In this episode of the “I Am a Mainframer” podcast, Steven Dickens is joined by John Smith, Executive Vice President, Ecosystems at Zafin. John shares his earliest experiences with mainframe and how his continued pursuit of knowledge around it led him to a successful career in financial services. Their conversation also explores John’s career, including the challenges he’s seen in the fintech space, his time at Salway, HPE, IBM, and Zafin, and what Zafin is doing to revolutionize how financial institutions of all sizes modernize their core banking systems.
Steven Dickens: Hello and welcome. My name’s Steven Dickens. And I’m the host of the I’m a Mainframer podcast, which is brought to you by the Open Mainframe Project. A Linux Foundation collaborative project focused on building open source and ecosystems around the mainframe platform. I’m joined today by a dear friend, multiple former colleague, John Smith, from Zafin. Hey, John, welcome to the show.
John Smith: Yeah. Hello, Steve. Really good to see you and really appreciate you having me on the show today.
Steven Dickens: Multiple time colleague as well. I was trying to work out when we were chatting for this, how long we’ve known each other. And I think it’s 2005, but you might be-
John Smith: I agree. Yeah, it was around about then. Yeah, ’05. I think I came into Hewlett Packard in ’08 and that’s when we worked together. But we were working on converged infrastructure at least, well, it was never called that then, it was just service storage networking software combined in around 2005. So yeah, good to see you.
Steven Dickens: It’s been a while my friend, it’s been a while.
John Smith: Yeah, it has. I can’t get away from you really.
Steven Dickens: You’ve been running to escape, but you’ve yet to manage it. So, John, we’re diving straight in, let’s get orientated for the listeners here. Introduce yourself, tell us what you do for Zafin and then we’ll dive straight in from there.
John Smith: Yeah, sure. So for Zafin, I’m heading up ecosystem and really it’s around building new business models for banks based on platforms. And I’ll talk about that a bit later on, but that’s where the market’s going. That whole platform and ecosystem space is really critical. And it’s really critical to competing with fintechs, but also building a new value model for banks.
I wanted to start off just by talking about the journey. When I think about mainframe, it’s interesting, I’ve seen it all the way through my career. So, if you went back to, God, 1995, I decided to not go to university, to my parents just horror really. And I knew I wanted to get out into the working world and I started to do a marketing degree while out in work.
And I looked to the market and I joined a distributor called West Coast. And while there, learned the trade of cold calling, getting into sales. And I kept coming across this platform, IBM Z, AS 400 was another platform, DEC VAX, all these different Unix and proprietary systems that were running banking, retail, and a number of other technologies that were running a lot of the core industries at the time. And so that was my first experience of seeing Z.
And I didn’t understand what it was at the time. I started building that knowledge. And you’re young when you first come into your career. And over time, I moved out of West Coast into a partner that was a system integrator called Salway. And we were working on ERP systems like Oracle.
And again, kept coming across the mainframe specifically in financial services. I mean, really my background is retail and financial services. That’s where I’ve done a lot of my work previously.
And I’ll spin forward 10 years because I moved from Salway into Hewlett Packard. And for my sins, Steven, I was in a mainframe attack team. So our role was to take mainframes out of retail and financial services. That was what I was working on. And that’s where I started to get a real understanding of the value of mainframe. Because what was happening at the time is we were taking out web services. We were digging around the fringe of the architecture, seeing the service orientated architecture that was around at that time. It was the big thing. And we were saying, well, take some of those fringe applications that really aren’t around core processing, that probably don’t have the right cost model, and remove them out of the mainframe and put them onto what was the start of converged infrastructure.
And that was very successful. But we were taking 2% or 3% or 4% of the workload. When you got down to the core processing, that needed industrial scale, that needed really high security, that needed straight through processing, that needed something that could scale and be secure at all times and reliable, then we just couldn’t get things off the mainframe, at that point, off the IBM Z platform.
And that’s where, fast forward a few more years, I got pulled into IBM to actually, poacher turned gamekeeper, to actually start looking after the Linux number in IBM in the UK. And that quickly evolved into a global role that I moved into. And at that time, what my role was, my remit, 2014/15, in that time, was to take all the open source, the Linux software in the market, and some of the industrial software, specifically for financial services, and broaden the ecosystem for the IBM Z platform. And for a new launch of a product called Linux One, which was a Linux only mainframe that was aimed not just at financial services, but at large industrial scale applications in many different verticals.
So that’s where you and I have worked together very successfully over time really. And that almost brings us up to date. While looking after some of those ecosystem players. I was working with Zafin. And what really excited me about Zafin was the fact that Zafin solves some of the biggest challenges for banking today in the mainframe space. Which is the mainframe is the platform that a lot of the banks run on. It’s certainly 50% or 60% of the banking workload today globally sits on that platform. So it’s of strategic importance and all those, the languages, the skills, the investment, the banks are still making in it.
