By Naresh Duddu, Associate Vice President, Global Head, Modernization at Infosys
Legacy systems are monolithic, hard to change, costly to maintain, and a major source of technical debt. They prevent businesses from scaling digital technologies, and hamper agility, efficiency and innovation, making it difficult to retain market share, attract customers, compete against new players and withstand disruption.
What’s particularly worrying is that a 2022 survey on technology modernization found that 88 percent of technology assets were legacy systems, of which half were business critical. However, the good news is that 70 – 90 percent of these legacy systems are due to be modernized within five years, driven by enterprises’ need to survive in the digital era.
The importance of technology modernization cannot be overstated. This is not just about bringing an organization’s technology estate up-to-date but actually about enabling its digital transformation agenda. A global consulting firm’s analysis emphasizes this connection by concluding that in sectors such as telecom, media, technology and financial services, 70 percent of the value of business transformation is dependent on technology.
This value derived from modernization manifests in several ways throughout the enterprise, including as:
Rich customer experience and improved brand perception
The changing consumer preference is redefining the way any product or service can be consumed. Customers are looking for more intuitive channels that help them navigate through digital platforms with ease and convenience. In such scenarios, a modernized IT system can help any organization to connect with key audiences and break free from the limited perception of their product or service through the right user experience. By leveraging advanced technologies and streamlined processes, businesses can deliver personalized services, efficient interactions, and innovative solutions through modernization. PwC found human interaction to be important or very important for up to 58% of customers, depending on the industry sector concerned. 51% said they’d be less loyal to a brand if its digital experience wasn’t as easy or enjoyable as in person.
Lower technical debt and capital costs, and easier provisioning
Cloud is the preeminent lever of legacy modernization. It frees enterprises of the burden of provisioning and maintaining technology assets and reduces infrastructure debt. Further, organizations can consume packaged code components off the cloud which, because they are regularly updated, help to reduce design and software debt. They can subscribe to various cloud services on a pay per use basis to convert upfront capital costs into ongoing variable expenditure. Unlimited capacity available on demand, through hybrid cloud, poly cloud, multi cloud and other variants, means that infrastructure provisioning is both highly flexible and scalable; this allows enterprises to respond to market changes with agility and innovate without constraints.
Another crucial lever is DevOps. It automates and streamlines software development, whereas modernizing legacy applications enables them to work with the latest technologies and architectures. The impact is an improvement in IT performance, reliability, security, cost efficiency and user experience.
Smarter, faster and better operations
Modernization using a combination of digital technologies, such as robotic process automation, machine learning, advanced analytics, artificial intelligence, and of course cloud, is a key step towards building a data-driven enterprise. Here, data is deeply, pervasively, integrated within the enterprise to provide visibility across it, and automate business processes, operations and decisions. The benefits range from efficiency (by automating routine, tedious, time-consuming activities), to hyper-personalization (of products, services and experiences), to business agility (anticipate and respond to events in real-time), deeper insights, and continuous learning and improvement.
Network modernization enables security to be embedded in network design to lower technology risk, while machine learning, predictive analytics and artificial intelligence can analyze massive data in real-time to identify and even prevent security breaches and cyber-attacks.
Gains in productivity, efficiency and revenue
Technology transformation is a source of tangible business value: a global survey on business and IT conducted a few years ago discovered that in the preceding 24 months, more than half of the respondents had created new revenue streams, two-thirds of the respondents had improved revenues from existing streams, three-fourths had improved employee experience and a similar number had saved some costs. Transformation initiatives based on advanced technologies, such as edge computing and Internet of Things, were even more effective at reducing cost (44 percent of organizations implementing these technologies saw significant reductions, versus 31 percent overall). Likewise, 54 percent of business leaders expect AI and Generative AI to deliver cost benefits in 2024 by increasing productivity in operations, customer service, and IT. The view is that generative AI will create a big jump in AI efficiency to make a very big impact over time.
Not just that, generative AI can add value to the modernization program itself. For example, it could automate some of the tedious activities in legacy code modernization to reduce the development effort by 50 – 70 percent, allowing developers and engineers to focus on solving problems and innovating new solutions. In the case of application modernization, the incorporation of generative AI can speed up the modernization process and also increase business agility.
Greater sustainability
Running an enterprise data center requires huge energy resources; this situation will worsen as organizations expand their AI/generative AI workloads. One way to counteract this is by migrating workloads away from on-premise data centers and moving them to cloud. It is estimated that this could drastically reduce energy consumption because a cloud server can support a workload that is 100 times the workload that an on-premise server of similar capacity can handle. With hyperscalers continuously improving the sustainability of their cloud offerings, cloud modernization could shrink an enterprise’s carbon footprint by as much as 88 percent.
The modernization imperative
Many organizations hold back on technology modernization fearing high investment, extended timelines, risk of business disruption, and need for change management. But neglecting modernization can cost them dearly. This is not only because modernization brings direct benefits – efficiency, agility, lower technical debt – but more importantly, because it is a precondition for enterprise digital transformation. Failure to modernize seriously compromises digital transformation outcomes, including competitive advantage, customer engagement, and innovation ability.
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ABOUT THE AUTHOR
Naresh Duddu is the Associate Vice President and Global Head of the modernization practice at Infosys. The practice incubates new offerings, builds services and consulting IP and spearheads application transformation engagements across verticals and service lines. The practice encompasses the four key pillars of application modernization – Open Source, Agile/DevOps, Legacy modernization, and Cloud.
