ISG Provider Lens™ Mainframes - Services and Solutions - Application Modernization Services, Brazil - Americas 2024

Mainframe modernization shows momentum, with an increased vendor focus on mergers and acquisitions

With increased attention to cost savings and budget control observed in 2023, more enterprises are considering mainframe modernization to reduce their IT spending. Software maintenance license is a significant cost element that companies can drastically reduce by moving applications to the cloud. IT organizations facing business pressure to reduce spending tend to prioritize replatforming their mainframes to the cloud, using partner tools such as OpenText (Micro Focus), TmaxSoft (OpenFrame), LzLabs and NTT DATA (UniKix) to rehost legacy applications to run in the  cloud rapidly. However, replatforming does not eliminate programming language obsolescence, requiring companies to retain obsolete software engineering processes to develop and maintain outdated applications. More advanced methods include rewriting applications to Java, .NET or C# to introduce DevOps and Agile development methods. Automated rewriting tools generate maintainable application code integrated with modern application development workbenches. Reengineering automation takes longer than rewriting as it uses reverse engineering techniques to explain the legacy code, map data and application dependencies and expose business rules for human reviews. Reengineering allows companies to eliminate a dead code and update the business rules before automatically generating a new code. Rewriting and reengineering tools ensure like-for-like behavior and performance validated by intensive automated testing. 

The high focus on GenAI in 2023 has positively impacted the global mainframe modernization market. Experimenting with GenAI tools allows clients to understand that automated code writing is possible. However, GenAI can only write pieces of code per a programmer’s prompt and cannot replace rewriting and reengineering tools that consistently generate millions of lines of code (LOC) in minutes. Practical GenAI tools demonstrated by participants in this study include business rules explanations and logic summarization to improve documentation and the creation of test cases. For example, the user can ask what the conditions are to calculate the insurance premium. Per the code, GenAI responds that for case XYZ, the conditions are A, B and C, and for case YYY, the conditions are B, D and E. Humans can find the same in the code, but GenAI does it much faster. 

Despite continuous, nimble and new technological innovations, mainframes offer a stable technology and have some appropriate use cases. Several enterprises are not ready to exit mainframes due to their simplicity, reliable performance and security compliance. Some clients continue to see no value in investing to change something that works well. Mainframe to cloud migration is not a priority for many, and consider other investments that can produce better returns. 

Application Modernization Services in Brazil are flourishing and expected to grow in 2024. The largest banks have started their application modernization and cloud migrations, inviting attention from hyperscalers such as AWS, Microsoft, Google and Oracle that want to run these banks’ huge number of processing hours — Brazil is the second largest IBM mainframe market after the U.S. The system integrators and software vendors expect that the millions of mainframe applications will require many years to modernize and migrate to the cloud. 

Banco Itaú’s modernization program is at center stage, with several cases promoted at AWS re:Invent in 2021, 2022 and 2023. The bank has a tradition of technological innovation and was a pioneer in online banking before the year 2000 and later by offering its mobile app in the Apple Store. It has questioned application reengineering and rewriting methods, requiring technology vendors to include innovation while modernizing applications instead of the conventional converting code for a like-for-like experience. The bank’s questioning is pushing vendors to improve their application modernization technology.

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