Overview

Embracing modernization in the banking sector comes with a degree of risk. Conventional mainframe systems need a cautious revamp without hindering business and offering customer-centric services.

The primary objective of mainframe modernization is to renovate monolithic operations into modular functions, thus enhancing scalability, reliability, agility, resilience, customer satisfaction, and productivity. This reduces costs, workforce, and human error to ensure sustainability in an ambitious market.

Factors Affecting Mainframe Systems from Modernizing

Legacy code base and skills: Financial institutions have lined up to modernize their legacy codes, but with a few issues:

• Inadequacy in planning and clarity on contingencies while shifting the legacy code to new innovative technologies.
• Unavailability of highly competent Developers, DevOps engineers, UX researchers, and data scientists.
• The incompatibility of outdated COBOL-based legacy systems with cloud computing platforms makes code base renewing complex.

Cost Management: Archaic Legacy codes such as transaction and risk management systems are so entangled with the entire system that undoing and transferring can affect revenues.

Performance and Scalability: The mainframe Modernization of core systems must be robust to manage real-time data processing and high-velocity transactions, providing scalability to accommodate future growth. In such a scenario, handling overloads and delivering persistent performance is a complex engineering challenge that requires timely testing and optimization.

Regulatory and Compliance requirements: Failing to adhere to regulatory requirements such as regulations on data privacy, for instance, CCPA, NIST and financial regulations such as IFRS 9, CFPB, FRS, and FDIC, in the hustle of automation, is one of the drawbacks faced by financial institutions.

Total cost of ownership (TCO): A significant bottleneck is managing the costs involved in planning, selection of vendors, under-maintenance revenue loss, employee training, the configuration of a new system, hardware upgrade, productivity downtime, compliance, regulatory administration, engagement of adept consultants, and licensing of new software.

Components of Mainframe Systems and Modernization

Mainframe Operating systems such as IBM zSeries, Unisys MCP, Fujitsu and Hitachi Mainframe Systems, and Bull GCOS are extensively used in both the US and European banking industry owing to their myriad advantages such as supporting open standards, enabling scalability, and enhancing performance. They are modernization-ready as they can easily interface with cutting-edge technology.

Support for contemporary database features like SQL improvements, interaction with big data and analytics platforms, ACID compliance, and adoption of cloud-native database technologies are all indicators for preparedness of mainframe database management systems like NoSQL, cloud-based databases, IBM Db2, CA IDMS, or Adabas, towards modernization.

Security frameworks are modernization-ready since they extend access controls, encryption mechanisms, competency audits, measure compliance, handle new cyber threats, have sophisticated authentication procedures, and lucidly integrate with contemporary security.

How to modernize mainframe systems in financial institutions

Decomposition Levers:

After a detailed inspection, financial institutions usually inherit seven levers to decompose monolithic mainframe software into smaller, manageable components, as follows:

• Deduct unwanted and unused customization components
• Inculcating a master database for information procurement
• Providing numerous operations for CBS (core banking systems) externally through efficient operating systems
• Escalation of data extraction to affordable and alternative data sources
• Turning to microservices for channelling customized needs
• Replacement of intricate liaisons by application programming interfaces (APIs)

Reducing complexity: Removing complex and redundant functionalities, rewriting obsolete legacy codes, dropping manual interventions, and automating workflow to simplify business processes and increase efficiency.

Optimizing Costs: Migrating to cloud technologies through a hybrid approach or transferring specific applications and understanding and downsizing the mainframe systems through resource scrutiny, hardware consolidation, and virtualization technology applications can reduce functionality costs.

Conclusion

Without tampering with the ongoing applications of legacy systems or processes, it is vital to figure out solutions offered by modernization and approaches that Financial institutions should consider

• Rehosting: Lifting and shifting the existing applications to a new platform, such as x86 servers, private or public clouds, or virtualized environments with sparse modifications if necessary.
• Re-platforming: It migrates mainframe operations to a different platform, such as Linux or Windows servers, or adopts containerization technologies like Docker or Kubernetes, with modifications to some legacy codes for better performance in the cloud.
• Rearchitecting: It demounts the system into small segments, adopting service-oriented architecture (SOA), microservices, or event-driven architecture to decouple and modularize the mainframe applications and refactor parts of the code to align with the new infrastructure.
• Redevelopment: It rebuilds the entire system using innovative technologies and modern programming frameworks and languages. Cautious planning and enough time and resources are required for this solution since it reimplements complete application logic and functionality.

The CBS has become more agile due to mainframe modernization, making it simpler for business functions to access crucial data, implement price changes more quickly, and create novel recommendations to satisfy both present and future client needs.