Modernizing mainframes is proving to be a high-impact strategy for enterprises. The average yearly cost savings reported by organizations is $23.3 million, even though the investment usually only accounts for 3.9% of the IT budget. Infact, updating workloads on the mainframe improves profitability by 9%, integrating with other platforms adds 11%, and migrating off the mainframe also delivers an 11% profit increase. These numbers show that carefully planned mainframe modernization, integration, or migration initiatives directly strengthen operational efficiency and financial performance.
This blog explores the strategic value of mainframe hosting by examining its return on investment (ROI), diverse cost models, and real-world use cases.
What Is Mainframe Hosting and Why Does It Still Matter?
Mainframe hosting is an infrastructure service where businesses outsource the management, maintenance, and operation of their mainframe systems to specialized providers. They provide compute capacity, storage, security, and technical services, via various cost structures. This frees up organizations from making significant upfront hardware, cooling, and personnel investments while providing high availability and disaster recovery support.
Despite the surge of cloud computing, mainframe hosting remains crucial due to unrivaled
- reliability,
- security,
- and transaction processing capacity.
Mainframes power key operations in banking, airlines, government, healthcare, and retail markets where even tiny delays can affect loads of people.
Long-Term Growth Outlook:
According to Forbes, 62% of respondents consider the mainframe platform destined for long-term growth and expect it to host new workloads, highlighting its continued strategic importance even in modern hybrid and cloud-integrated IT environments.
Since AI integration, virtualization, and hybrid cloud support are contemporary innovations, hosting these systems allows businesses to modernize their infrastructure while safeguarding workloads that are essential to their operations.
Understanding ROI in Mainframe Hosting
Organizations must evaluate pre-modernization costs and post-modernization advantages, taking into account the whole cost of implementation, while calculating the return on investment of mainframe hosting or modernization.
Cost Savings & Efficiency Gains
Pre-modernization overheads include hefty operating and licensing fees (like MIPS charges), dedicated staffing (mainframe operators, COBOL programmers), data center costs, and third-party support. Substitution of mainframes with other systems generally removes or significantly reduces these costs and enables recruitment from a wider, lower-cost talent base.
Productivity improvements and enhanced integration also deliver indirect value through accelerated innovation and reduced operational friction.
In fact, a 2024 survey from Kyndryl reveals remarkable ROI based on modernization approach:
- 114% for modernizing workloads on the mainframe
- 145% for integrating mainframe applications with other platforms
- 225% for migrating applications off the mainframe altogether
ROI Calculation
When evaluating ROI for mainframe modernization, several cost categories must be considered, such as:
- Direct Costs of Retaining Mainframes
Recurring costs like licensing, hardware, utilities, and specialized staff needed to maintain mainframe environments.
- Indirect Costs of Retaining Mainframes
Hidden expenses including limited agility, integration challenges, slower innovation cycles, and the opportunity cost of maintaining legacy systems.
- Post-Modernization Costs
The regular expenses post-migration, such as hosting fees, cloud infrastructure fees, or managed services, are generally lower and more manageable than legacy infrastructure.
- Modernization Implementation Costs
Costs associated with one-time investment in migration, i.e., tools, consulting, reskilling staff, and transitional support.
While comparing these four categories, organizations can create a clear picture of cost impact, which allows for the accurate calculation of ROI of modernization efforts.
Strategic Flexibility and Risk Mitigation
Sophisticated automation and AI-based tools now enable modernization to be quicker, less risky, and more affordable than ever before, with improved ROI potential. ROI is influenced by upfront migration costs, decreased continuing operating costs, and agility advantages from modernization programs for both small and big businesses.
Cost Models for Mainframe Hosting
New mainframe hosting provides varied cost models attuned to enterprise needs, with a focus on flexibility, scalability, and cost management.
- Tailored Fit Pricing (IBM Z)
This usage-based model brings cloud-type billing to hardware and software. Tailored Fit Pricing features offerings such as Software Consumption, Hardware Consumption, and Development/Test models, which are aimed at leveling out cost fluctuation, flexing to elastic demand, and making budgeting easier.
This technique, combined with IBM mainframe system services, brings predictable outcomes and decreases the complexity of traditional licensing approaches.
- Full Capacity vs Sub-Capacity Licensing
Full Capacity: Charges are based on the maximum MSU (Million Service Units) or MIPS capability of the system, regardless of actual usage.
