Financial Services CFO Nightmare: The Mainframe That Ate My P&L

Back in March 1991, Stewart Alsop, a venture-capitalist and editor of InfoWorld said, “I predict that the last mainframe will be unplugged on March 15th, 1996”.

Hindsight, as they say, is 20/20, so we know now, this could not be further from the truth. The mainframe is not only ‘not’ a dinosaur, it may be the single most important technology in the financial services industry, running almost every large Bank and Insurance Company’s back end system in the world.  Still today, seemingly only the mainframe can handle the performance requirements & reliability demands of these challenging operating environments and support the sheer volume of transactions demanded of it in today’s ever self-supporting ‘prosumer’ market.  On top of these pressures, is the demand that the information be served instantaneously to almost any device, in any ‘connected’ location around the globe.

Keeping up with the frenetic pace, are the heroes in a Financial Services Company’s Technology Group, working to not only keep up with demand, but deliver 100% availability, 24 hours a day, 7 days a week.  Most organizations run the mainframe and its software as a giant single point of failure.  In this environment, the first imperative is to deliver reliability non-stop because the alternative is simply unacceptable:

Those examples are but just a few higher profile outages last year:  there are many more.  The criticality can’t be understated, as just a 1-minute outage can cost millions and impact thousands of customers.  With competition getting more aggressive for your market share, any outage can cause thousands of accounts to be lost in the blink of an eye, not to mention the millions in transaction fees alone.

Why would, or should, this keep a CFO up at night?  While any lost transaction fees and or customers from an outage is bad for business, the lack of oversight and cost controls over this mission critical technology can cripple P&Ls in both the short and long term.  While the technology heroes are preoccupied with ‘keeping the lights blazing’, they are not necessarily scrutinizing the consumption costs of these same services.

Beyond the initial cost of the hardware, the software, and the services, Mainframe monthly consumption costs can eat as much as 40% to 60% of an IT budget, and the costs are difficult to predict, and even more difficult to manage.  What’s worse – the shifting reality of the customer demographic is increasingly demanding full features, 24x7 web access to their information, mobile use and consumption of all the banking services, and complete customer self-service.  It might not surprise you to hear that many of the IBM pricing metrics are not aligned with this new reality, causing a huge spike of consumption charges in this legacy environment when not future proofed and proactively managed as a specialty area for cost optimization.  This industry problem is pervasive and is afflicting most of the largest financial organizations in the world.  You can imagine why IBM is still making enormous profit from its mainframe business – literally at the customer’s expense. 

Optimizing the consumption costs of the mainframe (MCO - Mainframe Cost Optimization) in the financial services sector is quickly becoming NET(net)’s number one consumption management practice area for good reason – it’s needed.  While financial institutions are focused on customer retention and 100% availability, their consumption costs are skyrocketing and as is often the case, they are at the same time getting locked in to those escalating costs for years to come.

MIPS (Millions of Instructions Per Second – a measure of consumption) is steadily rising and it is anticipated that this trend will continue well into the foreseeable future, as the mainframe continues to be a pivotal player in the financial services industry, and as virtually all clients are currently undergoing digital transformation.  The NUMBER ONE priority for CEOs, CFOs and CIOs alike within any bank, insurance, or financial services environment should be Cognitive Transformation - a comprehensive program encompassing mainframe restructuring, mainframe cost optimization (MCO), and digital transformation.  MCO should be a major tenant of this multi-pronged strategy and be considered a force multiplier to Cognitive Re-structuring in substantially reducing and optimizing related mainframe costs.  Engaging NET(net) for MCO will not only increase operating margins, but the Savings generated can be a resource to fund digital transformation throughout the organization. 

MCO is the single best opportunity for Banks, Insurance Companies, and other large Financial Services Organizations to capture value in the mainframe operating environment, but only if you have the right expertise, and only if you’re managing it with a strong commercial focus.  Don’t get caught with shrinking margins and an out of control and unexpected budget. Work with NET(net) to implement MCO now.  Virtually all clients doing MCO save money, and 85% of our clients’ experience savings from 7-30%.

Click here to download our case study describing how a large global financial institution used MCO to:

  • Realize incremental cost savings of several million dollars
  • Achieve sustainable value as mainframe consumption and business demand increases, while at the same time costs actually decrease

About NET(net)

Celebrating 15 years, NET(net) is the world’s leading IT Investment Optimization firm, helping clients find, get and keep more economic and strategic value. With over 2,500 clients around the world in nearly all industries and geographies, and with the experience of over 25,000 field engagements with over 250 technology suppliers in XaaS, Cloud, Hardware, Software, Services, Healthcare, Outsourcing, Infrastructure, Telecommunications, and other areas of IT spend, resulting in incremental client captured value in excess of $250 billion since 2002. NET(net) has the expertise you need, the experience you want, and the performance you demand. Contact us today at, visit us online at, or call us at +1-866-2-NET-net to see if we can help you capture more value in your IT investments, agreements, and relationships.

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