US bank sees savings by moving to Linux servers

Cleveland's Key Bank is keeping its own bank balance healthy by moving much of its back-end infrastructure to Linux.

In mid-2004, Key Bank, which manages US$92.3 billion in customer assets, began replacing aging Unix servers with Intel-based Linux servers that are less expensive than sticking with pricey and proprietary Unix hardware. The bank saw its server costs fall by 80 percent, according to Dave Seager, vice president of Unix systems engineering.

As part of the project, the bank last year bought 100 HP servers running Red Hat Enterprise Linux. By 2008, Seager expects Linux to comprise half of Key Bank's servers.

"In the last year, Linux has gone from 'unapproved for use in the building' to our platform of choice," Seager said.

When Seager arrived at Key Bank fresh from a dot-com four years ago, getting support from higher-ups -- including the then-CIO -- to consider a move to Linux wasn't easy. Would the anticipated cost savings from Linux really offset possible issues with support, extra maintenance and uncertain compatibility? they had asked.

After culling vendors, Seager went to Red Hat Inc., which gave him "honest" advice that yielded solid cost-savings projections. "Red Hat went through our entire application stack with us," Seager said. "They were very explicit about where Linux excelled and where it had weaknesses, and where we could get the most dollar-for-dollar benefit."

Those areas included moving Oracle databases and WebSphere application servers to Linux, where "the cost savings are comical," Seager said. Meanwhile, Red Hat pointed out that switching out Windows servers already running on Intel hardware would lead to tiny cost savings at best.

Most of Key Bank's servers are Hewlett-Packard two- or four-way boxes, models such as the 360, 380 or 585 running Intel processors, Seager said. They typically start at just US$3,000, rather than US$30,000 for a Sun Sparc-based server. That price difference won over Key Bank executives who were initially hesitant about the move.

"Telling them Linux was cool or the new thing didn't translate very well," Seager said. "Saying it saved x percent of our budget translated very well."

Key Bank has spent only about US$1 million on Linux servers in the past year and a half, a fraction of what it would have otherwise spent on upgrades to new proprietary Unix servers.

Featurewise, Seager only needed Red Hat to be "on par" with Unix platforms, with reliability the most important factor. So far, he said, it hasn't disappointed. Key Bank also runs internal monitoring and system management applications on Linux, as well as Web and network servers.

The bank has no plans to rip out its mainframe -- which, along with Windows, makes up about a third of its back-end system -- and replace it with Linux servers, said Seager.

Key Bank is one of the earliest American banks to use Linux widely, according to Alenka Grealish, an analyst at San Francisco-based Celent Group. "The economics of banks are hard. IT projects tend to hit a glass ceiling in terms of size and also extend out in their cycle time," she said. Moreover, "the exposure to brand and regulatory risk is huge. So until it's tried and really true, banks are not going to go there."

The largest banks, such as Citigroup Inc., Bank of America and Wells Fargo & Co., have all "done a lot of beta testing" of Linux, according to Grealish. "They're a lot more cautious about moving forward, because they see a bigger risk of failure than a super-regional bank [such as Key Bank], and a lot more competitors will feed off their carcass if they do."

Also slowing any moves to Linux has been the number of mergers that have taken place in the banking industry in the past several years. Rather than using that as an opportunity to make a platform change, merging banks are generally too preoccupied with ensuring IT integration goes smoothly and cheaply to consider anything else, Grealish said. That has often meant "in the long run, they often don't do anything," Grealish said.

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