Sub-Capacity: Billing aligns with real usage measured via logical partitions’ peak 4-hour rolling average, enabling cost savings when workloads are optimized.
- Scaling Advantages via Aggregated Licensing
Managed service providers also leverage purchasing scale to bring down costs for smaller enterprises through bundled “Mainframe-as-a-Service (MfaaS)” offerings. As smaller organizations often face higher per-MSU costs, MfaaS models that enable pooled bulk licensing can reduce costs significantly for such clients.
Modern pricing models also extend to cloud-integrated structures, merging mainframe and cloud usage into a unified framework for hybrid environments.
- Managed or Hosted Services
Outsourcing mainframe operations to providers using pay-as-you-go or fixed monthly fees transfers operational risk and complexity. The model includes hosting, security, capacity planning, and maintenance as a package into a fixed cost.
Workload balancing, rightsizing, and monitoring are examples of cost management strategies that reduce resource waste and prevent fees for high utilization. Additionally, businesses can benefit from advanced cost analytics to find inefficiencies, optimize workflows, and boost return on investment.
By selecting appropriate pricing models and maintaining optimization, organizations may reduce total cost of ownership while maintaining the performance and dependability that mainframes offer.
Use Cases: Where Mainframe Hosting Delivers Tangible Business Value
Mainframes continue to anchor critical business operations across multiple sectors, underpinning functions where reliability, throughput, and security are paramount:
- High-Volume Financial Processing
Mainframes are still irreplaceable in banking and finance for processing enormous transaction volumes, including ATM withdrawals, online bank transactions, and credit card transactions, supported by unparalleled performance and fault tolerance.
They handle the overwhelming majority of all financial transactions around the globe with near-instantaneous accuracy.
- Insurance, Healthcare & Government Services
These industries use mainframes for the processing of sensitive information (e.g., patient information, claims adjudication, tax records), where uptime and compliance are paramount. The platforms ensure high levels of encryption, auditability, and continuous availability.
- Real-Time Transaction Systems: Aviation & Retail
Mainframe operating systems designed for real-time transactions are used by airlines to handle tickets, reservations, crew scheduling, and cargo logistics. Retailers use mainframes to sustain transaction consistency and up-to-date inventory across high-traffic environments.
- Innovation in AI, ML, and Big Data
Mainframes are transforming into analytics frameworks. They now support machine learning, like ML for z/OS, and host big data applications, preventing expensive data movement.
Additionally, generative AI is being embedded in mainframe environments for tasks like code translation, automated scripting, test data generation, and knowledge coaching. helping bridge talent gaps and modernize legacy codebases.
- Blockchain and Private Cloud Enablement
Leveraging the inherent security and scalability of mainframes, organizations are deploying blockchain applications benefitting from immutable ledgers and fast encryption. Similarly, mainframes serve as the foundation for secure private or hybrid cloud environments where regulatory constraints limit public cloud adoption.
Conclusion
Mainframe hosting continues to provide enterprise-critical operations with excellent dependability, security, and throughput. Organizations can enhance operational efficiency and minimize costs by employing correct ROI studies, appropriate cost models, and modernization methodologies. More than merely historical servicing, modern mainframe hosting supports essential operations in the public sector, banking, retail, healthcare, and travel. Furthermore, it has developed into a flexible platform for safety cloud infrastructure, blockchain, analytics, and artificial intelligence.
FAQs
What Are Mainframe Computers Used for in Business?
Financial operations, payroll, reservations, enterprise resource management, high-volume transaction processing, and mission-critical applications that demand scalability, security, and dependability.
What Are the Four Types of Mainframe Computers?
Mainframes for large-scale corporate processing include the IBM Z Series, UNIVAC Series, Fujitsu GS Series, and Honeywell 6000 Series.
What Programming Languages Are Used in Mainframes?
COBOL, PL/I, Assembler, REXX, and Java are used for system programming, business applications, automation, and modern integration tasks.
Arsen Harutyunyan is a freelance link-building and digital PR specialist who helps SaaS companies and growing brands earn high-authority coverage and appear in LLM results (ChatGPT, Perplexity, AI Overviews). He combines proven SEO strategies with innovative workflows—such as Google Sheets + GPT automations—to build links at scale, drive sustainable traffic, and future-proof brands in the era of AI-powered search.