ISG Provider Lens™ Mainframes – Services and Solutions - Mainframe Application Modernization Software - Europe 2024

Europe’s mainframe clients demand managed modernization, cloud migration and cost-effective optimization

Our 2024 study on mainframe modernization inEurope reveals a landscape marked by strategic adaptation and mainframes’ enduring significance in business infrastructure. The market is moving toward hybrid modernization strategies that balance between maintaining mainframe robustness and leveraging cloud agility. Financial benefits are key, with notable cost savings and profitability from modernization efforts. However, the journey remains ongoing, with many projects overextended and incomplete, emphasizing the need for specialized expertise. Security concerns remain paramount, with clients demanding the blending of mainframe stability with cloud security advancements.

Following are the five market-defining factors that stood out in the ISG Provider Lens™ Mainframes — Services and Solutions 2024 quadrant report:

Skills shortage and modernization: The industry faces a critical shortage of skills in traditional mainframe languages such as COBOL and Assembler. This is especially critical in the European market, where language barriers and strong locality prevent specialists from relocating for a new position. This gap prompts enterprises to refactor and modernize mainframe applications into more contemporary languages, including
Java and C#. To combat this talent scarcity, some providers have staff at large offshoring capabilities. Also, there is increased reliance on automation tools that facilitate testing and code conversion, making the modernization process more accessible and less dependent on dwindling expertise.

Cost and efficiency concerns: Economic uncertainties are driving businesses to find ways to minimize mainframe operational costs. The focus is shifting toward refactoring rather than replatforming for significant cost savings, enhanced agility and reduced reliance on third-party platforms. This trend reflects a broader strategy to optimize expenses while maintaining or optimizing service delivery efficiency.

Incremental modernization approaches: Adopting incremental modernization strategies allows  enterprises to tackle large systems in manageable phases. This approach mitigates risk by systematically replacing or upgrading system parts, enabling enterprises to realize immediate cost savings that can fund further modernization efforts. It is a practical response to the challenges of updating complex, legacy 
systems without disrupting ongoing operations. Companies are opting for incremental modernization not only for manageability and immediate cost savings but also to deliberately retain the mainframe for the most secure and important business functions. This reflects a shift in trend toward leveraging the mainframe 
where it proves most useful and cost-effective, rather than moving away from it entirely.

Hybrid cloud and containerization: In the hybrid cloud and containerization space, there is a growing emphasis on seamless coexistence between mainframe and cloud-native applications, offering greater
flexibility and scalability. By leveraging hybrid cloud architectures and container technologies, enterprises can modernize their IT infrastructure to be more adaptable and resilient, facilitating a smoother transition from legacy systems.

APIfication and DevOps: Integrating mainframe systems with modern applications through APIs and adopting DevOps practices are crucial for enhancing operational efficiency and agility. APIfication allows for easier access and interoperability between old and new systems, while DevOps practices streamline the development process, fostering a culture of continuous integration and delivery. These strategies are  essential for enterprises looking to modernize their IT landscape and accelerate digital transformation.

Examining the European mainframes market in 2022 and 2023, significant transformations occurred with hyperscalers entering the scene, catalyzing cloud migration initiatives and offering advanced solutions tailored to legacy systems. The 2023 focus on hyperscaler entry, AI- and ML-driven automation, and iSeries and AS/400 modernization has paved the way for broader trends in 2024, including efforts for skills shortage mitigation, cost and efficiency optimization, and the adoption of incremental modernization strategies. The market remains in strong motion, underlined by the three examples in 2023: IBM’s announcement to acquire Advanced’s application modernization assets, Amdocs’ acquisition of Astadia and OpenText’s decision to sell its Application Modernization and Connectivity (AMC) business, which was formerly part of Micro Focus acquired less than a year ago, to Rocket Software.

The emphasis on automation, including leveraging AI and ML, signifies a pivotal shift toward enhancing efficiency and precision in migration and testing processes. The spotlight on iSeries and AS/400 systems underscores a growing interest in diversifying modernization efforts beyond traditional mainframe
environments and addressing a larger midmarket potential in Europe.

The standout development is the strategic embrace of AI and automation technologies, underscoring a shift toward more intelligent, efficient modernization processes. This trend signifies a deeper integration of cutting-edge technologies, marking a pivotal evolution in addressing mainframe modernization challenges.

AI developments in mainframe modernization underline a consensus among providers to strategically integrate generative AI (GenAI) to revolutionize efficiency and innovation in legacy systems transformation. GenAI’s application spans from automating code conversion and enhancing testing protocols to data cleansing and post-migration optimization, with a notable focus on achieving near-perfect accuracy in
language conversion efforts.

Distinctively, some providers are setting industry benchmarks by extending GenAI’s utility beyond mere conversion, aiming to foster maintainable, object-oriented designs and significantly boost developer productivity through AI code assist functionalities. This trend toward an AI-first approach in tackling complex mainframe ecosystems reflects a collective ambition to not only streamline the modernization process but also ensure the future readiness of legacy applications through cloud-native integration and sustainable
architectural reforms.

Moreover, the proactive deployment of GenAI tools for application portfolio analysis, effective monolith decomposition and enriched business rule articulation underscores a holistic embrace of AI to decipher and reengineer the complex logic embedded in mainframe applications. Providers are thus not just focusing on isolated innovation but are keenly investing in GenAI as a cornerstone for a transformative leap in mainframe modernization, aiming to double performance on productivity metrics and seamlessly bridge the gap between traditional mainframe architectures and modern, agile infrastructures.

This unified advancement toward an AI-enhanced modernization landscape signals a pivotal shift in how legacy systems are perceived, managed and evolved. It promises a significant reduction in operational complexities and a substantial acceleration in delivering modern, efficient and scalable solutions.

While environmental, social and governance (ESG) aspects took a central role in 2022 and 2023, the hype has somewhat diminished. In the European mainframe modernization market, providers continue to highlight
industry-wide commitments to embedding ESG principles into technology solutions, focusing on sustainability through the adoption of cloud technologies, reducing carbon footprints via efficient modernization strategies
and leveraging AI for greener operations. During the provider briefings, ISG noticed a notable emphasis on regulatory compliance, sustainable IT practices and corporate sustainability reporting. Some providers stand out with specialized ESG-focused services, aiming to address specific sustainability goals and compliance standards. This approach reflects a broader industry trend toward aligning IT modernization with global sustainability objectives, showcasing a significant shift toward responsible and sustainable technology deployments in Europe. However, ISG wants to underline that the energy consumption of GenAI technologies