Thank you for joining us for this 10-part series to discuss the Top 10 Ways You can Save on your Mainframe Costs in 2023.
If you can't wait for all 10 to come out, you can request the eBook here which has all 10 included.
- Nearly all Clients are Clamoring for Savings in 2023. This is largely due to (a) rising input costs, (b) softening business forecasts, and (c) continued economic headwinds. This has caused many clients to re-evaluate spending plans and implement new cost-cutting targets.
- IT is the Number One Cost Savings Category of the Modern Enterprise. IT is typically the highest indirect spend area for modern enterprises and is also the cost category with the highest potential yield (we average about 33% savings on addressable IT spend). In addition, since 2020, clients have largely exhausted conventional cost savings countermeasures such as canceled projects, delayed spending plans, and cuts in discretionary spending, and many have even gone through Reductions In Force (RIFs), and/or even facility closures. As a result, clients are at risk of cutting muscle and bone this year as savings demands persist, but desperate measures are not necessary when we can help you harvest considerable value from your mainframe supply chain, do so with minimal risk, and perhaps even get additional value from modernization and other benefits.
- NET(net) is the Number One IT Cost and Value Optimization Provider. In the last 20 years, we have shaped over $2 Trillion of investment, captured well over $400 Billion of incremental value for our clients and partners, and have an 85% probability of achieving savings ranging between 13-53%.
When it comes to Mainframes, we see incredible savings opportunities in 2023. Not since 2008 has there been as much downward pricing pressure on technology incumbents, and we believe meaningful savings targets can be achieved, but due to the market conditions, incumbent suppliers will be highly disruptive to any cost savings agenda, so it will require a commitment to do the hard work.
Step 0: BONUS! Price Benchmark Your Mainframe Costs to see how much You can Save
Price benchmarking is generally the first thing a client organization should do in any situation where they are considering a cost savings effort. It is (of course) extremely important to understand if there is any room for improvement, and to measure the potential benefit against the effort required to achieve it (e.g., is the juice worth the squeeze). In the mainframe, this is certainly the case, as so much of the ecosystem is under the control of just a few suppliers who largely act as an oligopoly. However, in 2023, we expect these suppliers to be even more disruptive than normal when it comes to customer-initiated cost savings efforts, and fully expect them to be forcing through their own price increase agendas despite the external downward market pressures on pricing, which means value will be difficult to extract, which is why we strongly suggest professional representation through this process.
So sign-up today for a mainframe cost Price-Benchmark, and we will get started on helping you save money right away.
Where you are in your modernization journey will certainly have an impact on your potential to save. Modern enterprises, especially those in six major industries (banking, government, healthcare, insurance, retail, and transportation & travel), still rely heavily on the mainframe. Most are immersed in a mainframe modernization strategy that follows at least one of the “6 Rs.”
The "6 Rs" for mainframe refer to the strategies and best practices used to modernize and optimize mainframe systems to meet the demands of a changing IT landscape. The 6 Rs are:
- Rehost: Moving existing mainframe applications to cloud-based or virtualized environments.
- Refactor: Modifying the structure or design of applications to make them more flexible and scalable.
- Replace: Replacing outdated or non-strategic mainframe applications with modern, cloud-based or open-source alternatives.
- Retain: Retaining the core functionality and business logic of existing mainframe applications while modernizing the underlying technology.
- Retrain: Training personnel to work with new technologies, tools and processes.
- Retire: Retiring old or non-critical mainframe applications that are no longer needed.
The 6 Rs are not a one-size-fits-all approach and the specific steps taken to modernize a mainframe environment will depend on the specific needs and constraints of each client organization. The goal of the 6 Rs is to help client organizations modernize their mainframe systems in a way that maximizes the value of their existing investments while minimizing risk and disruption.
Client organizations that are committed to modernizing are also then faced with a bevy of decisions about how best to transform, and the pursuit of these ambitions all have an impact on how quickly and effectively clients could reduce, minimize, or potentially even eliminate mainframe costs.
