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The Price of Legacy: How Mainframe Maintenance Costs are Straining IT Budgets

Updated: May 29, 2023

By Hari Candadai


Thanks to their unparalleled stability and reliability, mainframes still power the world’s leading businesses, including banks, airlines, retailers, and healthcare, who need to manage billions of secure transactions every day. In fact, the mainframe is still the platform of choice for most of the world’s Fortune 500 companies.

Despite all the promises you hear about cloud computing, mainframes are hard to beat in terms of speed, security, uptime, and processing power. They can also last for more than 10 years, run multiple operating systems at once, and offer compatibility for both new and legacy applications.

These crucial core systems are inherently reliable, stable, and secure. But if something does go wrong, they require immediate attention. Even a few minutes of downtime can lead to devastating financial compliance risks for companies and their customers.

Businesses recognize the importance of keeping these systems in good shape and maximizing the value of their existing investment. However, most IT departments do not have the required expertise in-house. So, they turn to external support.

Mainframe Maintenance Costs Burying IT Budgets

As you know, mainframe ownership is a serious financial commitment. In addition to the initial investment, a large percentage of the total cost of these super computers goes toward maintenance. A portion of that cost is related to hardware, but the majority is dedicated to ongoing support and maintenance of the software that is running on the mainframes.

Companies are investing 90 percent of their IT budgets on just keeping the lights on, according to Gartner’s 2021 “IT Metrics Data: Executive Summary.” Software maintenance costs are now increasing faster than interest rates. Ten years ago, they comprised about 70 percent to 80 percent of a typical IT budget. That figure is now at 90 percent and rising.

Software maintenance fees alone used to run about 15 percent to 18 percent of the software license fee, but Bamboo Agile reports that in some cases, that percentage has increased to 20 percent and even 25 percent. On a $500,000 license deal, that five percent hike adds up to an additional $125,000 over five years.

And adding insult to injury, IBM raised its prices as much as 15 percent at the beginning of this year, in what it calls “modest price changes” that will improve “worldwide price harmonization.”

Pricing strategies that megavendors use to keep themselves profitable are not only directly impacting your budget, but your overall company growth as well.

Evergreening

Marketed as a modernization strategy to keep organizations up to date, evergreening relies on the notion that constantly replacing and upgrading systems is an essential part of a company’s digital agenda.  

However, these upgrades actually provide little value on the customer side since they are not necessarily about better product performance. Legacy systems don’t see a lot of innovation. Given the maturity of enterprise software, it is rare that an upgrade will contain new features that can truly add value to the application. 

What if You Do Not Upgrade?

If you decide not to upgrade, you will not receive any support from megavendors. You will not be able to log a ticket on an IBM software version that has already reached the end of support or access newly-released fix packs, which places your company and your systems at risk of downtime. 

This poses a dilemma for organizations that do not need to upgrade and would rather free up some of that maintenance budget for digital initiatives. Companies that are unaware of available alternatives can spend years stuck in needless upgrade cycles paying for forced upgrades. 

Diminished Overall Support

Long-time customers with older products find that their levels of support diminish over time, even as support costs increase. Most megavendors offer no fixed SLAs. There are many stories of customers waiting days, sometimes even weeks or months for fixes.

These customers tend to log fewer tickets because their products are generally stable. It is not unreasonable to think that they should benefit from maintenance contracts that match their support needs. These organizations need solid support but that is delivered in a more responsible and relevant way.

Resource Drain

The number one reason companies upgrade is due to end-of-support pressure from vendors. Otherwise, who would want to endure everything upgrades entail? They are rarely lift-and-shift operations and often take a great amount of time and expertise. Since companies tend to have their core operations and services built on multiple layers of legacy technology, it makes it challenging to implement a piecemeal approach to overhauling enterprise IT.

Patching and updating might offer short-term convenience, but at a potentially high long-term cost. Upgrades can make legacy systems even more convoluted and complicated to manage, and companies rarely have the internal expertise to handle potential interoperability challenges.

Lastly, skills are as valuable as dollars. In this current business climate, everyone is trying to figure out ways to best allocate their people resources as well as financial. If top IT talent is busy managing upgrades, they are not working on strategic initiatives for digital innovation.

