Financial services companies are stepping up efforts to move away from traditional mainframe systems in favor of cloud services, according to new research from NTT Data.
In a company study, 91% of respondents reported board-level support for a shift to the cloud, and 87% highlighted growing pressure to integrate AI technologies within their respective companies.
The reason such a notable shift in thinking is occurring can be attributed to a variety of factors, the most significant of which has its roots in the current rise of generative AI.
Respondents described generative AI as a key motivating factor in accelerating their shift to the cloud. Nearly two-thirds (63%) said the emergence of technology was “decisively facilitating” their efforts to migrate workloads and applications to the cloud.
Another 33% see generative AI as potentially helping the complexities of data migration, while 29% look to the new technology to help mitigate risk factors.
Nearly half (45%) of respondents said they were already integrating AI into their technology stacks, while another 30% were in the early stages of adoption.
Cost was also a major factor contributing to the decision to move away from mainframes, respondents told NTT Data. About 17% cited “cost reduction” as a key motivator in moving to the cloud.
However, cloud flexibility and scalability took higher priority than cost, described by 36% of respondents as the key factors for migration.
The abandonment of mainframes has been a long-term process
As NTT data shows, this move to the cloud has been in full force for some time and shows no signs of slowing down.
94% of banks currently use public cloud systems, 48% opt for a multi-cloud approach and 32% focus on hybrid cloud systems.
Enrique Ávila, director of IT transformation at Banco Sabadell, said that while the mainframe is expected to remain for the foreseeable future, current industry trends are causing widespread rethinking among financial services IT leaders, many of them who are eager to reap the benefits of technologies such as generative AI.
“While the mainframe and its associated applications are expected to remain relevant for the foreseeable future, it is undeniable that the arrival of generative AI will have a profound impact on the delivery of technological services,” he said.
“This will enable the deployment of viable methods to modernize existing technology landscapes, facilitating the transformation and evolution towards more modular cloud-based components across the software value chain,” he added.
The banking sector will have its fair share of challenges to overcome
Although the industry is excited about the benefits of the cloud, significant obstacles remain to achieving digital transformation success, the report warns.
Even though 89% of banking leaders describe themselves as innovators, for example, 63% still operate on the outdated mainframe system.
Not “a single respondent” of the 650 decision makers surveyed said that “all appropriate applications” had been removed from the mainframe,” according to NTT.
Another 78% also described moving away from mainframe systems as “a challenge.”
To mitigate the challenge, banks and financial services companies have been looking outward; The report found that 88% of banks had turned to “technology partners” to help them on their cloud migration journeys.
Skills shortages are also a recurring challenge faced by IT leaders in the industry, the report adds. NTT specifically highlighted that a marked decline in the availability of experienced mainframe experts has become evident.
This created an environment where banks have to ensure the “continuous operation of their existing mainframe systems” while also seeking to “keep pace with the rapidly changing digital landscape.”
The result is a worrying lack of systematic training and skills in new technologies.
80% of respondents reported a lack of a strategic framework for the adoption of generative AI, for example, clearly expressing the need for a training and upskilling program.
