U.S. Public Sector Applies AI to Mainframe Modernization

Organizations in the U.S. public sector are adopting AI-enabled solutions to modernize and sustain mainframe environments, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a global AI-centered technology research and advisory firm.

The 2026 ISG Provider Lens Mainframe ― Services and Solutions report for the U.S. Public Sector finds that agencies are rethinking mainframe strategies as the December 2026 deadline for liquidating pandemic-era funding approaches. Many organizations are balancing the need to maintain mission-critical systems with pressures to reduce costs, improve efficiency and ensure long-term sustainability.

“AI is helping public-sector organizations address longstanding mainframe challenges while preventing disruption of essential government services,” said Nathan Frey, ISG partner and lead, U.S. Public Sector. “It enables new strategies for extending the useful lives of critical systems while improving operational efficiency.”

U.S. public agencies seeking mainframe modernization are using AI to document legacy applications and extract business rules, the report says. This helps them understand complex, poorly documented systems that have been maintained for decades by staff members who, in many cases, are now retiring. Improved visibility into application logic reduces these organizations’ reliance on scarce expertise and paves the way to more efficient maintenance. By making legacy environments easier to navigate, AI tools also reduce training requirements for new staff.

Many organizations are adopting targeted modernization strategies that focus on business outcomes rather than broad transformation models, ISG says. Agencies are deciding which applications to keep on mainframes, integrate with cloud environments or remove from legacy systems. Secure APIs are enabling connections between mainframes and cloud platforms, providing access to critical data for analytics and AI training. This approach improves flexibility while maintaining strict security requirements.

Cost pressures and evolving security risks are shaping adoption decisions across the public sector, the report says. Agencies are embracing hybrid architectures and selective offshoring of non-sensitive workloads to improve efficiency. Modern technologies such as microservices and DevOps help them make this transition while preserving control over sensitive data. At the same time, organizations are strengthening defenses against growing cybersecurity threats, including those associated with AI and quantum computing.