Fall Conference: CIOs Say Legacy Systems Are Useful But Costly
CIOs at the InformationWeek Fall Conference say a lot of older systems are still valuable but consume a large share of IT departments' budgets.
Legacy systems are an asset, but a troubling one that consumes too much of the IT budget, a group of CIOs at the InformationWeek Fall Conference in Tucson, Ariz., said during a panel discussion Tuesday.
During "Legacy Systems: Assets Or Anchors?" Griffin Macy, VP of enterprise system development for Waste Management Inc., said any system more than 3 years old, including Web applications, is considered a legacy system at his company.
Kenneth Harvey, CIO of HSBC Bank, better known as Household International, the consumer-lending firm, said his company still relies on mainframe core systems but has unplugged its IBM AS/400 midrange computers because "no one is learning RPG," its programming language. "We do 40% of our development in India," he added, "and they won't do RPG."
Harvey said, however, that going with the most modern language carries its own risks. Household is moving to Java applications with XML messaging and document exchange, but "five years ago, we paid an extreme premium for Java programmers." They have since become more affordable, he said.
"All of my financial systems are on the [Digital Equipment Corp.] Vax. If anyone knows where there is a good source of parts, let me know," said Gail Holmberg, CIO of Bally Total Fitness. Since Bally's acquisition of a Vax, Digital Equipment has been acquired by Compaq, which in turn was acquired by Hewlett-Packard, with the Vax line discontinued in the process.
Bally spends $15 million a year on IT, with 80% of the budget going to mainframe and legacy systems. "We've got to get to 60%" of the budget for maintenance of legacy systems, she said.
Harvey said his company spends $1.5 billion a year on IT and has no clear demarcation line between maintenance of legacy systems and new development. Whenever any changes are made to an existing system, he said, the change is captured as a native IP transaction so systems may communicate with one another over an IP network, including the Internet. Legacy systems are being modernized as new systems are being developed, with the programming staff expected to be able to do both, he said.
Martin Davis, CIO of Wachovia Corp., said his company spends $1.4 billion a year on IT, with 65% to 70% spent on legacy systems, compared with 30% to 35% on new development. Integration of systems is his biggest problem. "I don't believe I can hire the latest programming skills out of college with that expertise," he said.
He tends to match up a recent graduate with an older mainframe guru and lets the mainframe programmer teach integration to the graduate. In turn, the graduate can teach Java and XML skills to the mainframe expert, he said.
With 1,300 locations around the country, Waste Management spends $250 million a year on IT and spent $12 million on one Web application. The high expense is a reflection of the varied systems at different locations, with an inordinate amount of time spent getting the Web application and other systems "to agree on how much a ton weighs and how long a week is," he said. Waste Management has spent a higher percentage than the other parties on new systems, and "the cost of new systems is going to kill us," he said.
On the other hand, he said, one new system ensures that Waste Management trucks "have air in their tires before they leave the yard," and that has eliminated an $18 million annual expense.
Davis pointed out that Wachovia's core deposit, debit, and credit systems are legacy systems that run fine. "We're not touching them too often," he said, but the IT department looks for ways to extend their services to new applications.
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