For a while now, the assumption has been that International Business Machines Corp. will phase out the manufacturing and servicing of its OS/2 system, which runs many an automated teller machine and branch terminal, by about the end of 2004.
Not so fast, IBM says - it does plan eventually to phase out OS/2, which is used extensively in banking, but not nearly as quickly as has been rumored.
A full 95% of ATMs currently in use rely on OS/2, according to Dove Consulting, though the two biggest manufacturers, Diebold Inc. and NCR Corp., both make Windows versions. (Diebold this month debuted a new line of ATMs called Opteva, which is Windows-based.)
The director of IBM's OS/2 division, David Kerr, says the OS/2 platform is far from dead.
"We continue to sell OS/2 and continue to service OS/2 and will continue to do so for the foreseeable future," he said.
IBM has stopped supplying OS/2 merchandise to computer stores, because so little of it was being sold, and it is trying to help its bank clients migrate to other platforms, Mr. Kerr said. But its plans for OS/2 have evolved over time, and there are various ways it could extend the various sunset dates that have been given, he said.
"What we have articulated to our customers are several dates, each separated by several years," he said.
The only date he was willing to discuss was the first: December 2002, which was when IBM planned to stop making "functional enhancements to OS/2," Mr. Kerr said.
But that has not exactly been the case, he said. If a customer requests a specific enhancement, IBM would make it, and the enhancements would also be available to other customers.
"That's why we have not published any future dates, because we want to retain flexibility to respond to our customers' requirements," he said.
Customers can look to their equipment warranties for a fairly clear idea of when IBM will stop supporting their OS/2 systems, Mr. Kerr said. When a warranty expires, customers can still purchase an extended warranty - but only once. "Eventually the extended warranty will expire, and IBM will not want to sell you a further extended warranty. That's the drop-dead date for our customers."
Some industry observers said IBM is being careful in its wording surrounding OS/2 so as not to alienate or scare its customers.
"The fact of the matter is IBM has ceased new development of OS/2," said Jerry Silva, a senior analyst at TowerGroup in Needham, Mass. "They will continue to support it. OS/2 is an operating system that's in use in a large number of ATMs as well as a large installed base of branch automation terminals, so it wouldn't behoove IBM to just drop it on one particular day."
Furthermore, "OS/2 comes in so many different flavors," that certain versions of the system will be discontinued later than others, Mr. Silva said.
The fact that IBM will continue to receive revenue from customers who insist on holding on to OS/2 is another reason it will not abandon the technology any time soon, Mr. Silva said. IBM developed OS/2, still the dominant ATM operating system, in 1987.
The understanding that OS/2 would disappear imminently spurred companies such as NCR and Diebold to begin making and marketing Windows-based ATMs in the late 1990s. According to The Nilson Report, Diebold sold about 14,100 ATMs in the United States in 2002, and NCR shpped about 9,200. The total number of shipments domestically in 2002 was about 51,300, giving Diebold a 27.5% market share, and NCR 17%.
Chuck Somers, the vice president of global software development at Diebold, of North Canton, Ohio, said that IBM had "made statements about OS/2 directly to us" about the phasing out of the operating system.
Nevertheless, Diebold and NCR continue to ship OS/2 machines to banks. Mr. Somers said the majority of the ATMs his company ships today use OS/2, though the number is on a "declining curve."
Stephen Risto, the director of NCR's Aptra software center of expertise, of Dayton, said one key point is that the OS/2 machines being used today can easily be modified to use Windows-based systems. Customers can "buy an OS/2 today, and you don't have to modify your software environment and connect to your existing system as is," he said. "But the critical element is they buy them with the horsepower to run Windows, so they can transition over to a Windows-based environment at their own pace."
Tony Hayes, the senior director of the financial services practice at Dove Consulting of Boston, said that, even though the sun is setting on OS/2, "retiring any piece of software that has got thousands of customers is a long process."
IBM, in the meantime, has been pushing banks to move to Linux-based platforms instead of the Windows system offered by Microsoft Corp. Mr. Kerr emphasized that IBM lets its customers migrate their machines to Linux or Windows and that IBM has a Microsoft consulting practice.
"Linux and Windows are two very different operating systems," he said. "At the customer level, they can be made to look the same. You hook them into the same network. However, under the covers they are very different. Different applications need to be written for those different platforms."
According to Mr. Kerr, Linux is a better operating system than Windows, because it gives customers more flexibility. "We would much prefer our customers move to open standards as opposed to Windows. If they go down the Windows path, they're locked into the Windows platform as a proprietary architecture. If they go through the open standards path, they keep their options open."
Warren W. Lewis, Microsoft's managing director for the banking industry, said that it is eager to compete in the banking market. "If a bank incorporates our technology, we do everything possible to ensure that it incorporates with existing or legacy systems."
ATMs in particular have not historically been integrated well into banks' other channels, such as teller stations and Web sites, Mr. Lewis said. Windows technology allows banks to better integrate their channels, as well as "add new functionality to provide additional services that the banks could offer to their customers and additional opportunities for the banks to communicate with their customers," he said.
For now Windows seems to have the edge over Linux in the ATM market.
"The fact is the world has embraced Windows, and banks have embraced Windows," said Mr. Hayes of Dove Consulting.
