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Enterprise modernization efforts aren’t what they used to be. Once limited to the IT side of the house, modernization efforts today now rightfully top the executive agenda.
This makes sense. Modernization, when done right, drives increased reliability, resilience and revenue across organizations. The result: Happier customers and a more healthy organization.
More organizations are recognizing this. Over the next five years, as much as 90% of legacy applications will be replaced by modern systems, according to a recent Infosys survey of 1,500 senior technology leaders and executives.
But while modernization’s importance is on the rise, not all modernization efforts are equally successful. On one hand, there has been a heartening rise in the number of organizations that have taken 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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Why discretionary modernization fails
Earlier this year our team set out to better understand the state of application modernization across large and small enterprises. In conversations with IT leaders and executives we found that, while companies overall invest 65% of their discretionary budget on modernization projects, smaller organizations were more likely than larger ones to do so.
This is dangerous. Companies that rely on discretionary budgeting to modernize their systems are more likely to experience frequent and severe disruptions, according to the business leaders we spoke to.
The costs of such downtime can be immense. According to some estimates, a minute of system downtime can cost an organization as much as $5,400. In today’s economy, few organizations can afford that kind of loss.
Why strategic investment succeeds
Fortunately, while many organizations still rely on discretionary investment, the majority are thinking differently. More strategic, future-thinking companies are approaching modernization like a marathon, building modernization roadmaps optimized for pacing, planning and persistence.
There are a few benefits to this approach. For one, thinking strategically allows organizations to be more deliberate. For example, we’ve seen consistent success among organizations that have embraced phased implementations of modern applications. This approach, also known as “coexistent” implementation, is less disruptive and ensures business continuity. It’s particularly important for critical systems, which are the most costly when they go down.
Second, organizations that embrace strategic modernization are also more likely to be able to articulate the commercial outcomes of their efforts. It’s hard to overstate how valuable this is. Nearly a quarter (24%) of the IT leads we spoke to said that cost was the most significant hurdle to their modernization projects. A better understanding of the financial impact can help. After all, it’s far easier to secure executive sponsorship for a project if you can explain to your finance team how it will drive revenue, reduce costs or, ideally, do both simultaneously. Indeed, 29% of the leaders we spoke to said that having a valid business case was most important to ensuring that a modernization program reaches its objectives.
Third, a more strategic approach to enterprise modernization can also drive a more informed approach to talent development. The tech talent crunch is real for organizations both large and small. When we asked respondents about the most significant impediments to their modernization efforts, more than half cited the skills gap and the difficulty of both retraining existing technologists and recruiting new ones. Thinking long-term can help IT teams better understand their current talent gaps and how to address them in a structured, sustainable way.
A more modern approach to modernization
To close, let’s highlight one element that separates successful business transformation efforts from less successful ones: The ability to articulate and share a single, cohesive vision for modernization. The organizations that succeed are those that can tell a story that aligns their people, process and technology. The organizations that fail are the ones that can’t.
Gautam Khanna is the vice president and global head of the modernization practice at Infosys.
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