Study: Majority of Banks Considering Moving Mainframes to the Cloud

Banks are reducing their decades-long dependence on legacy mainframe technology and aim to migrate a large percentage of their key business processes to the cloud, according to a recent Accenture research report. It’s part of banking strategies to offer new products rapidly and remain competitive. 

According to Accenture’s recent survey, four out of five banks are planning to migrate mainframes to the cloud or have already done so. The study, titled ‘The Great Cloud Mainframe Migration: What Banks Need to Know,’ is based on a global poll of 150 information technology and innovation executives representing banks in 16 countries across five continents.

According to the study, almost four out of five respondents (82%) intend to migrate more than half of their mainframe workloads to the cloud, with nearly one in four (22%) intending to migrate more than three-quarters, and the great majority intend to do so within the next two to five years.

Photo Michael Abbott, who leads Accenture’s Banking industry practice globally.
“Most basic banking products like checking and savings accounts are powered by a spaghetti tangle of code written decades ago,” said Michael Abbott, who leads Accenture’s Banking industry practice globally.

Although most banks have begun to migrate certain applications to the cloud, they would still rely on mainframe technology for the majority of their key business processes, such as customer data, payments, investments, risk, and compliance.

“While many banks have embraced cloud for customer-facing systems like mobile and online banking and employee tools like email and video conferencing, they still rely on older mainframe technology for their core business functions,” said Michael Abbott, who leads Accenture’s Banking industry practice globally. “As a result, most basic banking products like checking and savings accounts are powered by a spaghetti tangle of code written decades ago. Faced with rising interest rates, competition from fintechs and increased competition for deposits, banks are looking to the cloud to help them quickly drive core banking product innovation.”

Technological Expertise

According to the survey, these institutions perceive a compelling economic case for mainframe migration, citing speed and agility, security, and the capacity to add new capabilities as key drivers (cited by 43 percent, 41 percent and 37 percent of the respondents, respectively). Three-fifths of executives (62%) expect a higher internal rate of return on their migration investments than 10%, and more than three-quarters (77%) expect to recoup their mainframe migration investment in less than 18 months.

The risk of business interruption, a lack of understanding of how the code works, the capacity to attract and retain the proper technological expertise, and regulation of security and compliance issues are all major obstacles or barriers to mainframe cloud migration.

“Banks do well at recruiting and investing in young talent, but retention is a struggle,” added Mr. Abbott. “Successful banks are reshaping their cultures by creating roadmaps for the skills they need in the future and developing strategies for hiring from new talent pools and reskilling their workforce. Some are also dramatically increasing their use of external talent pools and embracing remote and hybrid workforces. Tackling talent challenges will be crucial for banks in achieving their mainframe migration goals over the next few years.”

Among other key findings of Accenture’s global survey:

  • Banks see the cloud as an opportunity for efficiency as mainframe costs rise – The great majority of banks questioned (91%) said the expense of maintaining mainframes has grown in recent years.
  • Talent needs are specific – The most in-demand talents among banking executives are cybersecurity (47%) and cloud solutions (46%) abilities, which include the ability to develop cloud-based virtual infrastructure, platforms, and applications for speed and agility.
  • Most legacy mainframes are between five and 20 years old – The mainframe systems of 58 percent of those polled are 5-10 years old, 27 percent are 11-20 years old, and 9 percent are 21-30 years old.
  • Public cloud is the preferred option for core system migration – Almost two-thirds of banks (63%) aim to shift their mainframe workloads to public cloud settings, which can bring further cost savings, flexibility, and simplicity of regulatory compliance; one-third (31%) expect to utilize a hybrid cloud model; and just 6% plan to use private cloud.

The survey was conducted online in December 2021. The banks involved in Accenture’s survey all have more than $100 billion in assets (33% have more than $1 trillion in assets; 33% have $500 billion to $1 trillion in assets; and 33% have $100 billion to $500 billion in assets), are either planning to migrate their core functions to the cloud or are already doing so. Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, Saudi Arabia, Singapore, Spain, Sweden, the United Kingdom, and the United States are among the countries represented.