Banks in China fear over-reliance on IBM information systems; Chinese banks ditch US providers for Alibaba’s Aliyun

Banks in China fear over-reliance on IBM information systems

Staff Reporter

2014-06-01

The issue of Chinese banks’ relying on core technology from overseas for their information systems has been a cause for concern for many in the regulatory and banking sectors.

It is estimated that 90% of China’s banking institutions use IBM for their core technology, and China is urging its banks to remove high-end servers made by IBM in favor of the servers made by local brands.

China Banking Regulatory Commission chairperson Shang Fulin spoke on the issue at a meeting held in late 2012.

Shang suggested a strategy for self-reliance in stages so as to gradually steer clear of reliance on foreign brands.

Several sources in the financial sector stated that it was very difficult for banks to let go of the use of high-end servers made by IBM, however. First and foremost, they said there is no alternative technology to replace them and any effort to replace them would take a long time.

Shang echoed these sentiments saying that China’s banks still rely on companies based overseas for their core technology in terms of information systems.

“The international brands are definitely dominating in the key hardware and basic software used in the information system of banks, and related technology services for hardware are also controlled by a few suppliers,” Shang said.

Banks are facing the dilemma of choosing between advanced technology and security controls, according to Shang. Shang also said banks are encountering growing web security problems, as well as an imbalanced development of information technology. He said that banking operations have grown rapidly in recent years. Banks often rely on outsourcing their information systems and are therefore vulnerable to information leaks, he said.

According to statistics from the commission, as of the end of 2011, 255 major banking institutions had set up 501 data centers and invested 69.9 billion yuan (US$11.2 billion ) in information technology, up by 38.3% from the previous year.

 

Chinese banks ditch US providers for Alibaba’s Aliyun

Staff Reporter

2014-06-02

Nearly a hundred financial institutions in China have switched to Alibaba’s cloud services division Aliyun amid security concerns with American service providers, reports our Chinese-language sister paper Commercial Times.

A “get rid of IOE” wave is currently sweeping across China’s financial sector, with IOE being an acronym for traditional American technology and data storage companies IBM, Oracle and EMC.

Recently, a large number of Chinese banks have abandoned IBM’s high-end servers, with the trend also expanding to Oracle and EMC as China’s state media also accused US networking equipment company Cisco of cyper espionage. Meanwhile, Beijing has also banned the Windows 8 operating system from all government computers.

China’s domestic cloud service providers have been the major beneficaries of the movement, with Aliyun gaining several million users as well as nearly a hundred financial institutions that have ditched IOE.

The switch comes after the US Justice Department made the unprecedented move of charging five officers from the People’s Liberation Army with cyber espionage earlier this month.

According to the China Securities Journal, Chinese internet giant Alibaba once negotiated with Oracle with plans of a partnership, but Oracle wanted several hundred million yuan for three years of service. Based on its calculations, Alibaba realized it would have to fork out one to 10 billion yuan (US$1.6 billion-US$160 million) in expenses if it continued to use traditional IOE equipment and services, prompting the Hangzhou-based company to start developing its own system.

Apart from Alibaba, Shandong-based technology company Inspur is also reportedly preparing to replace IBM’s Chinese servers. Reports say Inspur’s host systems are in charge of key applications for institutions such as the Export-Import Bank of China, China Development Bank, China Construction Bank, the Postal Savings Bankof China, and the Bank of Dalian, putting increasing pressure on foreign service providers such as IBM and Oracle.

Once China’s financial sector gets rid of IOE, the country’s telecoms, energy and other sectors could soon follow suit to create a wave of mass migrations from foreign to domestic service providers, the report said.