Chapter 32 Exercises: Modernization Strategy

Part A: Conceptual Questions

A1. Define the threshold concept "modernization is not migration" in your own words. Give one example of a modernization initiative that keeps the application on the mainframe and one that moves it off the mainframe. Explain why both qualify as modernization.

A2. Explain why automated COBOL-to-Java conversion tools produce code that is "COBOL in a Java costume." What specific characteristics of COBOL program structure (PERFORM THRU, WORKING-STORAGE, REDEFINES, copybooks) create problems when mechanically translated to Java?

A3. Sandra Chen says, "Any modernization proposal that doesn't include a plan for what happens when things go wrong is a proposal to fail expensively." Identify three categories of "things that go wrong" during modernization projects and describe what a mitigation plan for each category should include.

A4. Why does the chapter recommend zero applications for the Rehost strategy at FBA? Under what circumstances would rehost be the right choice? Describe a specific application profile where rehost makes sense.

A5. Explain the concept of "mainframe overlap cost" in TCO analysis. Why does this cost exist, and why do vendor proposals typically omit it? Calculate the overlap cost for a 6,000-MIPS installation at $5,000/MIPS/year if the migration takes 18 months longer than planned.

A6. Describe the three forces driving modernization urgency in the 2020s (workforce cliff, integration imperative, cost conversation). Rank them in order of actual business impact and justify your ranking.

A7. The chapter states that "38% of FBA's portfolio could simply be retired." Explain why dead code and dead batch jobs accumulate in mainframe environments. What organizational factors prevent their removal? What technical factors make them hard to identify?

A8. Compare and contrast the Refactor and Replatform strategies. For an application that currently runs on CICS with DB2 on z/OS, describe what each strategy would involve in concrete terms (which components change, which stay, what new components are introduced).

Part B: Applied Analysis

B1. Portfolio Assessment Exercise

A mid-size insurance company has the following COBOL applications on their mainframe. Score each on the three axes (Business Criticality 1-5, Technical Complexity 1-5, Technical Debt 1-5) and recommend a strategy (Retain, Retire, Refactor, Replatform, Replace).

For each application, provide: - Scores on all three axes with justification - Recommended strategy with justification - Key risks if the strategy is executed incorrectly

B2. TCO Comparison

Using the following data, build a 5-year TCO comparison for maintaining a COBOL batch reporting system on the mainframe versus rehosting it to AWS.

Current mainframe costs: - System contributes 800 MIPS to the total mainframe workload - Software licensing cost attributed to this workload: $4.8M/year - 2 FTE mainframe developers maintaining the system: $340K/year total - Hardware allocation (proportional): $600K/year - Operations support (proportional): $200K/year

Estimated AWS costs (from vendor proposal): - Micro Focus COBOL runtime license: $180K/year - EC2 compute (m5.4xlarge reserved instances, 3 instances): $120K/year - RDS PostgreSQL (replacing DB2): $96K/year - S3 storage for flat files: $24K/year - Data transfer (egress): $36K/year - 2 cloud engineers (retraining existing staff): $380K/year - Monitoring and operational tooling: $60K/year

Migration costs (one-time): - Micro Focus conversion and testing: $2.4M - Data migration from DB2 to PostgreSQL: $800K - Batch scheduler replacement (JCL → Airflow): $400K - Regression testing: $1.2M - Parallel running (6 months): $2.4M (mainframe) + $448K (AWS)

Questions: a) Calculate the 5-year TCO for each option. b) Identify at least five hidden costs not included in the vendor's proposal. c) At what year does the AWS option break even with the mainframe option (if ever)? d) What non-financial factors should influence this decision?

B3. Decision Framework Application

SecureFirst Retail Bank is evaluating modernization strategies for these three applications. Apply the decision tree from Section 32.4.