Digital transformation is the process of leveraging technology to fundamentally change how organizations operate and deliver value to customers. There are several key strategies that organizations can use to drive digital transformation, including:
- Customer-centricity: Focusing on delivering exceptional customer experiences by using technology to understand and meet customer needs.
- Data-driven decision making: Leveraging data and analytics to inform decision-making and drive business outcomes.
- Agile and DevOps: Adopting agile and DevOps methodologies to speed up the delivery of new products and services.
- Cloud computing: Moving to cloud-based infrastructure, platforms and software to increase agility, scalability, and reduce costs.
- Automation: Automating manual and repetitive tasks to improve efficiency, reduce errors and increase speed.
- Digital culture: Cultivating a digital culture that values innovation, experimentation and collaboration.
- Cybersecurity: Ensuring the security of data and systems by adopting robust cybersecurity practices and technologies.
These strategies are not mutually exclusive, and many organizations adopt a combination of them to drive their digital transformation. The specific strategies an organization adopts will depend on its goals, market, customers and current technology capabilities.
Where to Look?
Many modernization efforts for client organizations include mainframe upgrades to IBM’s latest platform, the z16, and these proposals from IBM are often bloated with significant over-investments based on perceived ‘technical requirements’ and are frequently sub-optimized with costs well above market rates. The ability to strong-arm customers with high mainframe dependencies into these upgrades was one of the reasons why the IBM Mainframe Monopoly was up in 2022, while nearly every other major technology company was down; some by half their value or more. We accurately predicted this in our previous blog entitled, “The Top 5 Reasons Why the Mainframe Empire will Strike Back in 2022.” Still, the majority of IBM customers have yet to upgrade, so this remains a big concern in 2023. As a result, clients seeking to save money on the mainframe should work with us to look closely at any upgrade plans from IBM to be sure these deals are cost and value optimized.
Mainframe Costs are Exorbitant Compared to Cloud. Mainframes cost as much as 4,500% more to operate than equivalent Cloud solutions. This figure is compounded by a scarcity of development resources and rising licensing and maintenance fees for ancillary mainframe utilities, applications, and databases.
Client organizations that are engaged in digital transformation efforts are overwhelmingly migrating workloads to the cloud and away from the cost albatross of the mainframe, and IBM has not yet been able to establish themselves as a reliable and objective partner when it comes to helping clients migrate workloads off the mainframe and to the cloud, clearly illustrating “IBM’s Diminishing Role in the Modern Enterprise.” However, not all workloads are suitable for the cloud, especially those that are data intensive, and the 70% of the digital transformation efforts that fall short of their goals (according to BCG) often result in a backlash of increased demand back to legacy platforms such as the mainframe. As a result, clients are advised to work with us closely to think well beyond IBM when it comes to sourcing the right eco-system of partners that are truly aligned to helping your organization with its digital transformation objectives.
Beyond IBM on the mainframe, there are the Independent Software Vendors (ISVs) that often consume a large part of the IT budget, especially if there has been a recent mainframe upgrade that has resulted in more MIPS (Millions of Instructions Per Second). In a recent article entitled, the “Top 20 Mainframe Software Suppliers,” we highlighted how the mainframe was still consuming large parts of the IT budget, and how legacy suppliers like CA, BMC, ASG, Compuware, and others (many of whom also have March fiscal year-ends) were still potentially pernicious consumers of discretionary spending if IBM upgrade deals weren’t done in an extremely careful way to future-proof organizational safeguards. If you were one of the clients who worked with us to do this, you know what we’re talking about, but if not, we recommend all client organizations consider how best to future-proof any planned mainframe upgrade against unexpected hikes from your ISVs or you could see significant cost increases with these suppliers.
