Why modernization investments should be more strategic than discretionary

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Business modernization efforts aren't what they used to be. Once confined to the IT side of the home, modernization efforts are now rightly at the top of the executive agenda.

That makes sense. Modernization, when done well, leads to increased reliability, resiliency, and revenue in all organizations. The result: happier customers and a healthier organization.

More and more organizations recognize this. Over the next five years, up to 90% of legacy applications will be replaced by modern systems, according to a recent Infosys survey of 1,500 technology executives and senior executives.

But even though modernization is becoming more and more important, not all modernization efforts are successful. On the one hand, there has been an encouraging increase in the number of organizations taking a strategic approach to their modernization projects. On the other hand, we still see many organizations that rely on a more haphazard approach, exposing them to a wide variety of risks.

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Register now Why Discretionary Modernization Fails

Earlier this year, our team set out to better understand the state of application modernization in large and small enterprises. In conversations with IT managers and executives, we found that while companies overall invest 65% of their discretionary budget in modernization projects, smaller organizations were more likely than larger ones to do so.

It's dangerous. Companies that rely on discretionary budgeting to modernize their systems are more likely to experience frequent and severe disruptions, according to business leaders we spoke to.

The costs of such downtime can be immense. By some estimates, one minute of system downtime can cost an organization up to $5,400. In today's economy, few organizations can afford this kind of loss.

Why Strategic Investing Succeeds

Fortunately, while many organizations still rely on discretionary investing, the majority think differently. More strategic and forward-looking companies approach modernization like a marathon, building modernization roadmaps optimized for pace, planning, and persistence.

This approach has a few advantages. On the one hand, strategic thinking allows organizations to be more deliberate. For example, we've seen consistent success among organizations that have adopted incremental implementations of modern apps. This approach, also known as “coexisting” implementation, is less disruptive and ensures business continuity. This is especially important for critical systems, which are the most expensive when they fail.

Second, organizations that embrace strategic modernization are also more likely to be able to articulate the business results of their efforts. It's hard to overstate how valuable this is. Nearly a quarter (24%) of IT managers we spoke to said cost was the most significant barrier to their modernization plans. A better understanding of the financial impact can help. After all, it's much easier to get executive sponsorship for a project if you can explain to your finance team how it will generate revenue, reduce costs, or ideally do both simultaneously. In fact, 29% of the leaders we talk to...