In our last blog, I outlined what modernization really means and why it matters. This blog will walk you through how to design a modernization approach that unites strategy, processes, and technology. Getting these elements right will help position your organization to successfully adopt new innovations like AI. I’ll start by covering a few common challenges to modernization, and then, I’ll use the Forrester Application Modernization Checklist to show how a holistic modernization approach can help address them.
But before we dive in, let’s recap what we’ve learned so far: modernization means updating and improving assets across all business areas so they work well with evolving software and the cloud. Successful modernization goes beyond tech upgrades or cloud migration—it’s a holistic approach to modernizing people, processes, and skillsets.
The result is technology that’s more aligned to meaningful outcomes, especially when it comes to AI. AI is worth thinking about as catalyst and accelerator of modernization. In fact, 61% of business leaders say their organization plans to invest most in generative AI as they prepare for the next evolution of generative AI-infused apps1.
Organizational and technical barriers complicate modernizing for AI readiness
Though modernizing is essential, it’s also complicated. On the technical side, businesses may depend on sprawling legacy app estates. An IDC survey found that an average 50% of an organization’s application estate is legacy, which often results in fragile interdependencies and bottlenecks2. This is only exacerbated when new technologies are added into the mix that increase the complexity of information technology (IT) environments.
On the operations side, things are just as frustrating. Many companies struggle with manual processes and security concerns that slow down modernization, made worse by a constant shortage of skilled IT professionals3. Then there’s the question of leadership buy-in; because modernization can be costly, it’s challenging to justify it to key decision makers.
“It’s a multi-million-dollar exercise for banks to modernize their core. And for large banks, it could even be hundreds of millions of dollars and a multi-year effort. So, lots of banks are hesitant to go on that modernization journey to the cloud or even to a newer core.”
Jeroen Unger, Director of Global Alliances, Backbase
Failing to address these challenges can have serious consequences like increased risk, platform-wide setbacks, and skyrocketing operating expenses. Businesses may find themselves locked into a long-term game of catch-up that reduces agility and prevents innovation.
Checklist: Building a holistic modernization approach
Taking a holistic modernization approach is critical. As we covered in our last blog, businesses that successfully modernize their operations do so by uniting their organization from the top floor to the frontline4. But what exactly does that look like? Let’s walk through the three critical focus areas recommended by the Forrester Application Modernization Checklist: strategy, processes, and technology.
1. Implement a clear technology strategy (especially around AI and training)
Where to start:
- Ensure you have buy-in from leadership.
- Embrace a mix of broad and focused approaches to AI and generative AI.
- Ensure that all organizational units and technology stacks are well-aligned.
Any modernization effort needs to be justifiable to your leadership team. Make sure your strategy is clearly aligned to tangible business objectives, since leadership often focuses on outcomes that directly impact performance. If app security is one of your priorities, for example, connect this goal to cloud’s potential for cost and exposure reduction through built-in, advanced security features and compliance tools.
It’s also crucial that your strategy includes an approach to AI. Since AI is relatively new, pay close attention to emerging use cases that hint at its potential impact. From accelerating software development lifecycle, faster anomaly discovery, and intelligent code completion, AI can also speed up process documentation by automatically generating reports, creating content, or driving personalization on a deeper level or more intelligent business processes. This wasn’t lost on leading Australian supermarket brand Coles, which got on board quickly after realizing AI could be used to predict what products need to be at what store at what time.
“Our entire supply chain is being driven through a machine learning engine. So, it is giving insight at a super localized level. We’re also using it to ensure that we are scheduling our team members based on customer demand and making sure we keep the shelves stocked appropriately.”
John Cox, Chief Technology Officer, Coles
A clear strategy also means building a roadmap for implementing, measuring, and tracking modernization and AI initiatives over time. Keep in mind that results for the first few months alone may not paint a complete picture of success—benefits like maintenance, monitoring, and management cost reduction may show up later. Instead, think creatively about measurement, especially in terms of what matters for your industry. You might use cross-team metrics or behavioral changes to evaluate how teams are adopting new tools. Or, if you’re in retail, maybe you’d track how long it takes for customers to move from shopping to purchasing.
Finally, don’t forget to involve your workforce. Any holistic modernization strategy should include a plan for upskilling employees across all departments to ensure widespread adoption of new tools and technologies.
2. Adopt modern operational and technology processes
What to do first:
- Map operational processes directly to modernization activities.
- View cloud migration as a means, not an end, to realizing AI value.
- Adopt modern operational approaches and track the outcomes of this shift.
Next, take a look at your processes. Whether that’s your governance or app development workflows, they should map directly to your modernization activities. If you’re looking to modernize your legacy applications, for example, think about how new tech like the cloud might factor into your development process. This step is critical to get right—many businesses report their biggest obstacles to modernization are organizational and political in nature. It’s also especially important to develop plans for infusing AI specifically into your existing workflows, like European PayTech company Nexi did.
“With the standardization and momentum that comes with the [Microsoft] Azure transition, we focused on automating more processes and taking another leap forward.”
Lars Einar Harberg, IT Director eCommerce Payments, Nexi Group
Don’t forget to use metrics to track your process updates, too. Modernization outcomes are measurable when they’re tracked against cross-business unit, cross-team (e.g. sales, marketing, and product) KPIs (key performance indicators) and OKRs (objectives and key results). Suppose you want to measure operational efficiency, time-to-solution value, quality, and depth of observability and manageability. You need to make sure that the way you measure isn’t only meaningful to one set of stakeholders.
3. Update technology stacks supported by strategic partnerships
What to do first:
- Limit technology sprawl and upgrade tech stacks.
- Organize your approach to security early on.
- Seek out strategic partners.
The last stop on our checklist is the obvious one: technology. Your modernization strategy must include a plan to integrate your technology stacks with support from strategic partners. Integrated technology stacks are sets of software, platforms, and tools that work together to avoid silos and point solutions that create inefficiencies. They can help businesses generate better data, unlock richer insights, and effectively incorporate AI.
But because these stacks add complexity on the backend, ensure your efforts are guided by trusted advisors. Nexi realized this early on and developed a strategic partnership with Microsoft, which provided comprehensive resources and support.
“We worked closely with Microsoft internal architects to double-check on architectural decisions. Microsoft helped us transition from a pure development mindset to a DevOps mindset, embracing ‘you-built-it, you-run-it’ as a fundamental philosophy.”
Jens Barnow, Senior Vice President, Group Technology, Nexi Group
Your plan should also include a strategy for addressing security concerns early—waiting until problems arise can slow down modernization at best and compromise security at worst.
Start your modernization journey today and lead your business into the future
When modernization is done right, the results can be transformative. We’ll take a look at the specific benefits in our next blog, but many organizations report outcomes ranging from increased efficiency to improved technical capabilities. And of course, many became AI-ready. According to one Forrester study, 75% of respondents agreed that migrating to the cloud was essential to AI and machine learning adoption5.
So, are you ready to begin modernizing your business? Start by reading the first blog in our series on the basics of modernization and check out the Forrester Consulting Application Modernization Checklist that Microsoft commissioned. Don’t forget to stay tuned for our next blog and explore the following resources:
- Learn about the benefits of Cloud Migration and Modernization from IDC.
- Consult the Application and Data Modernization: Azure page.
- Visit the Microsoft Azure Innovate site.
Sources:
1,3,4. Forrester Modernization Study | Microsoft Azure
2. IDC App Migration White Paper | Microsoft Azure
5. The Total Economic Impact™ Of Migrating Microsoft Azure For AI-Readiness