Streamlining ATM operations, not adding functionality, is the main driver behind the migration away from an OS/2 ATM operating system to Microsoft Windows, according to research conducted by Celent Communications in late 2003.

Just 12 percent of financial institutions were using Windows for ATMs by the end of 2003, but Celent analyst Gwenn Bezard expects the number to reach 65 percent by 2005. Only 36 percent of the FIs switching to Windows said they planned to add new ATM functionality in the next two years, however.

Vendors, rather than ATM owners, are driving the migration to Windows, Bezard said. They are offering only a Microsoft OS, primarily Windows XP, on their newest ATMs. They will likely stop shipping any ATMs with OS/2 in the next 18 to 24 months.

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James Trocme, director of Diebold's Global Software Solutions, said a move is necessary because of IBM's intent to withdraw support for OS/2 in June 2006. It's increasingly costly for FIs to maintain existing ATMs, Trocme said, because of a shrinking pool of programmers versed in OS/2 and a lack of standard or even custom driver support for new peripherals.

"For integrators like NCR or Diebold, (IBM will) support -- not develop, not modify or extend, but simply support -- OS/2 for as long as we pay them. The real issue is that irrespective of any date, nobody is developing anything new for OS/2 clients. So in some important and significant respects, it's already discontinued," said Rob Evans, director of Industry Marketing for NCR's Financial Solutions division.

ATM vendors have worked with Microsoft since 1995, when it introduced XFS (eXtensions for Financial Services), an interface used to support banking peripherals from multiple vendors. XFS-based software has the capability to run on a variety of different hardware platforms.

Major vendors have introduced XFS-based software, including Diebold's Agilis, NCR's APTRA, Fujitsu's Prism and Wincor Nixdorf's ProTopas. Third-party developers such as KAL and Phoenix Interactive have also introduced XFS-based application software.

Because of the development work to date, vendors are unlikely to switch to an alternative operating system, Trocme said. "You can't jump off the train once it has left the station and reached full speed."

Conversion to Windows is picking up as more FIs replace or upgrade ATMs to meet Triple DES mandates, Bezard said. In order to minimize future trips to the ATM, FIs are asking technicians to switch the OS when they visit machines to install new Encrypting PIN pads (EPPs).

Another driver is the merger and acquisition activity occurring among FIs, which shows no signs of abating. To reduce the operational costs of maintaining networks of ATMs manufactured by multiple vendors -- a frequent byproduct of mergers --  Bezard said FIs will need to switch to multi-vendor software designed to run on Windows-based machines.

"The migration to Windows again raises the issue of centralized channel management," said Tom Meurer, president of e-ClassicSystems, maker of ATM Manager Pro ATM channel management software. "In order to achieve the greatest benefit from any such migration, financial institutions need a solution to manage inventory and configurations, control the conversion project, and track subsequent and frequent patches needed for the Windows environment to remain secure and operational."