getting to the Bottom Line." The podcast, incidentally, runs in conjunction with a series of
Hewlett-Packard (HP) webinars and virtual conferences on the same subject.
Register here to access the Asia Pacific event. Register here to access the EMEA event. Register here to access
the Americas event.
Here with us now to examine alternatives to mainframe computing, is John Pickett, Worldwide
Mainframe Modernization Program manager at HP. Hello, John.
John Pickett: Hey, Dana. How are you?

2. Gardner: Good, thanks. We're also joined by Les Wilson, America's Mainframe Modernization
director at HP. Welcome to the show, Les.
Les Wilson: Thank you very much, Dana. Hello.
Gardner: And, we're also joined by Paul Evans, worldwide marketing lead on Applications
Transformation at HP. Welcome back, Paul.
Paul Evans: Hello, Dana.
Gardner: Paul, let me start with you if you don't mind. We hear an awful lot about legacy
modernization. We usually look at it from a technical perspective. But it appears to me that in
many of the discussions I have with organizations is that they are looking for more strategic
levels of benefit, to finding business agility and flexibility benefits. The technical and economic
considerations, while important in the short-term, pale in comparison to some of the longer term
and more strategic benefits.
Pushed to the top
Evans: Where we find ourselves now -- and it has been brought on by the economic situation --
is that it has just pushed to the top an issue that's been out there for a long time. We have seen
organizations doing a lot with their infrastructure, consolidating it, virtualizing it, all the right
things. At the same time, we know, and a lot of CIOs or IT directors listening to
this broadcast will know, that the legacy applications environment has somewhat
been ignored.
Now, with the pressure on cost, people are saying, We've got to do something, but
what can come out of that and what is coming out of that?" People are looking at
this and saying, "We need to accomplish two things. We need a longer term
strategy. We need an operational plan that fits into that, supported by our annual
budget."
Foremost is this desire to get away from this ridiculous backlog of application changes, to get
more agility into the system, and to get these core applications, which are the ones that provide
the differentiation and the innovation for organizations, able to communicate with a far more
mobile workforce.
At an event last week in America, a customer came up to me and said, "Seventy percent of our
applications are batch running on a mainframe. How do I go to a line-of-business manager and
say that I can connect that to a guy out there with a smartphone? How do I do that?" Today, it
looks like an impossible gap to get across.

3. What people have to look at is where we're going strategically with our technology and our
business alignment. At the same time, how can we have a short-term plan that starts delivering
on some of the real benefits that people can get out there?
Gardner: In the first two parts of our series, we looked at several case studies that showed some
remarkable return on investment (ROI). So, this is not just a nice to have strategic maturity
process, but really pays dividends financially, and then has that longer term strategic roll-out.
Evans: Absolutely. These things have got to pay for themselves. An analyst last week, looked me
in the face and said, "People want to get off the mainframe. They understand now that the costs
associated with it are just not supportable and are not necessary."
One of the sessions you will hear in the virtual conference will be from Geoffrey Moore, where
he talks about this whole difference between core applications and context -- context being
applications that are there for productivity reasons, not for innovation or differentiation.
Lowest-cost platform
With a productivity application you want to get delivery on the lowest-cost platform you
possibly can. The problem is that 20 or 30 years ago, people put everything on the mainframe.
They wrote it all in code. Therefore, the challenge now is, what do you not need in code that can
be in a package? What do you not need on the mainframe that could be running on a much more
lower cost infrastructure or a completely different means of delivery, such as software as a
service (SaaS).
The point is that there are demonstrably much less expensive ways of delivering these things.
People have to just lift their heads up and look around, come and talk to us, and listen to the
series and they will begin to see people who have done this before, and who have demonstrated
that it works, as well as some of the amazing financial rewards that can be generated from this
sort of work.
Gardner: John Pickett, let's go to you. We've talked about this, but I think showing it is always
more impressive. The case studies that demonstrate the real-world returns tend to be the real
education points. Could you share with us some of the case studies that you will be looking at
during the upcoming virtual conference and walk us through how the alternative to mainframe
process works?
Pickett: Sure, Dana. As Paul indicated, it's not really just about the overall cost, but it's about
agility and being able to leverage the existing skills as well.
One of the case studies that I will go over is from the National Agricultural Cooperative
Federation (NACF). It's a mouthful, but take a look at the number of banks that the NACF has. It
has 5,500 branches and regional offices, so essentially it's one of the largest banks in Korea.