But to compete and to stay competitive against fintechs, you need to do something around really getting your product offerings to market more quickly, being able to digitalize and being able to drive customer experience. And that’s where Zafin sits really neatly. As a value creator for the Z platform. And that’s how I’ve come into Zafin, to run that piece of driving new ecosystems, new platforms.
Steven Dickens: So, a lot in that introduction and an interesting journey through working with the mainframe platform. I don’t think we’ve had anybody else on the show whose specific job it was to take out mainframes from customers. So I’m going to take you back there just briefly first. That was where we got to work together. I was on the storage side, you were on the compute side.
Talk me through, if you would, just some of the challenges you came up against when you were trying to take these mainframes out of the UK and I banking and retail organizations? What were the challenges, what were you seeing? Where did you stumble through? I think that’d be interesting because we don’t really get that perspective on the show here. A lot of the show self-selects from the mainframe audience and mainframe community. So really just interested I think to unpack that for our listeners and really get your perspective there.
John Smith: Sure. I think just a bit more detail then around that. So, what I was finding at the time when I was in that space was, mainframes that have been around, I mean, Christ, I can’t even remember, but Cobol probably was late fifties, early sixties it came out, and these other languages have been around a very long time. But really, I think financial services went on to mainframe across the sixties. So a lot of the largest banks in the world built the platform.
And the difference with the mainframe, and I believe this is why it’s had the longevity, is the business logic is baked into the platform. It becomes the bank. So, Assembler or Cobol or PL1 or IMS or any of these technologies and kicks even that sit around it, all the logic was built into these. And you basically were building a banking app that could even be homegrown.
If you look at the market in banking, because I’ll be very banking specific on this call, you’ve got FIS with their systematics application. You’ve got Hogan from DXC or what was CSC at the time. They’re probably the two largest. And then you’ve got hundreds, if not thousands, of model banks. And those model banks was not only, but mainly, built on IBM’s model bank. It was almost like an architecture blueprint that was put out. And the banks would build their own core. They would take it. And a lot of the banks today still have got that core.
So everything is interlinked. And in some of the biggest banks in the world, we know there might be northwards of 10,000 different applications. Either connecting into or integrated into the logic of the IBM Z. So it’s like, and then you layer on a couple of things, data residency, security, and processing, and latency of all those applications inter connected.
And then you understand why people keep on making investment in the platform. Because actually if you try to take those things apart, when you look at it, it looks like the cost model’s very high. But actually when you pick it apart and think about running it on distributed systems, or running it in a cloud offering, the costs are tenfold. And so people just leave that because it’s running. So they start to modernize around the fringe.
And that’s what I was finding in at the time, we could take some of the web services layer, some of the engagement or distributed system layer. So, for a bank, where me as John goes to my bank via mobile, that can be run in the cloud very easily. But when it comes to the core layer and some of the security and processing challenges around that, actually in the interlinked and interoperability of the systems. Banks want choice. And for those who want to move to cloud, they can. But it’s all about that choice. And for me, it’s all about the processing, the performance and scalability and security of the mainframe that keeps it going.
Along with the fact that I think IBM have done a good job at trying to modernize it, and things like the open mainframe and other initiatives they’ve driven to really make it more low cost, open, easier to inter opt.
Steven Dickens: Well, that’s an interesting, and you naturally segue to me there, so thank you for that. But you talked about your time, you leave HPE and you join IBM, as you mentioned, poacher turned gamekeeper, to join the part of the business, and this is where we got to work closely together day to day, was around bringing on new vendors, bringing on ecosystem partners. So I know that’s a fascinating space. Maybe our listeners don’t have as much of an insight. Just talk us through some of the conversations, onboarding companies like Zafin and others that I know you did so successfully to working with IBM in that process and that ecosystem structure.
John Smith: Yeah. And I think it is always an interesting one because the challenge for a mainframer, and someone in IBM working with those partners is, some of those core vendors, what they want to do is they want to replace the mainframe as the core. And they want the banks to do that.
I think what I was seeing when I was in IBM certainly was … For me, there’s many different ways to modernize a platform. And if you look at one end, completely radical transformation, which is I’m going to move off mainframe fully, and I’m going to bring a new core in. And I’m going to work on that whole new modern infrastructure.
And then there’s the other end, which is more of a progressive modernization. And we are seeing in the market, certainly from a Zafin perspective, that progressive side is much more palatable.
It’s a heart and lungs transplant. And actually, if you look at the basis of the mainframe, the things it does around calculating interest, which is what a core does, as well as having some of the technical product data in there, and actually then really holding the system of record for the bank, there’s not many platforms that can compete with the mainframe for that.
