Why a business need modernization of legacy systems? How to approach modernization to create value? Modernization programs are necessary for business initiatives through digital transformation. Newer technologies Containerization, Analytics, Robotic Process Automation (RPA), the Internet of Things (IoT), Artificial Intelligence (AI) etc., comes under one umbrella of ‘digitalization’ that support the creation of digitally enabled new business models. Any organization that ignore this technological transformation becomes vulnerable to rivals, incumbent, or new entrant. Today, every organization is working with these technologies at least to some extent. Mckinsey research highlights ‘the companies using digital to compete in new ways are twice as likely as their traditional peers to experience financial growth’.
Businesses are held back from this exciting opportunity from digitalization because of technical debt of existing legacy systems in the companies. The technical limitations cause business disruption as they;
- Lack in individual user experience at one level above competitor
- Fail to deal with market agility, causing business disruption
- Cause resource crunch as old technologies, which do not interest millennial workforce
- Are not being able to cope up with the volume to meet key performance indicators
Gartner reports, ‘by 2023, 90% of current applications will still be in use, but most will have received insufficient modernization investment’. In addition, organizations that embark on modernization of legacy systems face various risks and challenges. The first challenge is the technology solution required in hundreds. Another key challenge is redesigning the process of companies to capture the value of transformation. These increase the risk of failure to transform as well digitalize. Other key challenges to modernizations are:
- Different outlook between IT and business stakeholder
- Large number of applications and unknown integration touchpoints
- Business rules and calculations embedded deep
- Difficulty to assess business and technical fitness of legacy systems
With said challenges, can companies avoid or postpone modernization till breakout? The IT and business leaders must play a major role in bringing cultural change in companies and to guide people in new pattern of thinking and operating to overcome modernization challenges.
The cornerstones to avoid modernization failures are:
- Focusing on key business challenge or objective
- Avoiding scope failure by in-depth analysis of critical business capabilities
- Planning budget for entire phase of modernization, even with less investment
- Using agile approach for continuous improvement
- Using modernized system as soon as possible to generate value
- Creating applications that interact through API to reduce impact in future change
What should be the approach to modernization that support digital transformation? Modernization from IT perspective can encapsulate, rehost, replatform, refactor, rearchitect, rebuild, or replace systems. Each approach brings with them a change of technology and this change alone is not a transformation. For example, moving IT apps to cloud is not a transformation as its capability will not change when moved to IT cloud. This myopic modernization approach of reducing only cost of maintenance of a platform that does not bring out expected value will surely disappoint business. Rate of failure or not meeting objectives is high in the case of similar IT-centric approach of modernization.
A holistic strategy is required for successful modernization and not stand alone tactical upgrade of technology of systems in different operations of a business. The knowledge of business capabilities of different applications ensures this.
Even when investment is less, selective modernization of systems that support business initiatives leads to revenue increase. Shun all eggs in one basket approach looking only at technical success.
Plan for agile or incremental approach lowers risk of business disruption and helps to use modernized system sooner to derive business value. This stop treating modernization as exception and disgruntlement of stakeholders.
Build or enhance applications that are future proof. In summary, with limited investment, to reduce the technical debt of systems in meeting business requirements and support digital transformation, limited scale modernization is must for every organization. As per Gartner ‘the best approach depends on the problem you are trying to solve, replacement is not the only solution’.
For success, modernization should focus on valuable business capability, business-centric approach, and continuous and multiplatform adoption. Also, align modernization with digital strategy and not take it as tactical task of replacing old platform. Taking this in stride we can approach modernization using automated tools for code conversion and machine learning based cloud assessment for application re-engineering and legacy revitalization.