Application 1: Core Savings Account Processing - 280K LOC COBOL on CICS + DB2 - Processes 50,000 transactions/second peak - p99 latency: 0.8ms - Business need: Mobile app needs REST API access for balance inquiry and transfers - Current access: 3270 terminal only

Application 2: Monthly Statement Generation - 45K LOC COBOL batch - Generates 2.1 million PDF statements monthly - Runs in 3-hour batch window - Business need: Move to real-time digital statements; reduce paper - Current: Batch-only, outputs EBCDIC print files

Application 3: Internal Branch Lookup Tool - 8K LOC COBOL on CICS + VSAM - Used by 50 branch managers for employee scheduling - ~100 transactions/day - Business need: Replace with web-based tool accessible on tablets - Current: 3270 green screen only

For each application, trace through the decision tree and provide your recommendation with full justification.

Part C: Architecture and Design

C1. Modernization Roadmap Design

You are the modernization architect for a regional credit union with the following mainframe portfolio:

• 3,200 COBOL programs (4.2M LOC)
• 2,800 MIPS (z15 model T02)
• Core banking (accounts, loans, deposits): 1,800 programs
• Card processing: 400 programs
• Regulatory reporting: 350 programs
• Member-facing services: 200 programs
• Internal tools and utilities: 450 programs
• Annual mainframe cost: $16M
• Team: 8 mainframe developers (3 retiring within 2 years), 12 cloud engineers, 4 DBAs

Design a three-horizon modernization roadmap:

a) Horizon 1 (0-12 months): Identify 5 specific quick wins, estimate their cost and benefit, and explain why you chose them.

b) Horizon 2 (12-36 months): Define the strategic modernization initiatives. Which applications are candidates for which strategies? How do you sequence them?

c) Horizon 3 (36-60 months): Describe the target architecture. What runs on the mainframe? What runs on cloud? How do they integrate?

d) Governance: Define the governance structures, meeting cadence, and metrics you'll track.

e) Risk register: Identify the top 5 risks and their mitigations.

C2. Dependency Analysis Challenge

The following batch job schedule shows the nightly processing for a banking system. Analyze the dependencies and identify modernization constraints.

JOB: EODBATCH (End of Day Batch Stream)
  STEP 1: EODEXTRC — Extract day's transactions from CICS journals → flat file
  STEP 2: EODSORT  — Sort transactions by account number
  STEP 3: EODPOST  — Post transactions to account master (DB2)
  STEP 4: EODINTCL — Calculate interest (uses INTCALC copybook shared with CICS)
  STEP 5: EODBALUP — Update account balances (DB2)
  STEP 6: EODRECON — Reconciliation check (compares posted totals to journal totals)

JOB: REGBATCH (Regulatory Reporting — depends on EODBATCH)
  STEP 1: REGRPT01 — Generate OCC Call Report data
  STEP 2: REGRPT02 — Generate BSA/AML suspicious activity flags
  STEP 3: REGRPT03 — Generate FDIC deposit insurance report

JOB: STMTGEN (Statement Generation — depends on EODBATCH)
  STEP 1: STMTEXTR — Extract account activity for statement period
  STEP 2: STMTFMT  — Format statements (uses STMTCOPY copybook)
  STEP 3: STMTPRT  — Generate print files for statement vendor

JOB: FEDBATCH (Fed wire/ACH processing — independent, runs parallel)
  STEP 1: FEDRCV   — Receive incoming ACH file from Federal Reserve
  STEP 2: FEDVAL   — Validate ACH entries against account master (DB2 reads)
  STEP 3: FEDPOST  — Post ACH credits and debits (DB2 updates)
  STEP 4: FEDSEND  — Generate outgoing ACH file

Questions: a) Which jobs can be modernized independently and which are tightly coupled? b) If EODINTCL (interest calculation) is the first program targeted for replacement with a microservice, what are the implications for both the batch stream and the CICS online system? c) Which component would you recommend as the first modernization candidate and why? d) Draw the dependency graph showing which modernization efforts must be sequenced.

