A common approach to maintaining mainframe or legacy systems has been, “If something isn’t broken, don’t fix it."

Although this may have been an acceptable approach in the past, enabling enterprises to avoid the challenges and risks of modernizing their systems, it isn’t wise today with ever-evolving technological advancements and the business benefits that come with them. If business and IT leaders in the banking industry consider modernizing mainframe systems to be a big risk, they should be aware of the even bigger risks of not modernizing them, that will have an inevitable impact on the business.

Legacy Mainframe Applications Pose Challenges

Mainframe-based applications and platforms lead to several challenges, such as a high total cost of operations (TCO), technical debt and complexity, skills shortages, data silos, regulatory and risk compliance, lack of agility and slower time to market. These pose clear impediments to business growth, especially when compared to a typical cloud-native application, which can promote innovation and agility while ensuring existing business process and practices aren’t lost or disrupted.

Despite all this, 44 of 50 of the world’s top banks run on mainframes.

It is a well-known fact that most of the top banks’ core banking business runs on mainframes, offering security and control benefits while posing challenges to business agility and innovation. With so much for banks to gain in the cloud, the best approach is not to avoid modernization but to approach it more strategically. By developing clear strategies for modernizing legacy mainframes into cloud-native applications, business and IT leaders can effectively “de-risk” the mainframe modernization, accessing the full benefits of the cloud with minimal disruptions to their banking business.

Modernization projects often fail to live up to the hype due to a lack of strategic planning. According to the 2021 Mainframe Modernization Business Barometer Report, 77% of respondents said they started but failed to complete at least one modernization program, and a lack of adequate planning was cited as the primary reason for those failures.

Modernization solution owners often think about application code, databases, and data, but they seldom consider the entire platform ecosystem – the interfaces, target operations, nonfunctional requirements (NFRs), architecture and the loss of knowledge. These oversights pose major risks to modernization initiatives, irrespective of which solution customers are trying to implement. Even seemingly simple lift-and-shift or rehosting projects require planning to prepare for potential effects across the entire ecosystem. While overlooked areas are often encountered in testing or worst-case analysis during production parallel, they can delay go-lives or halt them entirely, negatively impacting the brand, revenues, and timelines.

A Holistic De-Risking Strategy

The key to a successful modernization is detailed planning, which can identify potential risks and propose appropriate mitigation strategies. This kind of holistic de-risking strategy also accounts for various critical points such as:

• Determining the requirements
• Creating the relevant architecture
• Carefully navigating design phases, irrespective of the solution (such as automated migration or rehosting, rewriting, rearchitecting or reengineering, and replacing) 
• Determining appropriate automation and deployment strategies 
• Assembling the right talent and choosing the governance framework

For example, a bank or financial services provider might spend millions of dollars on legacy platforms with middleware in between to build customer and staff experience features and compliance checks. When the firm decides to modernize its mainframe systems, there are several major operations its IT teams will need to consider and develop strategies for: 

• Migrating systems to a new cloud platform 
• Refactoring the monolithic system by rearchitecting it into a macro/micro services-based architecture focused on specific components such as product offerings, customer evaluations and underwriting, regulatory compliance, customer onboarding, customer servicing
• Leveraging these components/engines to bring new banking products and distribution options to market more quickly and efficiently, based on greater levels of agility, while delivering better customer experiences 

Wipro uses a holistic risk-management approach that covers the full range of business, IT, process, employee, operational, and financial risks, as shown below. The de-risking strategy encourages clients to consider several “what if” scenarios and ask strategic questions such as Is there a comprehensive functional knowledge of the current application? Does the data modernization strategy align with the enterprise strategy? Are we prepared for test automation and parallel runs? Do we have a fallback plan automated to react instantaneously? Is there business clarity on deployment approach (e.g., incremental vs. big bang)? 

Wipro has successfully delivered many large modernization programs, consistently demonstrating the de-risk approach by eliminating unanticipated risks. Wipro’s approach focuses on collaboration with business and IT leadership teams, proactively identifying and addressing the inherent fears or risks ensuring a successful modernization journey.

As an example, one of Wipro’s large financial services clients wanted to start on a large custody platform modernization but feared knowledge loss due to the replacement of its legacy mainframe system, which manages over $2 trillion (USD) worth of assets. The leadership team’s fundamental ask was to de-risk the initiative and help their business build confidence even before starting on the modernization journey. Wipro responded by quickly identifying, understanding, and delivering comprehensive documentation on an application’s technical capabilities and how it would align with the custody platform’s business capabilities and processes, eliminating any of the business team’s doubts about how to move forward.

Wipro also worked with a large student aid organization which sought to modernize its mainframe system and become the platform of choice for student loan servicing. The organization had previously embarked on a modernization project that, despite reducing TCO, was not delivering the expected results. Through a strategic consulting engagement built around the de-risked modernization approach, Wipro understood the enterprise’s business objectives, analyzed its legacy applications, and determined the right modernization strategy for harnessing cloud-native platform capabilities, helping them become a more competitive brand, ensuring relevance and resiliency.

With so many options for how to modernize business-critical mainframe applications, enterprises can narrow the field by filtering for strategies that clearly offer an end-to-end, accelerated, and de-risked modernization process. Wipro’s holistic approach to legacy modernization meets all these criteria, while its expertise enables Wipro to partner with businesses across the industry spectrum, including large financial services (banking, capital markets, insurance) and healthcare organizations that are risk averse but are aspiring to modernize. Such strategic approaches can help banking and financial services organizations confidently pursue new opportunities without the fear of exposing themselves to new risks.