New IBM Midrange Attracts Small Banks

Model D Costs Less than Previous AS/400 Machines, but Does More

The revamped line of midrange computers announced by IBM last month is spelling large savings for some community banks.

The new IBM AS/400 Model D computers cost up to 30% less than the B and C models while offering more performance. This is good news for a number of banks that are planning to upgrade their systems in the coming months.

Big Savings

First National Bank of Western Pennsylvania, a $1.1 billion-asset institution, said it saved more than $200,000 in hardware costs alone as a result of International Business Machines Corp.'s upgrading of the AS/400 line.

Rather than purchase two B60 midranges to accommodate its rapid growth, New Castle-based First National found that buying a single D70 would provide a similar level of processing power. Such reports have come in from other institutions as well.

"We are suggesting that any customers who have previous models on order switch over to a D," said Robin H. Smith, vice president of North American sales at Fiserv Inc., a Milwaukee-based data processing company for banks. "There's simply no reason to do it any other way."

The announcement of the new AS/400s was not good news to all bankers, however. Experts said that small bankers who have held onto their pre-AS/400 IBM midrange computers - the System/36 and the System/38 - can expect a significant increase in what IBM will charge for maintenance.

Such increases are IBM's way of motivating institutions to buy into a new product line, observers said. But until the economy recovers, the banking industry is not likely to have much excess capital to spend on new equipment.

Recession Mode

"In a recession, we keep our shoes longer," said William Storts, head of banking practice at Andersen Consulting in Chicago. "If you don't have the money to spend, you've got to get as much mileage as possible out of what you've got, and that's what bankers are doing these days."

Mr. Smith said the higher-end D models, because of their mainframe-like capacity, are particularly popular among midsize institutions looking to expand through acquisitions. [Graph Omitted]

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