CIOs faced with mainframe application modernization have three options, according to CIO Rick Mears: replace, rewrite or migrate. Modernization can be costly: $100 million or more. But there is at least one way to let the project pay for itself without a large capital outlay up front.
That would be what Mears did at medical supply distributor Owens & Minor Inc.: modernize its heavily customized enterprise resource planning (ERP) through a "lift and shift" migration to Windows. The company's outsourcing partner financed the project in exchange for a contract extension. Mears plans to plow the savings from moving to a less expensive platform into improving the system.
At Mechanicsville, Va.-based Owens & Minor, the mission-critical ERP system is the "lifeblood" of its $7.2 billion business, doing everything from processing orders and billing to managing inventory, Mears said. The system's 10 million lines of COBOL code embody some 30 years of business process expertise.
"We have long felt our competitive edge lies, to some degree, in our technology. The processes that we use to do business, our business rules, the way we approach distribution are embedded in our custom ERP system," Mears said.
On the other hand, the unique system ran on a legacy 700 MIPS IBM mainframe that "did not lend itself well" to the type of online user experience the firm was looking to offer its users and some 3,500 customers, Mears said. Also, the data was managed in multiple legacy data storage and retrieval technologies that needed modernizing. In addition, Owens & Minor was growing by acquisition, having snapped up the medical supply division of McKesson Corp. in 2006, with more targets on the horizon. Adding capacity to an already-expensive mainframe operating environment is costly.
Replacing the whole system with a commercial package from an SAP AG or Oracle Corp. would not preserve "a lot of what was good about our technology," Mears said. A rewrite strategy could preserve the intellectual capital but would be risky. And either one would cost between $100 million and $200 million.
"We needed to find an approach that funded itself, where I did not need to go outside the IT organization to find benefits to justify a significant increase in IT expenses," he said.
He opted to migrate from the mainframe to a Hewlett-Packard Co.-based Windows environment using an application migration solution from Rockville, Md.-based Micro Focus Inc. IT achieved some modernization by moving the data to a relational database management system using Microsoft SQL server. But the first aim of the "lift and shift" migration was to achieve a "like-for-like" system by doing extensive testing. "If they hated the system yesterday, they will hate it today," was the project mantra.
Carried out over a three-year period, the project was financed up front by Owens & Minor's IT services partner, Perot Systems Corp. (now Dell), as part of a contract extension. Integrator Pete Fuson of Perot Systems boasts that the migration off the mainframe to the less costly Windows environment yielded in excess of $6 million in annual savings. The difference is being used to pay back Perot and to begin work on enhancing the ERP system.
Mears, reluctant to cast the migration project in dollars-and-cents savings, said the factor most important for IT and the business was the cost avoidance.
"When I reflect back on the decision to take a migration approach, the biggest factor was avoiding the $100 million to $200 million in capital investment," Mears said. "The most important role I played was choosing the right partners, and those teams took it from there."
Mainframe application modernization strategy gets nod -- and caveats
Phil Murphy, an analyst at Forrester Research Inc. in Cambridge, Mass., who covers application modernization, said he's not surprised that Mears chose migration over replacing or rewriting the system.
"If this is the heartbeat of your company, it takes a brave CIO to say, 'I'm going to perform open heart surgery.' You put another heart in there and guess what, it still beats, it still circulates blood. Is it $100 million better? That's a tough thing to say, absolutely positively," Murphy said. Migration poses considerably less risk.
"Off-hosting" COBOL from the mainframe to a more modern technology platform is hardly a new or untested engineering feat, Murphy said. And with IT budgets still under pressure, the cost of maintaining a mainframe environment is a powerful catalyst for taking the leap.
Yet such moves may not be the no-brainer they appear to be, Murphy cautioned. Factored into the decision should be the size of the mainframe, the nature of the business application environment and -- not to be ignored -- IBM's aggressive new campaign to make its mainframe offerings more cost competitive against alternative distributed systems.
"IBM deserves some credit for really working at bringing down the hardware costs of this platform precipitously," Murphy said.
But IBM is not the only mainframe vendor CIOs buy from, he added, and software vendors like a CA or Compuware have yet to convince their shareholders that they'll lose market share if they don't lower their own mainframe software prices, Murphy said.
Still, for companies with mainframes below 1000 MIPS, migrations can undoubtedly save money, Murphy said, but "within constraints." He has worked with companies with workloads as small as 500 MIPS that have run into trouble because of the complexity of their batch environments. Other companies realize months after their big moves that the operational maturity that they took for granted on the mainframe is "nowhere near close to it on the off-host," he said.
Gartner Inc. analyst and application development expert Jim Duggan said mainframe migration has become an increasingly popular strategy for modernizing important business applications that still have value, such as the Owens & Minor custom ERP. Junking it, or rewriting it from scratch, carries execution risk and "no immediate business value."
"Because it is relatively smooth migration, it is very cost effective," Duggan said, adding that the migration strategy also points up one of the paradoxes in applications written in COBOL. "COBOL is not in that bad shape. The challenge is that the platform is expensive and the skills to operate that platform are also expensive."
Duggan said the threshold for relatively worry-free "lift and shift" migrations three years ago, when he started tracking such migrations, was under 700 MIPS. "Today it is more like 1500 to 2000 MIPS."
Probably the greatest risk for a company taking a migration approach to modernizing a COBOL application is the availability of skilled COBOL programmers to make those incremental improvements, as well as the looming retirement of the internal people who know the application.
The application and computing environment itself helps determine whether to replace, rewrite or migrate, Forrester's Murphy agreed. A global company with thousands of instances would have to give more weight to standardizing on a commercial ERP package. A company like Owen & Minor had reason aplenty not to junk its ERP app, since the system did what it needed to do. "It may have an ugly exterior, a green-screen interface, but there is a way to fix that," Murphy said.
Changing everything all at once with a rewrite or new app is a risky way to go, Murphy said. "Rehosting is the equivalent of a decent paint job and a new interior because the engine and transmission is fine."
Let us know what you think about the story; email: Linda Tucci, Senior News Writer