How Application Modernization Fuels Innovation and Profit Acceleration

At a Glance

The big picture: Application modernization is a business innovation enabler.

Why it matters: Technology leaders are struggling with finding the right balance between upgrading legacy systems and investing in new technology while managing the perspectives, and expectations, of the business, its stakeholders, and the board.

The bottom line: Upgrading the back end of legacy systems delivers very few direct benefits to the business. Moving to the cloud and standardizing an organization’s technology stack allows the IT leader to deliver new features faster while upgrading legacy applications. Most importantly, it allows business and technology to ideate, experiment and deploy faster.

According to the recent Protiviti Global Technology Executive Survey, The Innovation vs. Technical Debt Tug of War, business and technology leaders are struggling to navigate the hype cycles of emerging technologies. They are also contending with obstacles like technical debt and talent shortages.

Technical debt, the accumulated cost of maintaining and supporting legacy IT systems, is a leading obstacle that impacts nearly 70% of organizations’ ability to innovate – and is expensive to tackle. On average, organizations surveyed invest more than 30% of their IT budget and devote more than 20% of their resources just to tame technical debt.

We talk with our clients about these issues every day and we see firsthand how enterprises are integrating modernization and innovation strategies to dissolve technical debt and accelerate achieving their business transformation objectives.

The struggle is real

Although we’ve seen many client successes, this isn’t to say that the technology leaders we work with have found the magical elixir that will allow them to effectively retire legacy systems while seamlessly implementing the latest and greatest technologies, all within budget and on time, of course.

• Our discussions with leaders reveal the ongoing challenge of balancing modernization efforts and adopting new modern technology. Legacy transition requires time, acquiring new skillsets, and incurring costs before achieving financial returns. It creates the platform to accelerate innovation, which has a much higher return in the long run.
• Simultaneously, there is a need to manage the perspectives and expectations of the business, stakeholders, and the board, who desire quick implementation for a faster platform to drive innovation and generate profitable revenue. At the same time, leaders are faced with an evolving workforce that’s bringing its own, new expectations to the table.
• The scarcity of resources with the necessary technical expertise compounds the challenges, as the team responsible for maintaining technical debt must also acquire new technology knowledge and take ownership of its new cloud implementation.
• And change management, while perhaps an overused term, is a significant concern as IT leaders are expected to convince the business to accept the right technology, at the right time, while keeping the lights on through the transformation.

Modernization enables innovation

There can be two ways a tech leader can present the same challenge to the executive team or the board: I need $10 million to modernize or I need $10 million to innovate and, oh by the way, I also need to modernize my tech stack. How well this message is received depends on the priorities of the organization’s board and executive team. We’ve seen this ask both ways and believe it’s always going to result in a better outcome when the focus is put on innovation and business benefits, with a simultaneous update to existing technology. After working with emerging technologies for the better part of the last decade, we feel confident about how we can deliver meaningful experiences and capabilities with newer technology. Addressing technical debt poses an opportunity to potentially do both.

Why it matters: Modernization can be an enabler for innovation. We never talk with IT executives who put in a new application saying, “I used 50-year-old programing language.” When you are talking modernization, you are talking new technology, so in the context of business value, it is important to ask questions like, “What are we going to create?” and “How will this move the business forward?”

Many times, we are brought into programs that start as modernization, then turn into innovation. Companies with legacy systems are competing with digital-native companies so they are asking, “how do I change my business model to better match the market?” We talk with clients about the top ten reasons to modernize and how to measure progress. We know that the quicker a company can make things happen, the quicker business value will be realized, which in turn builds better trust between IT and the business.

What they’re saying: In a recent conversation with technical leaders, they agreed that there is a major evolution in how enterprise applications are viewed underway.

• While a previous approach may have been, “drive this car until the wheels fall off,” now the focus is on agility, scalability, speed and more.
• Upgrading the back end of legacy systems delivers very few benefits.
• But standardizing an organization’s technology stack allows the IT leader to deliver new features while upgrading applications.
• After the new platform is created it provides an opportunity to quickly ideate, experiment and quickly deploy new features and functionality for a faster return. The challenge is the upfront work to get there.

Can innovation and compliance coexist?

A conversation focused on modernization and innovation doesn’t go far before the topic of compliance comes up. Is it possible to look forward while also meeting applicable regulatory requirements?

• Will those regulations limit the ability to think outside the box?
• While auditors understand that technology changes, will they embrace your plans to move ahead? We see these concerns in nearly every project.
• We want to make sure that controls are in place and are implemented at every step in the modernization process.
• We often bring in our own audit teams to make sure we understand the challenges, risks and regulations each client faces.
• Ultimately, we are working with technology leaders to protect the business.

The bottom line: It’s a fine balance between faster, better, more scalable technology and the parameters set by controls and predictability.

Future state vision

Our survey results tell us that global technology leaders recognize strategic planning and building an innovation strategy are not the same thing. There is a meaningful difference between goals and objectives. Most have insights into where they want to go but may be unsure how they want to get there. In fact, almost 80 percent said they have innovation goals but less than 50 percent had a strategy. The devil is in the details. It’s important to have a plan and know how to achieve it. Partnering across the enterprise is critical. Understanding how to build consensus and bring people along to the future state vision is important to that.

The most forward-looking companies today are investing 25 to 30 percent of their profits into modernization. They are innovating, experimenting, giving their engineers time to create and fail. They are building flexible architectures, investing in product managers who sit in the business and are empowered to bring new products to life.

Modernization is not a necessary evil. An innovation agenda should be governed by whether the company is offensively or defensively minded – this informs the debt to be retired and ultimately drives the future state to be achieved.

Read the results of our new Global IT Executive Survey: The Innovation vs. Technical Debt Tug of War.

To learn more about our application modernization and emerging technology solutions, contact us.