Further, beyond IBM and the ISVs, there are The Top 10 IT Services Companies for 2023, many of whom are mainframe-centric when it comes to digital transformation, application development, application maintenance, https://www.netnetweb.com/content/blog/the-top-10-it-services-companies-for-2023and support services – up to and including outsourcing. Many of these types of deals come due in Q1 as well, as there is a glut of supplier fiscal year-ends in March for suppliers such as DXC, Fujitsu, Infosys, Kyndryl, LTI, Mindtree, Mphasis, NTT Data, TCS, Tech Mahindra, and Wipro – among others. IBM’s spinoff of Kyndryl has resulted in some market disruption. We warned of this in 2022 with the article, “Time to Defuse Your Kyndryl Deal BEFORE it Detonates,” where we highlighted how IBM had essentially outsourced the attrition of the IBM customer and revenue base to a now ‘external’ organization in a message to the market that basically admitted IBM was no longer a player in digital transformations to the cloud, despite its enormous investments in Soft Layer and the seemingly never-ending ethereal yet antithetical marketing to the contrary. In response, Kyndryl started using the spin-out from IBM as an excuse to start raising rates and increasing costs with its customers, which is precisely what our client organizations don’t want or need right now, so we added another blog on this topic last month called, “The Top 5 Ways to Save on Kyndryl.” If you are even considering doing anything with Kyndryl, we want to talk to you.
In summary, the Top 5 places to look for direct savings on the mainframe is (i) with IBM, (ii) with the ISVs, (iii) with the ‘mainframe-centric’ IT Services Providers, (iv) with a supplier eco-system that can help with workload migrations to the cloud, and (v) with a supplier eco-system that can help with digital transformation efforts, especially as it relates to strategies surrounding the 6 Rs.
How Much Can You Save?
By working closely with NET(net) to price benchmark and implement these and other savings strategies as part of our Top 10 Ways to Save on Mainframes, client organizations can reduce their mainframe costs significantly and better align their spending with their actual usage, resulting in a more cost-effective mainframe environment.
- Clients fully committed to mainframe modernization efforts can save 80-90%.
- Clients who are committed to a mainframe cost optimization initiative (including workload migrations), but who have limited ability to move applications off the mainframe can still see savings between 32%-60% with full scoped efforts.
- Clients who are unwilling or unable to consider disruptive strategies, but those that still want to work with us strategically to optimize mainframe consumption and maintenance costs can see savings that range anywhere from 13%-33%.
- Clients who believe they can do this all on their own and those who believe they have all the skills, toolsets, and market & supply side knowledge to get the best outcomes have a savings opportunity of 5-15%, but most get only minor or no savings and unfortunately erode the opportunity to get future savings by unknowingly making subtle, yet critical mistakes which is why we always strongly recommend working with us as a trusted advisor.
Remember, this part zero is just a bonus in this series. Our first installment (1 of 10) in this 10-part series of the Top 10 Ways You can Save on your Mainframe Costs in 2023 is due to come out March 1, and will detail how clients can Optimize Mainframe Licensing to save money on mainframe costs.
In all respects, extracting value from the mainframe supply chain in 2023 is not be easy as the big iron cartel will not only be wildly disruptive to any cost savings effort, but they will also be implementing their own cost increase agendas. If you're ready to learn more and are dedicated to putting in the hard work with us, Contact Us today to learn more about how we can help you save on your mainframe as well as all your other technology investments or Sign up now for a Savings Cloud subscription, and we will get started on helping you save money right away.
Founded in 2002, NET(net) is the world’s leading IT Investment Optimization firm, helping clients find, get, and keep more economic and strategic value in their technology supply chains. Over the last 20 years, NET(net) has influenced trillions of investment, captured hundreds of billions of value, and has helped clients cost and value optimize all major areas of IT Spend, including XaaS, Cloud, Hardware, Software, Services, Healthcare, Outsourcing, Infrastructure, and Telecommunications, among others. NET(net) has the experience you want, demonstrates the expertise that you need, and delivers the performance you demand and deserve. Contact us at email@example.com, visit us online at www.netnetweb.com, or call us at +1 (616) 546-3100 to see if we can help you capture more value in your IT investments, agreements, deployments, and relationships.
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