Gartner Calls Third-Party Software Maintenance a “Quick Win”


Contrary to what you have heard in the past, you do have a choice when it comes to software support. When it comes to decisions about their legacy estates, third-party software maintenance can help put IT teams back in the driver’s seat.

Following OEM-mandated upgrades might offer companies short-term convenience, but it ultimately creates long-term dependencies and challenges that make legacy systems even more difficult to manage, pushing organizations deeper into technical debt.

In its 2022 “Market Guide for Independent Third-Party Support for IBM, Oracle and SAP Software,” Gartner found that using independent third-party software support can transform a company’s digital estate, resulting in an enhanced tech stack, reduced cybersecurity vulnerability, and overall improved performance.

When third-party support is a feasible alternative, Gartner labels significant software maintenance and support cost reduction opportunity a “quick win,” pointing out that it can keep budgets flat by “eliminating ongoing annual maintenance and support increases when organizations are challenged to meet cost-saving goals and initiatives.”

Take Control of Your IT Roadmap

Third-party software maintenance can protect, enhance, and extend the life of IBM estates and save up to 50 percent of your annual support spend. That can also mean quick response times and innovative problem-solving at almost half of the price of standard vendor support.

But it is not just about cost. It is about taking control of your IT roadmap and finding a unique, customized solution for your organization.

When megavendors make decisions about product longevity, upgrade frequency, and price changes without customer input, the customer loses control. These steadily rising maintenance costs and end-of-service decisions are greatly impacting the autonomy and agency of long-term customers.

With third-party software maintenance, companies can receive customized help to stave off potential audits, increased protection from cyberattacks, and concierge service that megavendors cannot provide.

Audits

One of the primary reasons organizations stay with megavendor plans is to protect themselves from audits.

That is understandable, given that companies can often face steep fines for seemingly small discretions in complex licensing rules. However, keeping OEM support does not guarantee immunity from audits.

Megavendors regularly modify their licensing metrics and regularly audit existing customers regardless of whether they have support in place with them or not.

Some third-party maintenance providers offer audit support that offer business insight into the tactics used during an audit, including a review of the compliance position, an assessment of potential exposure, and advice on how to limit the scope should an audit occur.

Cybersecurity

Cyber incidents are the number one risk to today’s businesses. In fact, the threat of data breaches and major IT outages has now surpassed natural catastrophes, supply chain issues, and even pandemic outbreaks on the Allianz Risk Barometer.

It is vital that IT decision-makers have a complete understanding of the threat environment in which they operate and how to strengthen their security protection.

OEMs offer security patches to address vulnerabilities, but the current cybersecurity climate requires much more. These patches are developed to be deployed to the mass market and are not tailored to individual customers.

This assumes the software has been uploaded right out of the box and that no customization or other configuration was needed. If there is any custom code the OEM is not aware of, implementing a security patch could severely impact the very thing it is supposed to help. The patch could actually break it, making the cure worse than the disease.

Megavendors will also only check for interoperability of their products within an open-source element shipped with their software. What is really needed is support regardless of version, custom configuration, or whether the issue lies within an open-source component. Each company’s unique set of circumstances needs to be addressed to identify the risk in a timely manner and leave you holistically more resilient to cyberattacks.

Service

Software support should be a help, not a headache. Third-party software maintenance provides a level of support megavendors simply cannot deliver. The glaring absence of SLAs causes downtime, lost revenue, and frustration.

On the other hand, third-party software maintenance providers can deliver access to expertise and customized support in a matter of minutes, which leads to smoother ticket resolution and peace of mind knowing you can talk to the same person every time you call.

This is personalized, dedicated support 24x7 from product experts who understand all the various challenges your systems can face, allowing you to free up resources: Not just budget costs, but time and people, too.


Author Bio

Hari Candadai is senior vice president of global marketing and thought leadership at Origina, the leading provider of third-party IBM and HCL software maintenance. A seasoned marketing leader and accomplished speaker, he has more than 20 years of experience in global solutions marketing, thought leadership, and market research.

Email: h.candadai@origina.com

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