4. One of the items that they were struggling with was how to overcome some of the technology
and performance limitations of the platform that they had. Certainly, in the banking environment,
high availability and making sure that the applications and the services are running were
absolutely key.
At the same time, they also knew that the path to the future was going to be through the IT
systems that they had and they were managing. What they ended up doing was
modernizing their overall environment, essentially moving their core banking
structure from their current mainframe environment to a system running HP-
UX. It included the customer and account information. They were able to
integrate that with the sales and support piece, so they had more of a 360 degree
view of the customer.
We talk about reducing costs. In this particular example, they were able to save
$40 million on an annual basis. That's nice, and certainly saving that much money is significant,
but, at the same time, they were able to improve their system response time two- to three-fold.
So, it was a better response for the users.
But, from a business perspective, they were able to reduce their time to market. For developing a
new product or service, that they were able to decrease that time from one month to five days.
Makes you more agile
If you are a bank and now you can produce a service much faster than your competition, that
certainly makes it a lot easier and makes you a lot more agile. So, the agility is not just for the
data center, it's for the business as well.
To take this story just a little bit further, they saw that in addition to the savings I just mentioned,
they were able to triple the capacity of the systems in their environment. So, it's not only running
faster and being able to have more capacity so you are set for the future, but you are also able to
roll out business services a whole lot quicker than you were previously.
Gardner: I imagine that with many of these mainframe systems, particularly in a banking
environment, they could be 15 or 20 years old. The requirements back then were dramatically
different. If the world had not changed in 20 years, these systems might be up to snuff, but the
world has changed dramatically. Look at the change we have seen in just the last nine months. Is
that what we are facing here? We have a general set of different requirements around these types
of applications.
Pickett: There are a couple of things, Dana. It's not only different requirements, but it's also
being driven by a couple of different factors. Paul mentioned the cost and being able to be more
efficient in today's economy. Any data center manager or CIO is challenged by that today. Given
the high cost of legacy and mainframe environment, there's a significant amount of money to be
saved.

5. Another example of what we were just talking about is that, if we shift to Europe, Middle East,
and Africa region, there is very large insurance company in Spain. It ended up
modernizing 14,000 million instructions per second (MIPS). Even though the
applications had been developed over a number of years and decades, they
were able to make the transition in a relatively short length of time. In a three-
to six-month time frame they were able to move that forward.
With that, they saw a 2x increase in their batch performance. It's recognized as
one of the largest batch re-hosts that are out there. It's just not an HP thing. They worked with
Oracle on that as well to be able to drive Oracle 11g within the environment.
So, it's taking the old, but also integrating with the new. It's not a one-size-fits-all. It's identifying
the right choice for the application, and the right platform for the application as well.
Gardner: So, this isn't a matter of swapping out hardware and getting a cheaper fit that way.
This is looking at the entire process, the context of the applications, the extended process and
architectural requirements in the future, and then looking at how to make the transition, the all
important migration aspect.
Pickett: Yes. As we heard last week at a conference that both Paul and I were at, if all you're
looking to do is to take your application and put it on to a newer, shinier box, then you are
missing something.
Gardner: Let's go now to Les Wilson. Les, tell us a little bit about some studies that have been
done and some of the newer insights into the incentives as to why the timing now for moving off
of mainframes is so right.
Customer cases
Wilson: Thanks, Dana. I spend virtually every day talking directly to customers and to HP
account teams on the subject of modernizing mainframes, and I'll be talking in detail about two
particular customer case studies during the webinar.
Before I get into those details though, I want to preface my remarks by giving you some higher
level views of what I see happening in the Americas. First of all, the team here is
enjoying an unprecedented demand for our services from the customer base. It's
up by a factor of 2 over 2008, and I think that some of the concepts that John and
Paul have discussed around the reasons for that are very clear.
There's another point about HP's capabilities, as well, that makes us a very
attractive partner for mainframe modernization solutions. Following the
acquisition of EDS, we are really able to provide a one-stop shop for all of the
services that any mainframe customer could require.

