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Chinese Companies Moving Away from Foreign Mainframes

By Michael Low & Marcus Wong - on 30 Jun 2014, 12:06pm

Chinese Companies Moving Away from Foreign Mainframes

Chinese companies are replacing IOE systems (products made by American companies IBM Corp, Oracle Corp and EMC Corp) with homegrown brands said to be safe, more advanced and a lot less expensive. This is in line with global trends as prices for X86-based PC server systems have been falling ever since worldwide sales exceeded Unix server sales in 2007.

That’s also when both China’s NDRC (National Development and Reform Commission) and finance ministry started encouraging the use of homegrown IT systems in government agencies and financial institutions, opening doors for domestic suppliers like Huawei, Inspur and Sugon Information Industry Co.

According to, an unnamed central bank official said the government has not ordered the scrapping of all IOE systems by banks as that would be too expensive, but it does want domestic companies to rely less on foreign brands and to encourage more domestic development.

Meanwhile, e-commerce giant Alibaba Group has followed in the footsteps of Amazon, Google and Facebook, which earlier built their own computing networks (and in Facebook’s case, an entirely new open source network switch).

Alibaba’s network has been revamped using several PCs with X86 microprocessors linked in a chain to function as a server, replacing a traditional mainframe server. The company has also built their own database management system with an open source structure, and has started storing data on an internal cloud-storage solution. The rest of the company’s databases are scheduled to switch from Oracle’s system to a homegrown one by 2015.

The rise of Internet banking is also spurring Chinese banks to explore new IT options and cut back on IOE systems to save on hefty maintenance fees, which come on top of the purchase price. The sheer scale of operations of these banks means that changes will not happen overnight, as the IOE companies as well as Microsoft Corp and Hewlett-Packard Co. (HP) offer integrated solutions that are difficult to replace.

Big banks are moving cautiously because of how interconnected their networks are, and also because moving to a non-IOE system would mean transforming personnel and management, which further adds to the cost.