Best Practices in Banking IT: Mainframe + Cloud Hybrid Model

Treat Mainframe (Z) as enduring “system of record” | Modernize in place with essential SaaS services

By Jack Wagnon, Principal Consultant, SIM

For decades, the mainframe has been the unsung backbone of the U.S. banking industry. Despite past predictions of its demise, experts say 2026 will find the IBM Z platform still firmly entrenched at the center of financial operations. Increasingly surrounded by cloud services, pursuing a hybrid model with your mainframe will deliver speed, resilience and compliance.

Z Basics

At the heart of the story is IBM z/OS, long trusted for large-scale data workloads with near-perfect uptime. Banks rely on the platform for core deposit and loan processing, card authorization and clearing, ACH and wire settlement batches, and the CICS transaction monitors and schedulers that drive them.

The reason for this reliance is straightforward: the Z platform offers unmatched reliability, throughput and integrated cryptography through features such as CPACF accelerators and Crypto Express hardware. Combined with pervasive encryption and advanced key management, the mainframe continues to serve as a system of record with security engineered at all levels.

2026 Hybrid Roadmap

Industry leaders agree the mainframe’s role as the system of record is enduring. What is changing is the architecture around it. The 2026 roadmap points toward hybrid integration: core banking workloads remain on Z, while analytics, customer experience, security and compliance surround it in the cloud.

The strategic imperatives are clear: modernize in place with APIs, move existential surrounds to the cloud, cross-train talent, and govern securely. Done right, the hybrid model promises banks operational excellence, resilience under auditor scrutiny, and faster speed to market—without risking the reliability of the mainframe core.

Modernize in Place

Banks are not planning a mass “lift-and-shift” of their core. Instead, they are modernizing in place by exposing services through APIs, automating workflows and enabling DevOps pipelines that integrate mainframes into hybrid CI/CD environments.

This approach accelerates development, testing and deployment without destabilizing mission-critical systems of record.

Move Essential Surrounds to the Cloud

The key shift lies in surrounding the mainframe-powered core banking framework with cloud-based services. Experts emphasize that banks should move existential, “must-have” surrounds to the cloud: data lakes and warehouses, customer-facing platforms (CRM and digital UX), SIEM tools for security operations, and regulatory reporting services.

Other services, such as AI/ML platforms and archival storage, offer value and agility but are not existential.

Stack rank by customer impact:

Cloud data lake/warehouse — driving BI, compliance and insights.
Cloud CRM and digital UX — direct customer-facing value, enabling modern banking experiences.
Cloud SIEM/SOAR — essential for cyber resilience and regulatory scrutiny.
Regulatory reporting SaaS — reducing compliance costs and accelerating delivery.
Contact Center Cloud — improving customer service integration.
AI/ML platforms — advancing fraud detection, personalization and forecasting.
ETL and data catalog tools — enabling governed pipelines.
Archival and storage tiering — optimizing cost but less urgent.

Mainframe/Cloud Hybrid Model Features Essential SaaS Surrounds

Govern Securely

Security is the non-negotiable pillar of hybrid frameworks. Exposing APIs creates new risks, but industry best practice offers a clear playbook for mitigating these risks. If governed properly, these interfaces expand capability. But poorly configured APIs risk becoming new attack surfaces unless secured with TLS encryption, RACF mapping and audit integration.

What “good” looks like, according to experts:

External Security Manager (ESM) hardening with least-privilege controls.
Pervasive encryption for data at rest and in motion.
Multi-factor authentication on Z for privileged access.
SMF-first audit logging integrated with zSecure and SIEM tools.
APF-authorized code control to protect system integrity.
A quantum-safety posture, with IBM already offering quantum-safe firmware signatures and crypto migration planning on its z16 line.

Factor in the Skills Pinch

One of the sharpest forcing functions in the roadmap is the talent shortage. Banks are increasingly understaffed in z/OS systems programmers, CICS specialists and Db2 DBAs. Analysts recommend cross-training cloud engineers on Z basics through Zowe and z/OSMF, building apprentice pipelines, and leaning on outsourcing and managed services for around-the-clock support in RACF, Db2 and CICS.

Gartner projects that reliance on managed services for mainframes will increase through the decade, with organizations contracting for 24/7 coverage to close expertise gaps.

New IBM Tools Close the Skills Gap – Zowe and z/OSMF

The mainframe’s staying power is now bolstered by new tools designed to close the skills gap.

z/OS Management Facility (z/OSMF) provides a web-based management interface, while Zowe, an open-source framework under the Open Mainframe Project, exposes mainframe resources through REST APIs, CLI tools and web dashboards.

These technologies do not replace core workloads. Instead, they function as interfaces and orchestration layers—the “modern skin” that makes Z assets consumable in a hybrid cloud world.

Analysts say Zowe and z/OSMF let new generations of developers, familiar with APIs and VS Code, interact with mainframes without needing deep 3270 or COBOL expertise. The market currently faces a shortage of qualified, cross-over technical labor. This is creating a reliance on augmented resources and outsourced managed services – from core IT to application management services.

References

Gartner. Forecast: Mainframe Outsourcing Market, Worldwide, 2025–2030. Stamford, Conn.: Gartner Research, 2024.

IDC. Worldwide Financial Services IT Spending Guide, 2024–2028. Framingham, Mass.: IDC, 2024.

IBM. IBM z16 Technical Overview: Security and Resiliency Features. Armonk, N.Y.: IBM Redbooks, 2023.

IBM. z/OS Management Facility (z/OSMF) Documentation. IBM Knowledge Center, updated 2024.

Open Mainframe Project. Zowe: An Open Source Framework for z/OS. Linux Foundation, 2024.

BMC Software. Annual Mainframe Survey 2024: The State of the Mainframe in Financial Services. Houston: BMC, 2024.

U.S. National Institute of Standards and Technology (NIST). Framework for Improving Critical Infrastructure Cybersecurity, Version 2.0. Gaithersburg, Md.: NIST, 2024.

Financial Services Information Sharing and Analysis Center (FS-ISAC). Resilience and Hybrid IT Adoption in Banking. Washington, D.C.: FS-ISAC, 2024.