More enterprises chip away at high costs by modernizing applications, moving to cloud or outsourcing legacy software operations, ISG Provider Lens™ report says

As macroeconomic conditions made enterprises in the Americas more cost-conscious in 2023, interest in mainframe modernization increased significantly, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The 2024 ISG Provider Lens™ Mainframe — Services and Solutions report for the Americas finds that while not all organizations are moving away from legacy systems, mainframe software maintenance licenses represent a major expense that a growing number of firms want to reduce or eliminate.

“Despite ongoing innovation in enterprise computing, mainframes are stable and reliable, so many companies remain committed to the technology,” said John Schick, Americas leader, Mainframe Modernization and Optimization, for ISG. “Mainframe optimization services and outsourcing help to make that possible.”

Most IT organizations in the Americas that need to cut costs are quickly rehosting their mainframe software in the cloud, the report says. Others are rewriting legacy applications in modern programming languages or re-engineering them, both of which ensure like-for-like behavior and performance that can be validated through automated testing.

Strategies to reduce costs while retaining legacy code remain popular, ISG says. The market for outsourced mainframe operations and mainframe-as-a-service (MFaaS) continues to grow. More organizations are decommissioning on-premises data centers to fulfill sustainability goals. MFaaS provides a cloud-like, pay-per-use experience on a private cloud, while mainframe operations engagements let clients retain hardware and software ownership as needed.

Mainframe application modernization is accelerating in the U.S., driven more by cost considerations and the need for regulatory compliance than by innovation, the report says. In Brazil, the second-largest IBM mainframe market after the U.S., application modernization services are expected to keep growing in 2024. The country’s largest banks have started modernization and migration initiatives, attracting interest from global cloud giants.

Enterprises grew more interested in generative AI’s potential to further automate mainframe modernization in 2023, ISG says. Though today’s GenAI platforms cannot replace tools that rewrite or re-engineer mainframe applications, there have been demonstrated use cases involving tasks such as explaining business rules and summarizing logic for better documentation.

“Excitement about GenAI’s future is increasing interest in AI solutions that already make application modernization faster and more efficient,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research.

The report also explores other mainframe trends in the Americas, including the rising interest in DevOps methodologies for mainframe optimization and a wave of acquisitions in the rapidly growing market for application modernization software.

For more insights into the biggest mainframe challenges enterprises face, including local skills shortages and the high cost of software integration, along with ISG’s advice for addressing them, see the ISG Provider Lens™ Focal Points briefing here.

The 2024 ISG Provider Lens™ Mainframe — Services and Solutions report for the Americas evaluates the capabilities of 57 providers across six quadrants: Mainframe Optimization Services, Application Modernization Services, U.S., Application Modernization Services, Brazil, Mainframe as a Service (MFaaS), Mainframe Operations and Mainframe Application Modernization Software.

The report names DXC Technology and Wipro as Leaders in five quadrants each. It names Capgemini, Ensono, Infosys, Kyndryl and TCS as Leaders in three quadrants each. Accenture and Cognizant are named as Leaders in two quadrants each. Astadia (Amdocs), Atos, Avanade (Asysco), AWS, GFT, Google, HCLTech, Heirloom Computing, Hexaware, LTIMindtree, mLogica, Mphasis, OpenText, TmaxSoft and TSRI are named as Leaders in one quadrant each.

In addition, FNTS is named as a Rising Star — a company with a “promising portfolio” and “high future potential” by ISG’s definition — in two quadrants. Kyndryl and NTT DATA are named as Rising Stars in one quadrant each.

Customized versions of the report are available from AWS, AveriSource, Base100, FNTS, Heirloom Computing, Hexaware, LzLabs, mLogica, Recovery Point, and TSRI.

In the area of customer experience, HCLTech is named the global ISG CX Star Performer for 2024 among mainframe services and solutions providers. HCLTech earned the highest customer satisfaction scores in ISG's Voice of the Customer survey, which is part of the ISG Star of Excellence™ program, the premier quality recognition for the technology and business services industry.

The 2024 ISG Provider Lens™ Mainframe — Services and Solutions report for the Americas is available to subscribers or for one-time purchase on this webpage.

About ISG Provider Lens™ Research

The ISG Provider Lens™ Quadrant research series is the only service provider evaluation of its kind to combine empirical, data-driven research and market analysis with the real-world experience and observations of ISG's global advisory team. Enterprises will find a wealth of detailed data and market analysis to help guide their selection of appropriate sourcing partners, while ISG advisors use the reports to validate their own market knowledge and make recommendations to ISG's enterprise clients. The research currently covers providers offering their services globally, across Europe, as well as in the U.S., Canada, Brazil, the U.K., France, Benelux, Germany, Switzerland, the Nordics, Australia and Singapore/Malaysia, with additional markets to be added in the future. For more information about ISG Provider Lens research, please visit this webpage.

A companion research series, the ISG Provider Lens Archetype reports, offer a first-of-its-kind evaluation of providers from the perspective of specific buyer types.

About ISG

ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including AI and automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,600 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.

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