In the Age of AI, Mainframe Modernization Crucial for European Firms

Amid slower economic growth, Europe’s enterprises favoring smaller modernization projects that demonstrate clear ROI, ISG Provider Lens™ report says

LONDON--(BUSINESS WIRE)--Facing cost pressures, skills shortages and increasing regulation, European enterprises are leveraging service providers to modernize their mainframes and integrate them with cloud platforms to drive AI innovation, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a global AI-centered technology research and advisory firm.

The 2025 ISG Provider Lens™ Mainframe – Services and Solutions report for Europe says the region’s slow or near-stagnant economic growth has made enterprises more cautious about IT investments. Many favor smaller, high-impact modernization projects that demonstrate clear ROI.

Meanwhile, the need for innovation is spurring more companies to invest in upgrading their mainframes and adopting hybrid models that blend the reliability of mainframes with the agility and scalability of the cloud. Companies, in particular, are looking to harness data across platforms for AI and analytics.

Service providers in Europe are responding with novel tools and platforms that enable more incremental, service-based approaches to modernization. Generative AI (GenAI) has become increasingly viable, assisting organizations with code refactoring, documentation and skills transfer.

“Some 28 percent of mainframe clients tell us they lack the in-house skills to be able to modernize their mainframe systems effectively,” said Dr. Matthias Paletta, director and ISG lead for technology modernization in EMEA. “With up to 30 percent of Europe’s IT workforce retiring by 2030, and with universities having already transitioned to teaching cloud-native and web-based development, the talent pool for mainframe positions is shallower than ever before.”

Over the past 18 months, the use of GenAI in mainframe environments has progressed from niche pilot tests to structured deployments, particularly in industries like banking, insurance and public administration that rely heavily on mainframes, the report says. Providers say GenAI is enabling faster discovery of code dependencies and helping bridge knowledge gaps for younger developers. Yet it still requires domain-specific tuning and subject-matter experts to validate output.

Strict European data protection laws add complexity to mainframe modernization, as organizations must handle code and correlated data carefully to avoid breaching GDPR or sector-specific regulations, the report says.

Expected improvements in the use of GenAI in mainframe modernization include the development of more precise domain-focused models to handle COBOL variants and legacy data structures, integrated compliance features that log and audit AI use, and deeper ties to DevOps pipelines for automated testing. Many providers, the report says, are working on capabilities supporting hybrid cloud architectures, where modern and legacy systems interconnect seamlessly.

“Enterprises’ mainframe teams are shrinking,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “So, more and more, they’re turning to outsourced and managed services to maintain their mission-critical systems. This frees those teams from having to constantly monitor their systems and respond to incidents, so they can focus on innovation.”

The report also explores other trends, including the continuingly low availability of Mainframe as a Service (MFaaS) options for Europe. Although the MFaaS model has gained more visibility among potential customers in the last 18 months, adoption remains measured, and the number of providers offering MFaaS is still minimal.

For more insights into the landscape for Europe’s mainframe service providers, see the ISG Provider Lens™ Focal Points briefing here.

The 2025 ISG Provider Lens™ Mainframe – Services and Solutions report for Europe evaluates the capabilities of 46 providers across five quadrants: Mainframe Optimization Services, Application Modernization Services, Mainframe as a Service, Mainframe Operations and Mainframe Application Modernization Software.

The report names Atos, DXC Technology and TCS as Leaders in four quadrants each. Capgemini, HCLTech, Infosys and Kyndryl are named Leaders in three quadrants each. Cognizant and Wipro are named Leaders in two quadrants each. Accenture, Avanade, AWS, Google, Heirloom Computing, LTIMindtree, Rocket Software, TmaxSoft and TSRI are named Leaders in one quadrant each.

In addition, Kyndryl and NTT DATA are named as Rising Stars — companies with a “promising portfolio” and “high future potential” by ISG’s definition — in one quadrant each.

In the area of customer experience, UST is named the global ISG CX Star Performer for 2025 among mainframe services and solutions providers. UST earned the highest customer satisfaction scores in ISG's Voice of the Customer survey, part of the ISG Star of Excellence™ program, the premier quality recognition for the technology and business services industry.

A customized version of the report is available from TSRI.

The 2025 ISG Provider Lens™ Mainframe – Services and Solutions report for Europe is available to subscribers or for one-time purchase on this webpage.

About ISG Provider Lens™ Research

The ISG Provider Lens™ Quadrant research series is the only service provider evaluation of its kind to combine empirical, data-driven research and market analysis with the real-world experience and observations of ISG's global advisory team. Enterprises will find a wealth of detailed data and market analysis to help guide their selection of appropriate sourcing partners, while ISG advisors use the reports to validate their own market knowledge and make recommendations to ISG's enterprise clients. The research currently covers providers offering their services globally, across Europe, as well as in the U.S., Canada, Mexico, Brazil, the U.K., France, Benelux, Germany, Switzerland, the Nordics, Australia and Singapore/Malaysia, with additional markets to be added in the future. For more information about ISG Provider Lens research, please visit this webpage.

About ISG

ISG (Nasdaq: III) is a global AI-centered technology research and advisory firm. A trusted partner to more than 900 clients, including 75 of the world’s top 100 enterprises, ISG is a long-time leader in technology and business services that is now at the forefront of leveraging AI to help organizations achieve operational excellence and faster growth. The firm, founded in 2006, is known for its proprietary market data, in-depth knowledge of provider ecosystems, and the expertise of its 1,600 professionals worldwide working together to help clients maximize the value of their technology investments.