6. That includes anything from optimization of code, refactoring of code on the mainframe itself,
all the way through re-hosting, migration, and transformation services. We've positioned
ourselves as definitely the alternative to IBM mainframe customers.
In terms of customer situations, we've always had a very active business working with
organizations in manufacturing, retail, and communications. One thing that I've perceived in the
last year specifically -- it will come as no surprise to you -- is that financial institutions, and some
of the largest ones in the world, are now approaching HP with questions about the commitment
they have to their mainframe environments.
We're seeing a tremendous amount of interest from some of the largest banks in the United
States, insurance companies, and benefits management organizations, in particular.
Second, maybe benefiting from some of the stimulus funds, a large number of government
departments are approaching us as well. We've been very excited by customer interest in
financial services and public sector. I just wanted to give you that by way of context.
In terms of the detailed case studies, when John Pickett first asked me to participate in the
webinar, as well as in this particular recording, I was kind of struck with a plethora of choices. I
thought, "Which case study should I choose that best represents some of the business that we are
doing today?" So, I've picked two.
The first is a project we recently completed at a wood and paper products company. This is a
worldwide concern. In this particular instance we worked with their Americas division on a re-
hosting project of applications that are written in the Software AG environment. I hope that many
of the listeners will be familiar with the database ADABAS and the language, Natural. These
applications were written some years ago, utilizing those Software AG tools.
Demand was lowered
They had divested one of the major divisions within the company, and that meant that the
demand for mainframe services was dramatically lowered. So, they chose to take the residual
applications, the Software AG applications, representing about 300-350 MIPS, and migrate those
in their current state, away from the mainframe, to an HP platform.
Many folks listening to this will understand that the Software AG environment can either be
transformed and rewritten to run, say, in an Oracle or a Java environment, or we can maintain the
customer's investment in the applications and simply migrate the ADABAS and Natural, almost
as they are, from the mainframe to an alternative HP infrastructure. The latter is what we did.
By not needing to touch the mainframe code or the business rules, we were able to complete this
project in a period of six months, from beginning to end. They are saving over $1 million today
in avoiding the large costs associated with mainframe software, as well as maintenance and
depreciation on the mainframe environment.

7. They're very, very pleased with the work that's being done. Indeed, we're now looking at an
additional two applications in other parts of their business with the aim of re-hosting those
applications as well.
The more monolithic approach to applications development and maintenance on the mainframe
is a model that was probably appropriate in the days of the large conglomerates, where we saw a
lot of companies trying to centralize all of that processing in large data centers. This
consolidation made a lot of sense, when folks were looking for economies of scale in the
mainframe world.
Today, we're seeing customers driving for that degree of agility you have just mentioned. In fact,
my second case study represents that concept in spades. This is a large multinational
manufacturing concern. They never allow their name to be used in these webcasts, so we will
just refer to them as "a manufacturing company." They have a large number of businesses in their
portfolio.
Our particular customer in this case study is the manufacturer of electronic appliances. One of
the driving factors for their mainframe migration was precisely what you just said, Dana, that the
ability to divest themselves from the large mainframe corporate environment, where most of the
processing had been done for the last 20 years.
They wanted control of their own destiny to a certain extent, and they also wanted to prepare
themselves for potential investment, divestment, and acquisition, just to make sure that they were
masters of their own future.
Gardner: You mentioned earlier, John, about a two-times increase in the demand since 2008. I
wonder if this demand increase is a blip. Is this something that is just temporary, or has the
economy -- and some people call it the reset economy, actually changed the game -- and
therefore IT needs to respond to that?
In a nutshell the question is whether this is going to be a two-year process, or are we changing
the dynamic of IT and how business and IT need to come together in general?
Not a blip
Pickett: First, Dana, it's not a blip at all. We're seeing increased movement from mainframe
over to HP systems, whether it's on an HP-UX platform or a Windows Server or SQL platform.
Certainly, it's not a blip at all.
As a matter of fact, just within the past week, there was a survey by AFCOM, a group that
represents data-center workers. It indicated that, over the next two years, 46 percent of the
mainframe users said that they're considering replacing one or more of their mainframes.