C3. Vendor Proposal Evaluation

A vendor has submitted the following proposal for modernizing a state government's benefits processing system (12M LOC COBOL/IMS, 6,500 MIPS). Identify the red flags.

Vendor Proposal Summary: - Phase 1 (Month 1-6): Automated analysis and conversion planning - Phase 2 (Month 7-18): Automated COBOL-to-Java conversion using proprietary tool - Phase 3 (Month 19-24): Testing and deployment - Total timeline: 24 months - Total cost: $85M - Projected annual cloud savings: $12M/year (vs. $32M/year current mainframe cost) - Team: 80 vendor engineers + 20 state employees - Risk: "Low — our automated tool has been used successfully on 50+ projects" - Cloud platform: AWS GovCloud - Database: Aurora PostgreSQL (replacing IMS) - No parallel running planned — "cutover is a single weekend event" - Regression testing: "Automated via our proprietary comparison tool" - Business rule discovery: "Handled by our AI-powered code analysis tool"

Write a 2-page evaluation identifying: a) At least 8 specific red flags in this proposal b) Questions you would ask the vendor about each red flag c) What a more realistic timeline and budget would look like d) What alternative approach you would recommend

Part D: Critical Thinking

D1. The chapter argues that "the business rules are the code." Some modernization advocates counter that well-structured requirements documents and domain models can capture business rules independently of the code. Evaluate both positions. Under what circumstances is each correct? Is it possible to fully extract business rules from a 40-year-old COBOL codebase?

D2. Carlos Vega initially pushed for a microservices rewrite at SecureFirst, then changed his mind after seeing production metrics. Analyze this shift: What biases might have driven his initial position? What data changed his mind? What does this tell us about how technology decisions should be made in enterprises?

D3. Sandra Chen's portfolio assessment found that 38% of FBA's applications could be retired. If this is a common pattern (25-40% dead code in large mainframe installations), why hasn't the industry addressed it already? Analyze the organizational, technical, and cultural factors that prevent dead code retirement.

D4. The chapter presents the "workforce cliff" as a modernization driver. Some argue this is overstated — that the mainframe skills shortage can be addressed by training a new generation of developers. Others argue it's understated — that the knowledge being lost is not COBOL syntax but decades of domain expertise. Take a position and defend it with specific examples from the chapter.

D5. Evaluate the ethical dimensions of modernization decisions. When a government agency (like FBA) handles benefits for millions of citizens, who should have a voice in the modernization strategy? What happens to citizens when a modernization project fails? Should there be regulatory oversight of critical-system modernization projects?

Part E: Research and Presentation

E1. Research the Queensland Health payroll replacement project. Write a 1,500-word case study analysis that identifies: (a) the modernization strategy chosen, (b) the specific failures in planning and execution, (c) the impact on end users (nurses and healthcare workers), and (d) what strategy the project should have followed.

E2. Research IBM's Application Discovery and Delivery Intelligence (ADDI) tool and Micro Focus's COBOL Analyzer. Compare their approaches to portfolio assessment. Which aspects of the assessment described in Section 32.3 can they automate, and which require human judgment?

E3. Interview a mainframe professional (or find a published interview) and document their perspective on modernization. What do they think works? What scares them? How do they feel about the "getting off the mainframe" narrative? Present your findings in a 10-minute presentation.

E4. Research the Gartner "Five Rs" framework for cloud migration (Rehost, Refactor, Revise, Rebuild, Replace). Compare it with the Four Rs presented in this chapter. What does Gartner add? What does this chapter's framework add that Gartner doesn't cover? Which framework is more useful for mainframe-specific modernization and why?

E5. The chapter mentions that mainframe software licensing is "MIPS-based" at $3,000-$10,000+ per MIPS per year. Research IBM's pricing models (MLC, IPLA, Tailored Fit Pricing). How has IBM's pricing evolved in response to cloud competition? How does pricing influence modernization decisions?