So what are the challenges? Well, the challenges are open banking’s coming in. The challenges are new revenue models, the fintech angle, where there’s so much investment in the market. That these fintechs can get very much ahead of some of the banks because of their business model. And then you look at the platform and ecosystem side, and you look at trust and data regulation. These are the market pressures that are coming in.
For me, where it really sits, Steve, is that you need something where if your core is working and it’s got the scalability, it’s got the trust piece covered, it’s got the security angle covered, then actually surely modernizing it in a way that allows you to have the platform and ecosystem piece, that allows you to be fintech nimble, that allows you to launch new products and services very quickly to market, that would be the angle.
And that’s really why I joined Zafin. That’s what we do as a business. We help modernize the IBM Z platform and deliver our product and pricing. That was where my segue, and I could see it uniquely positioned because I was working with, as you know, many of the leading core vendors, trying to put them on the platform. But actually I had a couple of unique players at the front end distribution end, and at this mid tier externalizing some of the key functions of the core product, customer and others. And that was a great choice.
Because my belief is, the market is, if my core does what it needs to do in a really highly efficient and secure way, which is what the IBM Z platform does, I’m going to leave that alone, I’m going to actually look to externalize some of the small functions in there that give me this ability to deliver buy now pay later. To deliver embedded finance. To deliver some of the new revenue streams and new models that I need to as a platform for banking. And that’s what Zafin is really about.
Steven Dickens: I think that’s a really interesting perspective. You hear so much of the narrative of, get off the platform or that people have got to stay on the platform. And it becomes almost a religious battle between those two camps. Maybe there’s somebody in the bank saying, let’s throw the baby out with the bath water. Let’s embark on that five to 10 year core replacement project. Let’s go pick a vendor, let’s go put it in the cloud and throw away the mainframe.
And then there’s obviously the IBM mainframe team trying to keep that platform and fight for the status quo. I think what you are talking about, there’s a more nuanced hybrid model of, you can do both and be successful. And I think that’s really interesting for me to understand and pull on that thread a little.
I mean, I know you probably can’t talk about clients specifically. But where are you seeing clients embark on that journey of maybe they’ve gone past the religious rhetoric of get off the mainframe. And now they’re looking for that alternative. Just talk us through, and obviously don’t mention customer names if you’re not able to, but just really talk us through what you are seeing from that customer base? Because I think that’s fascinating for our listeners.
John Smith: Yeah. I will, Steven, thanks. I mean, for me, a great example would be, you talked about religious battle, let me just touch on that really briefly. It’s really important to think about that. Because this is a business decision when you’re doing any sort of core. And it’s a big business decision. In a tier one bank, you could be spending anywhere from a hundred to 500 million and it may be even more than that to replace one of these cores. So it’s almost like trying to change all the tires on the car while you’re going along at a hundred miles an hour. Very high risk.
So progressively is a good way to look at it. So what are the functions you need and how do you modernize and how do you do that quickly? For me, what we’ve seen, and I could name a particular client, we have one in Asia, I’ll just be as loose as that, where they’re running on a mainframe, they went out to build a new digital platform. And they looked at what they had and they recognized that actually the base core, which was an IBM Z with a certain software type, one of the ones I mentioned earlier in the program, was the right platform for them.
And what they needed to do was transform that platform, so they could launch new products and services to the market much more quickly. To compete with fintechs, to drive new business models, new revenue, to be able to get ahead of regulation, and to be able to meet future compliance and regulation in the market. And really about, like I said, it’s speeding up time to market, time to revenue, but being able to launch products in literally a matter of days, rather than in a 12 to 18 month period.
And by doing that, and externalizing the product out of the core into Zafin as a system of record for that, they’ve been able to achieve that. And we’ve been a big success in that product in terms of, they’ve probably taken out about 400 products out of their core. And now they have 10 products in the core. And what that allows them to do is all of the product variations are within Zafin. And it means that I can demographically, I can really micro tune how I target clients. So the cross selling, the upselling, the amount of revenue per customer can go up. The time to market goes down. The time to revenue improves. So these things are really important.
But Zafin as a whole also helps them modernize the program and digitalize. So not only the backend core, the next best offer for a client can also be looked at at the front end of the bank. So we’re multifaceted. We have this unique position of being able to sit between the backend and the front end. But if I was putting my mainframer hat on when I was at IBM, Zafin protects and modernizes that mainframe, it keeps it nimble. It makes it much more like a fintech proposition. So these bigger banks can suddenly become more nimble, more agile and deliver new products and services to the market much more quickly. And you can only really do that through externalization, Steve. Yeah.
Steven Dickens: It’s interesting, you talked about the bank, and we’ll use that as a reference point here, taking 400 products off the mainframe, keeping 10 on it. The negative way to look at that is you took workload off the mainframe. But I think what’s coming across, and I know we’ve spoken about it, is the more nuanced view that by making the bank more competitive and making it more transformational in the way it interacts with its clients, what you actually do is drive up usage of the core and drive up core MIPS consumption. Because the bank’s processing more transactions and more customers. So yes, you’ve moved 400 workloads off, but the 10 that remain end up consuming more MIPS, and it’s great for the IBM hardware gravy train if you will, to drive that back end. Am I seeing that right?