8. Now, let that sink in -- 46 percent say they are going to be replacing high-end systems over the
next two years. That's an absurdly high number. So, it certainly points to a trend that we are
seeing in that particular environment -- not a blip at all.
Dana, that also points to the skills piece. A lot of times when we talk to people in a mainframe
environment the question is, "I've got a mainframe, but what about the mainframe people that I
have? They're good people, they know the process, and they have been around for a while." We
found that HP, and moving to an HP centralized environment is really a soft landing for these
people.
They can use the process skills that they have developed over time. They're absolutely the best at
what they do in the process environment, but it doesn’t have to be tied to the legacy platform that
they have been working on for the last 10 or 20 years.
We've found that you can take those same processes and apply them to a large HP Integrity
Superdome environment, or NonStop environment. We've found that there is a very strong
migration for those skills and landing in a place where they can use and develop them for years
to come.
Gardner: Les, why do you see this as a longer term trend, and what are the technological
changes that we can expect that will make this even more enticing, that is to say, lower cost,
more efficient, and higher throughput systems that allow for the agility to take place as well?
Wilson: Good question, Dana, and you have two parts to it. Let me address the first one about
the trend. I've been involved in this kind of business on and off since 1992. We have numbers
going back to the late 1980s as to the fact that at that time there were over 50,000 mainframes
installed worldwide.
When I next got into this business in 2004, the analyst firms confirmed that the number was now
around 15,000-16,000. Just this week, we have had information, confirmed by another analyst,
that the number of installed mainframes is now at about 10,400. We've seen a 15-20 year trend
away from the mainframe, and that will continue, given this unprecedented level of interest we
are seeing right now.
You talked about technology trends. Absolutely. Five years ago, it would have been fair to say
that there were still mainframe environments and applications that could not be replaced by their
open-system equivalents. Today, I don't think that that's true at all.
Airline reservation system
To give you an example, HP, in cooperation with American Airlines, has just announced that
we're going to be embarking on a three-year transition of all of the TPF-based airline reservation
systems that we HP has been providing as services to customers for 20 years.

