Inside Jack Henry’s Long-Term Modernization Roadmap
March 28, 2022 Alex Woodie
Jack Henry & Associates is one of the stalwart brands for IBM i applications. The Monett, Missouri, company has more than 1,000 banks and credit unions running its core banking systems on IBM i, with another 650 on AIX and a few hundred more on Windows Server. So when the company last month officially unveiled its next-generation technology strategy, it turned a few heads.
As it turns out, Jack Henry has been working on its new tech stack for the past five years. As the company sussed out the strategy and the first products were born – an application for domestic and international wire transfers – Jack Henry decided the time was right to reveal the new technological direction to the world. Jack Henry was kind enough to make former chief technology officer Ted Bilke available to IT Jungle to explain the new technology strategy in depth, and especially, what it means to the company’s large and loyal IBM i installed base.
At a high level, the strategy is aimed at ultimately delivering a new core banking system that is composed of many distinct microservices-based application that run-in containers in the cloud, says Bilke, who retired from Jack Henry in January but is still working with the company through the end of the fiscal year as its CTO Emeritus. The system will be delivered in incremental pieces, and it will take about 15 years to eventually deliver it, he says. That is a decade and a half. You heard it right.
“We said ‘Okay, we see the technology evolving. Where are we going to go? What’s the next generation look like?’” says Bilke, who was the executive sponsor for the new technology strategy. “We like to think of where we are today and our competitors as second generation core banking systems with commercial databases, but now we see the emergence of this cloud-native capability. And to me, probably the most important aspect is the microservice architecture approach, which is really the un-coupling of these monolithic applications.”
Jack Henry currently supports four separate core banking systems, which are essentially ERP systems for banks and credit unions. Its flagship offering is the SilverLake System, which is an RPG-based application that runs on IBM i and supports more than 500 community banks around the country. There is also CIF 20/20, which Bilke described as a “precursor” to SilverLake. It also is an RPG-based IBM i application and it has around 500 customers. There is also Symitar, its AIX-based core banking solution for credit unions, which has about 650 customers, according to the Symitar website; and Core Director, which runs on Windows and has about 200 customers, according to Jack Henry’s website.
There is considerable duplication of effort on the part of Jack Henry to not only maintain these four separate systems, but also to create new functionality, Bilke says. With its new microservices strategy, Jack Henry aims to reduce that duplication of effort, while delivering new features and functionality–like native cloud support–that the market demands.
“We like to think of core as somewhere between 60 and 100 products all mushed together over time that creates these very large monolithic systems that deliver that primary processing for full-service community banks and credit unions,” Bilke says. “The analogy I like to use is the monolithic core is like the big whale swimming in the water, and it’s got some complementary products that surround it, for everything from fraud payments, loan origination, to account opening.”
A lot of that functionality has already been broken out of the whale and delivered as separate add-on products, Bilke says. The third-generation platform that Jack Henry envisions is all about codifying how that break-out process works, and will result in a more formalized set of applications that run consistently in cloud environments using Docker and Kubernetes, and integrate with each other, with customers’ core banking systems, and with the outside world using industry standard REST microservices.
“Instead of having this big monolithic application, we want to convert that over time into 100-plus smaller product applications that can be sold independently, that can be bundled, that can be easily replaced by third-party products,” Bilke continues. “You can go to the open market to buy a third-party product and make it more of an a la carte model, and people can pick and choose what components they want to use.”
As mentioned, Jack Henry has already been doing this to some extent, and is replacing a handful of products as part of its regular release cycle. But with hundreds of applications and functions embedded across the four core systems, it will be many years before the company eventually delivers a microservices-based replacement for every function in those four core banking systems. This is a marathon, not a sprint.
“With 300 products, we’re rewriting somewhere between four and eight products a year kind of as a normal cadence,” Bilke says. “So let’s kind of switch to a common modern technology stack and architecture approach that makes things more leverageable between the products. So simple things like managing user ID, passwords, the privileges that are associated with those applications – let’s do that in a way that we can leverage that and don’t have to recreate it for every individual application.”
Jack Henry, which is publicly traded and recorded $1.76 billion in revenue last year, has made a number of technology selections already. Docker and Kubernetes are the choice for containers and container orchestration systems, respectively. All three major public clouds – AWS, Google Cloud, and Microsoft Azure – support their own Kubernetes flavors today.
