IBM wins $310 mil. contract with KB Kookmin

By Kim Yoo-chul

KB Kookmin has decided to continue its controversial partnership with IBM, which offered heavy discounts to supply its mainframe system for use in the bank's banking application system.

The monetary value of the deal is estimated at 340 billion won ($310 million). KB Kookmin will hold a board meeting later this week to fix the budget for the system renewal, bank officials said Monday.

“A UNIX system had been considered, but IBM guaranteed big discounts and continued help for system maintenance in exchange for using its core mainframe system. Just some paperwork remains before the agreement is finalized,” a KB Kookmin official said, saying the signing will be done next month.

Despite many advantages of using a UNIX system, its interface is command-line-based, which makes it difficult for casual users. Also, because of the productivity of the utilities of UNIX, this system could be too much to handle for “novice users.” Meanwhile, the majority of commands used in UNIX entail the use of “special characters” where even minor mistakes could cause unanticipated results in UNIX machines.

“KB Kookmin has been keen to cut the bank's heavy dependence on IBM's mainframe system. The bank had no option but to embrace frenemization for a while given several challenges the bank would have to tackle before a complete shift towards UNIX,” the official said by telephone.

Frenemies are persons or groups that are outwardly friendly as the relationship brings benefits, but harbor feelings of resentment. IBM was hit by ethical issues as its employee had been jailed due to a bribery scandal. In 2014, IBM Korea's then-chief sent a letter to then-top KB Kookmin management with a signature on the bottom demanding the bank use its mainframe system.

The agreement added support for IBM's x86 server systems, which KB Kookmin officials think is a plus factor to expand the bank's cloud-centric business projects.

“With a little change in core banking systems, KB Kookmin plans to study how to better fit IBM's x86 architecture servers into non-core banking systems for new business opportunities,” the official said.

KB Kookmin and IBM plan to start building the new banking application system in September. The project is expected to be completed by September 2020.