9. That TPF environment will be re-engineered in its entirety over the course of the next three years
to provide those same and enhanced airline reservation systems to customers on a Microsoft-HP
bladed environment.
That's an unprecedented change in what was always seen as a mainframe centric application,
airlines reservations, with the number of throughputs and the amount of transactions that need to
be done every second. When these kinds of applications can be transformed to open systems'
platforms, it's open season on any mainframe application.
Furthermore, the trend in terms of open-systems price performance improvement continues at
30-35 percent per annum. You just need to look at the latest Intel processors, whether they be x86
or Itanium-based, to see that. That price performance trend is huge in the open systems market.
I've been tracking what's been going on in the IBM System Z arena, and since there are no other
competitors in this market, we see nothing more than 15 percent, maybe 18 percent, per annum
price performance improvement. As time goes on, HP and industry standard platforms continue,
and will continue, to outpace the mainframe technology. So, this trend is bound to happen.
Gardner: Paul, we've heard quite a bit of compelling information. Tell us about the upcoming
conference, and perhaps steps that folks can take to get more information or even get started as
they consider their alternatives to mainframes?
Evans: Based on what you've heard from John and Les, there is clearly an interest out there in
terms of understanding. I don't think this is, as they say in America, a slam dunk. The usual
statement is, "How do you eat an elephant? and the answer is, "One bite at a time."
The point here is that this is not going to happen overnight. People have to take considered
opinions. Investments here are huge. The importance of legacy systems is second to none. All
that means that the things that John and Les are talking about are going to happen strategically
over a long time. But, we have people coming to us every day saying, "Please, can you help me
understand how do I start, where do I go, where do I go now, or where do I go next week, next
year, or next month?
The reason behind the conference was to take a sort of multi-sided view of this. One side is the
business requirement, which people like Geoffrey Moore will be talking about -- where the
business is going and what does it need.
We'll be looking at a customer case study from the Italian Ministry of Education, looking at how
they used multiple modernization strategies to fix their needs. We'll be looking at tools we
developed, so that people can understand what the code is doing. We'll be hearing from Les,
John, and customers -- Barclays Bank in London -- about what they have been doing and the
results they have been getting.
Then, at the very end, we'll be hearing from Dale Vecchio, vice president of Gartner research,
about what he believes is really going on.

10. Efficiency engine
The thing that underpins this is that the business requirement several decades ago drove the
introduction of the mainframe. People needed an efficiency engine for doing payroll, human
resources, whatever it may be, moving data around. The mainframe was invented and was built
perfectly. It was an efficiency engine.
As time has gone on, people look at technology now to become an effectiveness engine. We've
seen the blending of technologies between mainframes, PCs, and midrange systems. People now
take this whole efficiency thing for granted. No one runs their own payroll, even to the point that
people now look to BPOs or those sorts of things.
As we go forward, with people being highly mobile, with mobile devices dramatically exploding
all over the place in terms of smartphones, Net PCs, or whatever, people are looking to blend
technologies that will deliver both the efficiency and the effectiveness, but also the innovation.
Technology is now the strategic asset that people will use going forward. There needs to be a
technological response to that.
Over the last year or two, either John or Les referred to the enormous amounts of raw power we
can now get from, say, an Intel microprocessor. What we want to do is harness that power and
give people the ability to innovate and differentiate, but, at the same time, run those context
applications that keep their companies alive.
That's really what we're doing with the conference -- demonstrating, in real terms, how we can
get this technology to the bottom-line and how we can exploit it going forward.
Gardner: Well, great. We've been hearing about some case studies that demonstrate how costs
can be cut significantly, while productivity and agility are boosted.
I want to thank our guests in today’s discussion. We've been joined by John Pickett, Worldwide
Mainframe Modernization Program manager. Thank you, John.
Pickett: Thank you, Dana.
Gardner: We've also been joined by Les Wilson, America’s Mainframe Modernization director.
Thank you, Les.
Wilson: Thank you for the opportunity, Dana.
Gardner: And also Paul Evans, worldwide marketing lead on Applications Transformation at
HP. Thanks again Paul.
Evans: It's a pleasure.

11. Gardner: This is Dana Gardner, principal analyst at Interarbor Solutions. You have been
listening to a sponsored BriefingsDirect podcast. Thanks for listening, and come back next time.
Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Learn
more. Sponsor: Hewlett-Packard.
Gain more insights into "Application Transformation: Getting to the Bottom Line" via a series of HP virtual
conferences. For more on Application Transformation, and to get real time answers to your questions,
register to access the virtual conferences for your region:
Register here to access the Asia Pacific event.
Register here to access the EMEA event.
Register here to access the Americas event.
Transcript of the third in a series of sponsored BriefingsDirect podcasts on the rationale and
strategies for application transformation. Copyright Interarbor Solutions, LLC, 2005-2009. All
rights reserved.