A Case Study: The Restructuring of Japan’s Long Term Credit Bank
Amid the mayhem of economic problems in Japan in 1989, the Long Term Credit Bank (LTCB) underwent a surgical transformation. Ten years had passed since the economic downturn and the bank was still lurching from one problem to another. Many felt that the end was near. Finally, in 1998, the bank was sold to an international group who restructured and renamed the bank, giving birth to the present Shinsei bank in 2000.
LTCB’s mainframe-based IT infrastructure had developed haphazardly with different applications and systems supporting a number of moderately different card products. The new owners were very keen to consolidate these into a single product, but were anxious that customers did not face further disruption. Thus, closing all competing card services was not an option.
The path Shinsei followed was this: each card type was molded into a separate business with a new, specialized IT application. Over five years, the bank transferred each of these ‘businesses’ to a common platform and application. Existing customers were slowly moved to a common hardware and operating system without ever becoming aware of it. All mainframe and legacy systems were ported. A full bank was ported to the cloud in small steps, with no disruption to its already fragile customer base.
This case study has formed the blueprint for thousands of such transformations since 2000. The cloud itself has evolved enormously over the years and become far more advanced and user-friendly. It has also become far cheaper than the fees Shinsei Bank paid due to ever-increasing economies of scale in the public cloud. Improvements in cloud security have undermined other reasons to stay with a private cloud. Automatic patching and updating of cloud-based systems is already closing the window of opportunity available to hackers.
Cloud systems are becoming much more compliant with various regulations that govern computing practices. As technology evolves and our understanding of security and inter-operability requirements improves, compliance issues become better defined and cloud systems are adapting. For example, whereas e-commerce used to be held back by lack of reliable digital signatures, this has now changed and we take these for granted. Today you can even take out a bank loan with a digital signature. As the number of subscribers to the public cloud increases, compliance mechanisms will naturally develop. Enormous computing capability and practically unlimited storage is making compliance easier than ever before.
The low costs of cloud computing are making people develop applications privately. This is sometimes even called rogue IT. One of the best known examples is of Derek Gottfrid wanting to put all of the New York Times archives online. Instead of waiting for the Times’ IT set up to give him the equipment, he promptly set up a cloud instance and hosted the archives on it without the knowledge of the IT department. The archives came on line in a fraction of the time and the cost it would have taken otherwise.
The cloud-reaching path illuminated by the Shinsei Bank is now trodden by thousands of businesses, a sure sign cloud computing is getting more cost effective and robust.
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About the Guest Author:
Sanjay Srivastava has been active in computing infrastructure and has participated in major projects on cloud computing, networking, VoIP and in creation of applications running over distributed databases. Due to a military background, his focus has always been on stability and availability of infrastructure. Sanjay was the Director of Information Technology in a major enterprise and managed the transition from legacy software to fully networked operations using private cloud infrastructure. He now writes extensively on cloud computing and networking and is about to move to his farm in Central India where he plans to use cloud computing and modern technology to improve the lives of rural folk in India.