John Smith: Yeah. It could be. I suppose for me, I think it’s more that the bank remains competitive. And they’re going to get more longevity out of the mainframe platform because it becomes this core DDA. Which is really what it’s meant to be. It’s the account management system, it’s the general ledger, it’s the system of record. And yes, it has the straight through processing.
And what Zafin does is allow the bank to be much more segmented around how we launch new products for the bank in partnership. And also deliver a hybrid cloud story. And that’s the other thing. The bank needs choice. So if the bank wanted to run the software on a mainframe, it could. On any cloud, it could. As a SAS model, it could.
And I think that’s the other thing, it’s like, the way we offer clients value is through choice. We are not locked in. We want to give them optionality around how they can deliver this. But you are right, it does, it makes the core much more nimble. And in time, yeah, the core levels aren’t going down, they’re probably increasing. Because actually a lot more upselling, a lot more cross selling, a lot more analytics can be run. And actually the bank can be a lot more nimble in how they launch products, what segments they go after.
So, where are technology is used, it’s across bank, and it’s probably 50:50 between retail and corporate, but it’s actually becoming more and more as a marketing tool. Because we do loyalty, we do offers and rewards. So a marketer could be saying, well, I’ve launched that offer to these clients. What’s my return on that? How can I tune that? And so our technology actually drives the workload up and make it even more efficient. It just means that they can compete.
Because think who you’re competing against, Square, massive valuation, hundreds of billions, and very targeted for small business, going after that small business on the high street type store. You’re going after Walmart coming in into the market and looking at that. So you’ve got all this embedded finance, the banks need to react quickly. And to do that, they’ve got the assets and the loyalty, but they need to exploit that asset and that data. And Zafin helps them do that.
Steven Dickens: It’s really interesting, I mean, you’ve give me a natural segue to a question I ask of all the listeners. You are describing I think where you see the mainframe platform. So I’ll ask the question I always ask of every guest on the show. Where do you see that mainframe platform, let’s pick on financial services, five years from now? I think you’ve got a different vision. So I’d be really interested to hear your thoughts in that space.
John Smith: Yeah. I think the market is going towards this concept of corelist, Steve. And corelist doesn’t mean there’s no core. But corelist is taking some of that function and putting it into the servicing element. So maybe putting it into a Salesforce or a Dynamics or other parts. In some ways you’re externalizing some of the features out of the core and making it simpler and more customer experience based.
Obviously Zafin has a play in that space because that’s where the market is going. However, for me, the mainframe will stay for well past five years, it’s got so many things integrated into it. And actually when you strip away the cost models, and you and I spend a lot of time at this at IBM, it actually is very cost effective. And that’s what people don’t … they see this big cost number because IBM include everything, the software, the hardware, the servicing, the delivery of it. But actually when you look at the distributed system, you’ve got to add all these things up, all the apps. So, all the licensing, all the hardware, all the cloud. You put that all together, many times we found that that model actually didn’t work from a cost efficiency point of view.
So I think it actually forms a very important cog in the overall financial services market that will carry on. And the other things is data residency and security. We have some customers who want to go all cloud. And of course they’ll move. But others that say, actually, it’s almost, I need it on prem. I need the security and a data residency on prem. And I’m not comfortable with it moving. And in that case then it absolutely stays as well. So I see it as an ongoing critical piece of the financial services infrastructure that we can help modernize. That would be my view there.
Steven Dickens: Yeah, that’s fantastic. I tend to agree as you know. One final question, John, as we look to wrap up here. I know we’re time crunched today. I think you’ve got a really interesting career arc. Poacher turned gamekeeper. Worked in channel partners. One question I always ask, if you’ve got the opportunity to go back to John Smith, aged 21, what would you say to build a career in that space? What would your advice be?
John Smith: Yeah, I would absolutely say it’s a marathon, not a sprint. And that’s a classic. But it is something for me. It’s about getting mentors. Make sure you get mentors. Make sure you take feedback on your career. For me, it’s about having integrity and honesty in what you’re doing. And staying the course.
And one of the biggest ones, treating people with respect. And as I’ve moved into leadership positions, what I’ve found is, that’s the key. If you’re going to lead a team, treat people with respect. And lead from example. So rather than the talk, and the talk is important, but it’s got to be an action. Execution is key.
Steven Dickens: I think that’s really solid advice. Well, John, thank you very much for coming on the show. I know we’ve been trying to do this for months it seems now. So, it’s been a pleasure. It’s great to see you in person. We’ll get that scheduled to catch up in real life. It’s been too many years now since we got together.
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