The company has selected Microsoft’s .NET and C+ as the foundational language for the new technology strategy, Bilke says, and it’s also using Google’s Go language for some projects, he says. The company is not using a code converter to automatically convert its many lines of RPG code into .NET or Go, but instead is using its documentation to better understand how the RPG delivered that functionality so it can be replicated with the .NET and Go code it is writing from scratch.
Things get more interesting in the database department. Because the three public clouds offer different databases, Jack Henry is planning to support a multitude of different data stores.
“If you’re going to go to Azure, then you are likely going to standardize on Cosmos,” Bilke says. “If you go to Google Cloud, you’re going to standardize on Spanner. And then if you’re unsure, or want more flexibility, as we did with our Wires product, we are standardized on MongoDB.”
Customers who self-host their own Jack Henry applications (via on-prem Kubernetes) will also have the option of using standard PostgreSQL, Bilke says. And they will also be able to use Microsoft’s SQL Server database in any of the three clouds, on-prem, or in Jack Henry’s private cloud – Jack Henry hosts more than 60 percent of its IBM i customers in its own private cloud.
For log management and monitoring in the cloud, Jack Henry will be standardizing on Datadog. It also is bringing some innovation to the extract, transform, and load (ETL) front. Instead of batch ETL, the company will be embarking upon more real-time information flows, and so it will offer streaming data services, such as the Apache Kafka offering developed by Confluent.
“There are about 40 products that we go through with the business units to help them preselect based on some selection criteria,” Bilke says. “Again, the objective is to keep that under a narrower family of tools, which gives them more leverage of knowledge and people across Jack Henry as a whole. It makes it easier for us to move people from one group to another when we flex up or flex down on projects.”
While the technology stack may look a bit foreign to veteran IBM i professionals, Bilke stresses that the process of moving to the new stack is not intended to be a “big bang” project, and will be implemented over a period of decades. The company doesn’t envision having completed the development of all the microservices-based replacement products for about 10 to 15 years, Bilke says. And once the products are ready, he envisions it will likely take another 10 to 15 years to get customers to fully adopt them.
In the meantime, Jack Henry’s IBM i customer base will able to continue to use the IBM i applications as is, and Jack Henry is fully committed to supporting them. “We will continue to support the legacy capabilities that customers are very comfortable with,” Bilke says.
Customers running Jack Henry’s older products will be encouraged to adopt the new features and capabilities that the company provides as containerized microservices-based applications running in cloud environments because, in some cases, they won’t be made available in the core systems. That is what the company has done with its Wires product, which supports international wire transfers, which is not supported in the core banking systems.
“That’s really the model: Make it attractive, make it cost effective for them, and bring them new capabilities,” Bilke says. “I’ll tell you that what we’ve learned over the years of introducing new products – and we’ve done a number of next-generation replacement products over the years – it really becomes an approach of bringing new capabilities and new value that motivate the customer to want to make a change.”
Existing users of the core banking systems will be encouraged to adopt the new microservices-based applications and use them in conjunction with their core systems. “By delivering it incrementally along the way, as we’re doing with Wires, you don’t have to wait till the end to get benefit,” Bilke says. “You can get benefit through new capabilities and features that get delivered along the way.”
Considering that there is currently no plan for IBM to support Kubernetes with its IBM i platform, it would seem that the new technological platform may be the beginning of the end of Jack Henry’s long relationship with the proprietary midrange server from Rochester, Minnesota. Is that the case? Bilke hedged a bit.
“Well, not in the foreseeable future,” he says. “We’re pretty entrenched the iSeries or pSeries platforms, and we’re going to have those for a long, long time.”
“We absolutely expect the majority of our customers will continue to run on those platforms for ten or fifteen years,” he continues. “The journey to create the equivalent functionality that’s in the cores today for anyone is a 10- to 15-year journey. So even when you look at the market today and who’s out there and what products are available – they’re more niche based products. Nobody’s got a cloud-based, full-service type core system.”
Jack Henry is going to invest in its second-generation core banking system based on IBM i and AIX “at the level we have in the past and we’ll keep investing going forward because customers are going to run them for the long foreseeable future,” he adds.
“So a very long horizon. Those systems run very well. They’re very efficient. We have got a very happy customer base. So this is really a long play that’s got some short-term implications for our customers.”