Users of Aging IBM Midrange Postponing Shift to AS/400s

Though computer industry professionals sing the praises of the newest line of midrange computers from International Business Machines Corp., many community bankers doubt they need to buy one now.

In the spring, IBM announced significant performance improvements to its AS/400 line of midrange computers. According to industry experts, the increased power of the machines will enable small bankers to implement a number of new technologies, such as image processing, that had previously run only on multimillion-dollar mainframes.

But despite price cuts and trade-in allowances that have brought the new AS/400s into a price range most community bankers can afford, many small institutions have been content to hang on to their present hardware.

Clinging to System/36

The IBM System/36 is among the most popular models among community banks.

"Our System/36 may be what you'd call a mature computer, but it's reliable as can be, and we are through tweaking the bugs out of it," said Larry Harcum, a senior vice president at Bank of Tidewater in Virginia Beach, Va. "I'm in no rush to push something that's working out the door."

The $100 million-asset bank has run most of its computer applications on the System/36 for about 12 years. The computer cost about $100,000 then, including software and support.

A comparably sized AS/400 costs about $250,000. Since many community bankers have already fully depreciated their older computers, it pays to keep using them as long as possible to squeeze out the maximum productivity, Mr. Harcum said.

Software Worries

The biggest obstacle facing banks with older midrange computers is finding software vendors to write new applications. IBM has thrown its full weight behind its new line, and many software vendors now tailor their software exclusively for the AS/400s.

"IBM has spoken, and we have no choice but to listen - the AS/400 is the future as far as they are concerned," said one banking software vendor who asked not to be identified.

In addition, experts said that maintenance costs for the System/36 are sure to rise as IBM prods owners of older model midranges to upgrade.

Fear of Switching

Meanwhile, many System/36 owners say it is prudent to stick with their present system.

"When you are running your systems in-house, it's not as simple plugging in the new computer," said Mr. Harcum, "The learning curve on the AS/400 is pretty steep."

Peerless Systems Inc., Dallas, is one of a handful of large software companies that continues to write banking software programs for IBM's System/36. Company officials said they will continue to enhance their data processing product, known as Inform, for at least the next three years.

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