BT’s Chief Digital and Innovation Officer (CDIO) Harmeen Mehta’s efforts to trim a £600 million/year legacy IT maintenance bill continue as the telco looks to “move off mainframes given the prohibitive increase in legacy infrastructure cost – without rewriting decades-old applications” and extends a contract with Kyndryl.
IBM spin-off Kyndryl currently runs BT Group’s mainframe estate but has now extended its partnership with BT to deliver the transformation project by 2026 to reduce cost and open up data insights across the mainframe-based applications that service its legacy copper business and consumer broadband products.
As part of the project, some applications are being ‘retired’ (contributing to the Group’s target to get to fewer than 500 strategic systems by 2027, simplifying its technology estate), ‘refactored’ or rehosted on cloud. BT and Kyndryl estimate that the project will cut mainframe operating costs and energy consumption by 70%, generating annual savings of £17 million by the time the project is due to complete in 2026.
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The move comes as BT remains under pressure to trim costs. CEO Philip Jansen said on the firm’s last earnings call that the company has delivered £1.7 billion of annualized cost savings since May 2020 and that “given current market conditions it’s important that we go even further. We… [plan to] deliver an additional £500 million of savings by fiscal year ’25 bringing out total target to £3 billion of growth annualized cost savings.”
Kyndryl said in a press release that it will use APIs and microservices to “help integrate the value of data across wider BT Group systems and drive innovation through automation, while lowering costs.”
The company added: “Applications will be hooked into BT Group’s service management platform, and support its ‘AIOps’ self-healing IT estate model, reducing the risk of downtime and accelerating and automating fixes.”
Speaking at a 2022 BT investor day, BT’s CDIO said: “£600 million of my spend actually goes in maintaining [legacy systems]. And because all of our products are also going live on [them], legacy increases the time to market, increases the complexity even further – and I’ve got a reverse flywheel going there.”
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That £600 million represents half of BT Digital’s budget, and the weight of those legacy systems – representing 80% of BT’s 2,400 applications – means BT’s IT cost to revenue ratio is 40% worse than other telco peers, according to Mehta. She also used the “reverse flywheel” metaphor to describe the effect this complexity has on the company: “If we have so many apps, and for even our simple processes we are going through that level of complexity, every change costs more, takes more time – and that keeps adding into our cost base.”
BT aims to reduce its applications from 2,400 to less than 500, and cut legacy applications from 80% to 30% of total spend by 2027. This plan will also see BT cut its telco stacks from 58 to 14, and halve its legacy IT cost.
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As UNICOM Global’s EMEA CTO Neil Evans has noted in The Stack, it is getting somewhat easier to update mainframe-based applications thanks to new toolkits from IBM and others. As he put it:: “The initial priority for mainframe modernisation has largely been on making important customer-facing applications easy and effortless: think online insurance quotes or mobile banking. These typically constitute the core transaction processing systems for the organisation, and you don’t want the mainframe to do all the work delivering the end-user customer experience – the costs in terms of processing workload would quickly mount up… adding some business logic placed within a middleware layer using technologies such as WebSphere, APIs and JAVA can take away all the other processing that is required to deliver the customer experience, leaving the mainframe to only execute the transactions. IBM’s WebSphere toolkits, for example, allow you to orchestrate all transactions with a layer in between and deliver the front-end experience to mobile apps and websites.
“Importantly, this means you are creating new applications which then communicate with the back-end systems on the mainframe. So, you are not directly modernising or interfering with the core system at all.