Better "cloud smart" than "cloud first"
Mainframes are still widely used in banking, keeping critical products and processes running. Currently, many banking institutions are considering the future of their mainframe solutions. This is driven by regulatory requirements to ensure secure operations - which is becoming increasingly challenging given the lack of and aging IT talent with mainframe expertise. New cloud technologies, as well as tools for easy migration, are making it easier to move from mainframe to cloud.
This is also confirmed by Accenture's recent market research "The great cloud mainframe migration: what banks need to know" from 2022, in which 150 bank managers from 16 countries were surveyed whose institutions are planning to migrate their mainframes to the cloud or have already started. As a result, four out of five respondents (82%) said they intend to move more than half of their mainframe workload to the cloud. In fact, nearly one in four (22%) say they intend to move more than three-quarters of their mainframe capacity, and the vast majority intend to do so in the next two to five years. In the process, most banks have started to gradually move certain applications - including the core banking system - to the cloud.
What are the arguments in favor of the cloud?
There are many reasons to move to the cloud. In addition to increasing efficiency, agility, flexibility and reducing costs, there is an increasing lack of IT specialists who are versed in mainframe programming languages such as Cobol or PL/1. More and more system developers and administrators with mainframe skills are retiring in the next few years. Around 60 percent of all mainframe experts are already over 50 years old. Young specialists in this field will hardly be able to keep up.
In addition, feature updates are more costly in mainframe environments than in modern IT landscapes. As a development platform with proprietary hardware, network, storage and computer systems, mainframes have grown arbitrarily over many decades and are very complex to interface with. Administration is therefore usually associated with high costs. It is not uncommon for mainframe environments to develop with "rough edges," which is due to the fact that developers sometimes simply copy a piece of code, rewrite it, and paste it again when implementing new products. In addition, IT managers often have no overview of which batches are running on which days and whether they are even necessary. There is no database for documentation. There is also a lack of micro-services to develop products faster in the future.
Planned product development times are often not adhered to.
Every switch is individual
The need to digitize combined with cost and skill factors is increasingly causing financial institutions / insurance companies / automotive groups to re-evaluate their pro/contra mainframe decision. Should they modernize their legacy applications? And if so, how?
Moving from mainframe to cloud and modernizing legacy systems is a challenging undertaking. A "one-size-fits-all" solution or a classic customer journey does not exist.
It is important to take a close look at the unique initial situation of each company. A comprehensive assessment to analyze the circumstances forms the basis for the successful introduction of a cloud solution. With IT partners such as Cognizant, this is possible within six to eight weeks. Many questions need to be answered: What business benefits are expected to be achieved by the mainframe-to-cloud replacement? To what extent can the existing mainframe system still be modernized, to what extent does it need to be transformed? Which components have become irrelevant because certain functionalities are no longer used or operated? Which parts should be moved? Which systems can be transferred 1:1? What makes business sense and pays off? How large and complex will the whole undertaking be? Which processes should run through the migration and how? Which approach is advisable: Big Bang or Small Steps? What costs can be expected?
Better "cloud smart" than "cloud first".
If financial institutions / insurance companies / automotive groups are thinking about moving to the cloud, a smart cloud approach is recommended. The smart cloud approach is to gradually modernize, decommission, replace, with the goal of ensuring short-term success and long-term business value - rather than rushing to migrate all work (old) loads to the cloud at once.
The smart approach requires IT leadership teams to address specific industry and technology requirements. They must also consider the complex implications and full benefits of a successful cloud adoption, in terms of people, processes, technology, procurement and business interfaces.
The hybrid variant: the best of both worlds
For many companies, a hybrid strategy is the tried and tested means to success. It combines the best of both worlds, minimizes risk and saves costs at the same time. Modern mainframes can also play an important role in the target architecture. For example, a company could leverage the resilience of mainframe platforms and use them for business-critical applications. For customer-oriented applications, on the other hand, it turns to the cloud.
Ready for the digital age
Migration to the cloud is a costly and intensive process, but one that is worthwhile. Financial institutions / insurance companies / automotive groups that make their legacy applications fit for digitalization and introduce a cloud-enabled microservices-oriented architecture enable the integration of data and processes in an agile and flexible manner. Integrating legacy applications with modern software development approaches such as DevSecOps brings the enhanced capabilities to market faster. As an added benefit, moving to the cloud lowers total cost of ownership and maintenance.
Moving mainframe applications to the cloud has shown that organizations can reduce their total cost of ownership (TCO) by up to 35 percent and application maintenance by 38 percent. Moving legacy applications to modern cloud-based environments reduces reliance on outdated and scarce skills. Modern tools and approaches can be leveraged across the entire application landscape.
Conclusion
Transforming banking through cloud technology optimizes the efficiency of banking operations. With a smart cloud approach, financial institutions realize the full potential of the cloud and ensure that their investments will last in the long term. They can leverage cloud technology developments, increase flexibility and agility, and reduce costs. By modernizing core banking with cloud technologies, banks benefit from faster innovation cycles and a contemporary developer and operations experience. Customers receive improved banking services. At the same time, applications should not be moved to the cloud on a grand scale without a strategy. The key is to find the right mix of cost, risk and speed - flexible and adaptable. The solution is often a hybrid migration strategy that allows for legacy aspects, maintains the right balance for cloud conversion, and combines new and existing technologies.
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