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How mainframe modernisation is powering government digital transformation
Mainframes are no longer seen as a constraint on public sector digital transformation, with government agencies abandoning rip-and-replace strategies in favour of modernising mainframe systems with hybrid cloud and AI
Australians expect government services to work as smoothly as the banking or retail apps they use every day. From healthcare to social security, citizens want fast, personalised, secure digital services that work. When they don’t, trust in public sector organisations erodes quickly.
But those digital front doors are only as good as the platforms behind them. For many agencies, the mainframe remains the engine room: the platform that processes high volumes of transactions, enforces controls, and maintains a system of record for critical citizen services.
The challenge is that many of these core environments were built decades ago and were never built for today’s transaction volumes, cyber threats or expectations of real-time, always-on service delivery. Yet, despite common assumptions that digital transformation means leaving the mainframe behind, governments aren’t abandoning this vital technology. They’re modernising them and integrating them into hybrid environments to deliver better public outcomes, not just better technology.
Australia is doubling down on mainframe capability
Kyndryl’s latest 2025 State of mainframe modernisation survey shows that Australian organisations – including government entities – are doubling down on the platform. In fact, four out of five (80%) of responding ANZ organisations have shifted their mainframe modernisation strategies in the past year.
Mainframes continue to underpin mission-critical operations. In ANZ organisations, 57% of mission-critical applications still run on mainframes, and usage is growing: half of the surveyed organisations increased use in the past year, with 54% expecting further growth ahead.
Why? Because mainframes continue to do what they’ve always done well: process high-volume transactions securely and without interruption. But now agencies are finding new ways to unlock their value. Rather than just replacing stable systems and rebuilding them elsewhere, they are exposing mainframe data through application programming interfaces (APIs), connecting it to cloud platforms, and introducing automation and AI.
This allows governments to extend the life of proven systems while accelerating digital service innovation, without risk to citizens.
The shift in modernisation strategies
We are seeing a strategic inflection point. Nearly 80% of ANZ organisations have changed their modernisation approach in the past year, with 46% modernising more on the mainframe. As such, they are re-thinking not whether to modernise, but how.
For government agencies, hybrid is the practical answer. Highly regulated, high-dependency workloads continue to run where they run best, while digital enhancements are layered around them. This approach reduces operational risk, a core consideration in environments where even brief downtime can disrupt payments, delay healthcare access or hinder emergency response.
Agentic AI can strengthen this risk-managed approach by helping teams automate discovery and dependence mapping, identify potential failure points earlier and accelerate testing and remediation. In practice, it can reduce the risk and effort associated with modernising mainframe environments, while preserving the reliability, security, and data gravity that mission-critical government services depend on.
This shift is being driven by the need to integrate modern technologies such as cloud, AI and APIs, to support new applications and data growth, and to enable business and service transformation. Done well, it allows agencies to modernise with these technologies continuously, rather than betting everything on a single ‘big bang’ migration.
Modernisation tied to measurable public outcomes
Modernisation only matters when it results in better services for citizens. The organisations seeing the strongest returns are those that start with outcomes they want to deliver, rather than simply focusing on infrastructure updates.
For government agencies, these gains translate into tangible improvements such as faster processing times that speed up access to services, lower costs per transaction that free up public funds, greater uptime and reliability, and stronger fraud prevention and compliance. For the government, that means clearer benefits for citizens and better use of public money, not just a more modern technology stack.
Survey respondents report returns of 215% to 290% depending on the strategy they choose – whether modernising on the platform or moving specific workloads elsewhere. For agencies, these gains translate into tangible improvements for citizens, such as faster processing times that speed up access to services, lower costs per transaction that free up public funds, greater uptime and reliability, and stronger fraud prevention and compliance.
In a sector where reliability equals public trust, these outcomes matter. When systems are stable, secure and responsive, citizens notice.
What leading agencies are doing now
The data makes it clear that governments are not moving away from mainframes but modernising them with a clearer, more deliberate strategy. Leading agencies are modernising first and considering migration only when it aligns with a clear strategic benefit. They are also turning to specialist partners to support this work, recognising that safe, cost-effective transformation requires depth of experience. This approach reduces complexity and risk while allowing them to modernise at a pace that aligns with service priorities.
The mindset shift underway is significant, with the mainframe no longer seen as a constraint on digital transformation but as a foundation for it. It has quietly powered the systems that governments cannot afford to fail, but today, when connected and modernised, it becomes an enabler of innovation – supporting new digital services without compromising the integrity of what already works.
Looking ahead, agentic AI has the potential to make mainframe environments more self-optimising and hybrid-integrated, supporting faster innovation without compromising reliability and security.
The future of digital government will not be built by replacing everything at once, but by evolving the systems that already work and applying modern capabilities where they deliver the greatest public value. In this context, mainframe modernisation is not just supporting digital transformation; it is powering it.
Michael Vincetic is practice leader for cloud, core enterprise and zCloud for Australia and New Zealand at Kyndryl
