The Unyielding Mainframe: Understanding Its Role In A Cloud-Driven Future

In a sector that is by its nature, risk-averse and cautious, it’s no surprise that mainframes have long been the backbone of the banking industry. Their operational resilience and robust security features have made them a trusted technology for decades. As recently as 2020, IBM published a business report1 that found 45 of the global top-grossing banks still prefer mainframe computers. 

However, change is coming.

NTT DATA’s latest research shows that cloud technologies combined with AI may be about to loosen the mainframe’s grip on banking. In a period marked by the ubiquity of digital transformation, the allure of cloud technologies' flexibility, scalability, and innovative capabilities – not to mention the draw of AI itself - is becoming increasingly hard to ignore.

The Tenacious Grip of Mainframes

Mainframes have long been synonymous with reliability in the banking sector. Their robust architecture has ensured the smooth handling of massive transaction volumes, underpinning the critical operations of banks for decades.

The demise of mainframes has long been forecasted, it is often dubbed as legacy tech on the brink of extinction. Yet, these robust machines continue to power core business processes for banks. Their longevity can be attributed to several factors:

• Reliability and Stability: Mainframes are renowned for their impressive uptime and resilience against failures, making them an attractive option for businesses that require high availability.
  
  
• Security: Built with robust security features, mainframes offer an unmatched defense against cyber threats, ensuring the protection of critical data and operations.
  
  
• Legacy Applications: Many legacy applications, developed over years, are so deeply embedded in organizational processes that migrating them to newer platforms poses a daunting challenge. The cost, risk, and time associated with these migrations often deter companies from moving away from mainframes.
  
  
• Performance: For large-scale transactional workloads, mainframes still offer impressive processing power that are powerful enough for the tasks they were built for, and new mainframe hardware is still being developed and released.

However, while these factors have contributed to the mainframe's impressive lifespan, technological advances and changing business needs indicate that its reign may be waning.

Cloud: The Strategic Enabler

Cloud-based infrastructure is not only an operational platform but also a strategic enabler. It offers banks the flexibility to adapt to rapidly changing regulatory environments, improve operational efficiency, and respond to changing customer expectations. It also offers direct access to the latest innovations in AI and analytics.

In the world of banking, where agility is key to staying competitive, the cloud's ability to facilitate rapid change is invaluable. According to NTT DATA's research, 89% of decision-makers view their banks as innovators. However, a significant 63% still rely on mainframe infrastructure, with 20% yet to start transitioning to cloud platforms. This paradox highlights the challenge of balancing innovation with the reliability of established systems.

Generative AI: A Catalyst for Change

The rise of AI, particularly Generative AI, is reshaping the capabilities of the banking sector. From data analysis to the creation of new digital outputs, AI is a transformative force. A staggering 63% of industry leaders confirm that Generative AI is accelerating their transition towards cloud-based applications. This AI-driven shift is not just about technological advancement but also about redefining the very essence of banking services and solutions.

But interestingly, generative AI itself may accelerate the move to cloud, with the technology having a role in recoding legacy applications, automating testing, and reducing the risk of migrating off mainframe hardware.