By Park KI – Rock

rock@ddaily.co.kr
[Digital Daily]

Korea’s largest commercial bank, Woori Bank will develop a new-generation banking system by 2018 at an estimated cost of about 300 billion won.

The bank’s board of directors held a special meeting on August 10 where it approved a plan for the replacement of its IBM mainframe-based system with a new system based on an open standards IT technology. The bank is expected to develop the new system in 2016 and 2017.

In addition, Woori Bank has decided to maintain the Open Infrastructure Offering (OIO) contract with IBM only until 2018 when it completes the new system. It will not renew the contract beyond that time.

Under the OIO contract, the more you buy IBM products, the more discounts you are given. But Woori Bank finds no charm to it any more. Use of many IBM products including the mainframe (z series) in its system can cause dependence to IBM. The bank is also worried about the situation where a certain company such as IBM interferes with internal decisions of client companies concerning IT issues.

In fact, another commercial bank of Korea, Kookmin Bank (KB) was caught in a big scandal in 2014, concerning the IBM’s main computer system.

Shirley Yu-Tsui, then CEO of IBM Korea, sent a provoking e-mail to the chairman of KB Financial Group Inc. where she claimed the bank’s decision to abort the IBM mainframe was mistaken. The email eventually led to a power game between the KB Financial Group chairman and the KB president, both of whom were dismissed following a special audit by the financial authorities.

Experts say that Woori Bank must have considered the case of KB when it decided to switch to an open standards IT environment.

IBM lost another major client, IBK, in 2013. The bank aborted the IBM mainframe-based system to change to a UNIX system when it developed its post next-generation banking system.

In Korea, the banks with IBM mainframe systems had been dubbed “a goose that lays the golden egg” as they bring income amounting to tens of billion won to IBM every year in system expansion. But the repeated misjudgment of IBM seems to have driven the company into a corner. Other Korean clients of the IBM mainframe system are also pretty shaken up by the Woori bank decision.