Bank of Russia saves US$400 million per year by consolidating to IBM System z9

As the central bank for the Russian Federation, the Bank of Russia serves the interests of the state, the Russian people, and private businesses. Its main responsibilities include supporting the Russian currency, managing the national payment system, overseeing money and loans policies, and supervising the country’s financial sector. With 78 regional offices, 800 local branches and 70,000 employees, the Bank provides services for around 1,000 commercial banks and 20,000 state budget institutions across the Federation.

The Bank of Russia was set up in the early 1990s, inheriting the structure of the Gosbank, the state bank of the USSR. Its first main objective was to modernize its operational processes, which were then reliant on paper-based processing of payments. With the liberalization of the Russian economy, the rapid growth of commercial banking and the increasing influence of international finance put a heavy strain on these payment processing systems.

The Bank set up a network of 74 electronic payment processing centers, each with its own data center, servers and software. With numerous processing applications, six hardware platforms, three different database platforms, more than 200 servers, and around 1,500 full-time technicians, transaction costs were high—at around 11 rubles per transaction. Additionally, it was difficult to ensure the right level of security across this widely-distributed infrastructure, both physically and in terms of protecting against increasingly sophisticated cyber attacks.


Tackling the challenge

Aiming to simplify its IT landscape to enable greater efficiency and innovation, the Bank of Russia decided to consolidate its 74 payment processing centers. The initial plan was to move to five regional facilities, but ultimately the Bank realized that it would be possible to reintegrate its entire distributed infrastructure in just two centers.

“The Russian Federation is huge—we have branch offices spread across eleven different time zones”, says Mikhail Senatorov, Deputy Chairman, Bank of Russia. “There was initially some opposition to the idea of moving everything to two data centers in the European part of Russia, because people thought there would be communications problems. However, by using a combination of land and satellite telecommunications, we knew we could handle the traffic reliably”.

The Bank’s IT department began to look for a technology platform for the consolidated infrastructure, considering both the IBM System platform z and HP Superdome servers.

“We quickly realized that IBM System z™ offered us more options than competing platforms”, explains Mikhail Senatorov. “For example, payment volumes are increasing year-on-year, so it was important to buy servers that could scale to meet the demand. With IBM System z, instead of buying an oversized server and growing into it over the years, we only need to pay for what we use. As volumes increase, we can ask IBM to activate more processors within the mainframe to deal with the demand”.

“Another unique selling point for IBM was its expertise with long-distance data replication for high availability, business resilience and disaster recovery. The two sites we chose for the new data centers are 1,000 kilometers apart, and we needed to be able to mirror data between them so that we could fail over from one to the other in case of disaster. IBM Global Mirror and Metro Mirror are the only technologies on the market that we trusted to do this job reliably”.


Taking the first steps

Working closely with IBM and EC-Leasing, the Bank set up an IBM System z9 Enterprise Class (EC) as a test system and performed a number of migrations from its existing platforms into a new software landscape based on Oracle databases running under IBM z/OS® and applications running in virtualized Linux® servers under z/VM®. IBM WebSphere® MQ provides messaging services, and IBM Tivoli® OMEGAMON® is used for monitoring.

The success of the test phase encouraged the Bank to consolidate three of its 74 processing centers to the new platform as a proof of concept. It quickly became apparent that the new system could not only handle the traffic reliably, but was also delivering considerably improved performance.

Mikhail Senatorov comments: “The final test was to prove that we could provide a good service for the more remote areas in the Eastern part of Russia, so we moved Chukotka, Kamchatka, Sakhalin, Vladivostock and Khabarovsk onto the platform. This was the turning point—when we put it all together and showed that it worked, the decision was taken to switch the entire country over to the consolidated platform”.

The remaining migrations were planned and executed, and the entire project was completed within three years. The new shared architecture is split between two data centers, each containing two z9 EC mainframes. A storage area network, based on IBM System Storage hardware, provides a reliable, high-performance architecture for data storage. The Bank’s new infrastructure is an excellent example of what IBM terms the “new enterprise data center”: an efficient, simplified, virtualized, highly resilient set of shared resources capable of responding dynamically to business demands.

“Using virtualization to consolidate more than 200 distributed servers on just four IBM System z9 mainframes is a great advantage in terms of hardware licensing and energy costs, and decommissioning the 74 existing data centers was another major saving”, says Mikhail Senatorov. “In addition, we only need 200 full-time staff to run the new environment, compared to 1,500 for the old systems—and with a single software and hardware platform, we don’t need to maintain such a broad technical skillset”.


Massive cost savings

As a result of the improvements in operational and energy efficiency, the cost per transaction has been reduced from 11 rubles to just 50 kopeks—a 95 percent reduction, saving around US$400 million per year. As transaction volumes are predicted to more than double by 2013, the savings will continue to increase in the coming years.

“We are planning to consolidate further, to just four System z mainframes by 2010, so we will continue to increase efficiencies and reduce costs”, says Mikhail Senatorov. “IBM deserves credit not only for the reliability and performance of the hardware, but also for dedicating a team of experts to Bank of Russia, who help us make the best decisions about the future of the environment. IBM is also very flexible about allowing us to run test environments and try out new products”.

The IBM solution plays a vital part in the Russian economy—50 percent of all payments and 60 percent of the country’s money now pass through it. By 2013, it will handle 17 – 18 million payments per day; yet even this huge volume will be within the capabilities of the IBM System z9 EC.

“We will simply switch on more processors as and when we need them”, explains Mikhail Senatorov. “We are currently using 17, and we calculate that we will need 42 by 2013; but since each machine can use as many as 54, we have plenty of room for growth”.

With the payments system reintegrated, virtualized and standardized, the next project for the Bank of Russia is to develop an analytics system to monitor trends and evaluate the activities of different banks.

Mikhail Senatorov concludes: “Payments processing is really only the first step. Now that we have the data in a single central repository, there is almost no limit to what we can achieve in terms of analytics—which will help us monitor the financial sector more closely and react dynamically to changing economic conditions. IBM has been a vital partner for us throughout the modernization of payment processing, and we look forward to the IBM team’s help and advice as we move forward with these new projects”.