This blog will guide you through designing a modernization approach that integrates strategy, process, and technology.
In my last blog, I explained what modernization really means and why it’s important. This blog will guide you through designing a modernization approach that integrates strategy, process, and technology. Getting these elements right will help position your organization to successfully adopt new innovations like AI. We’ll first cover some common challenges to modernization, then use the Forrester Application Modernization Checklist to show how a holistic modernization approach can help you address them.
But before we go into detail, let’s summarize what we’ve learned so far. Modernization means updating and improving assets across all areas of your business to ensure they work well with evolving software and the cloud. Successful modernization goes beyond technology upgrades or cloud migrations and is a holistic approach to modernizing your people, processes, and skill sets.
The result is technology that is more aligned with meaningful outcomes, especially when it comes to AI. AI is worth thinking about as a catalyst and Accelerator of modernization. In fact, 61% of business leaders say their organizations plan to invest the most in generative AI as they prepare for the next evolution of generative AI-based apps.1.
Organizational and technical barriers complicating modernization for AI readiness
Modernization is essential, but it is also complex. On the technical side, businesses can rely on vast legacy app assets. IDC research shows that on average, 50% of an organization’s application assets are legacy application assets, which often result in weak interdependencies and bottlenecks.2. This only gets worse when new technologies are added to the mix, increasing the complexity of the information technology (IT) environment.
Operationally, the situation is also disappointing. Many businesses struggle with manual processes and security issues that delay modernization, made worse by an ongoing shortage of skilled IT professionals.3. Then there is the issue of leadership buy-in. Modernization can be expensive, making it difficult to justify it to key decision makers.
“It costs millions of dollars for a bank to modernize its core. For large banks, this can cost hundreds of millions of dollars and be a multi-year effort. Therefore, many banks are hesitant to undertake a modernization journey to the cloud or new core.”
Jeroen Unger, Director of Global Partnerships, Backbase
Failure to address these issues can have serious consequences, including increased risk, platform-wide disruptions, and skyrocketing operating costs. Companies can become locked in a long-term game of catch-up that reduces agility and hinders innovation.
Checklist: Building a Holistic Modernization Approach
taking A holistic modernization approach It’s important. As we covered in our last blog, companies that successfully modernize their operations do so by integrating their organizations from the top to the front lines.4. But what exactly does that look like? Let’s look at the three key focus areas recommended by Forrester’s Application Modernization Checklist: strategy, process, and technology.
1. Implement a clear technology strategy (especially around AI and education)
Where to start:
- Make sure you have buy-in from leadership.
- Embrace a mix of broad and focused approaches to AI and generative AI.
- Make sure all organizational units and technology stacks are well aligned.
Any modernization efforts must be justified to the leadership team. Because leadership is often focused on results that directly impact performance, make sure your strategy is clearly aligned with practical business goals. For example, if app security is one of your priorities, tie this goal to the cost and exposure reduction potential of the cloud through built-in advanced security features and compliance tools.
It is also important that your strategy includes your approach to AI. Because AI is relatively new, pay close attention to new use cases that hint at its potential impact. AI can also speed up process documentation by accelerating the software development life cycle, faster anomaly detection, intelligent code completion to automated report generation, content generation, and driving personalization at a deeper level or more intelligent business processes. Australia’s leading supermarket brand, Coles, is not missing out on this either. Coles quickly got on board after realizing that AI could be used to predict which products should be in which stores and when.
“Our entire supply chain is powered by machine learning engines. So we’re providing insights at a very localized level. We also use it to plan our team members’ schedules based on customer demand and to keep our shelves properly stocked.”
John Cox, Coles Chief Technology Officer
A clear strategy means building a roadmap to implement, measure, and track your modernization and AI initiatives over time. Keep in mind that the results of the first few months alone don’t paint a full picture of success. Benefits such as reduced maintenance, monitoring, and management costs may emerge later. Instead, think creatively about measurement, especially in terms that matter to your industry. You can use cross-team metrics or behavioral changes to assess how your team is adopting new tools. Or, if you’re in retail, you might want to track how long it takes your customers to go from shopping to purchasing.
Lastly, don’t forget to involve your workforce. An overall modernization strategy should include a plan to upskill employees in all departments to ensure widespread adoption of new tools and technologies.
2. Adopt modern operational and technological processes.
First things to do:
- Map operational processes directly to modernization activities.
- Think of cloud migration as a means to unlocking AI value, not an end to it.
- Adopt a modern operational approach and track the results of these changes.
Next, take a look at the process. Whether it’s governance or app development workflows, they should map directly to modernization activities. For example, if you’re looking to modernize a legacy application, think about how new technologies like the cloud could impact your development process. This step is very important to get you moving in the right direction. Many companies report that their biggest obstacles to modernization are organizational and political in nature. It is also particularly important to develop a plan to specifically inject AI into existing workflows, as European PayTech company Nexi has done.
“The standardization and momentum that came with the (Microsoft) Azure transition allowed us to automate more processes and focus on taking another leap forward.”
Lars Einar Harberg, IT Director, E-Commerce Payments, Nexi Group
Don’t forget to use metrics to track process updates. Modernization results are measurable when tracked across business units and across teams (e.g. sales, marketing, product) against key performance indicators (KPIs) and objectives and key results (OKRs). Let’s say you want to measure operational efficiency, value of time to market for solutions, quality, depth of observability, and manageability. You need to ensure that your measurement approach is not only meaningful to specific stakeholders.
3. Technology stack updates supported through strategic partnerships
First things to do:
- Limit technology sprawl and upgrade your technology stack.
- Get your security approach in order early.
- Find a strategic partner.
The last step on the checklist is technology. Your modernization strategy should include a plan to integrate your technology stack with support from strategic partners. Integrated technology stack is A set of software, platforms and tools that work together to avoid silos and point solutions that lead to inefficiencies. This can help businesses generate better data, gain richer insights, and integrate AI effectively.
However, these stacks add complexity to the backend, so make sure you follow the efforts of a trusted advisor. Nexi recognized this early and developed a strategic partnership with Microsoft that provides comprehensive resources and support.
“We worked closely with Microsoft’s internal architects to double-check our architectural decisions. Microsoft helped us move from a pure development mindset to a DevOps mindset by embracing ‘build it and run it’ as its foundational philosophy.”
Jens Barnow, Senior Vice President, Group Technology, Nexi Group
The plan should also include strategies for resolving security issues early. Waiting until problems arise can delay modernization and, in the worst cases, compromise security.
Start your modernization journey today and take your business into the future.
When done right, modernization can have transformative results. We’ll look at the specific benefits in the next blog. However, many organizations report results ranging from increased efficiency to improved technical capabilities. Of course, many companies are ready for AI. A Forrester study found that 75% of respondents agreed that migrating to the cloud is essential for AI and machine learning adoption.5.
So, are you ready to start modernizing your business? Read the first blog in a series on the basics of modernization and check out the Forrester Consulting Application Modernization Checklist commissioned by Microsoft. Stay tuned for our next blog and check out these resources:
source:
1,3,4. Forrester Modernization Study | Microsoft Azure
2. IDC App Migration White Paper | Microsoft Azure
5. Total Economic Impact™ of Migrating to Microsoft Azure for AI Readiness
