As the C-suite increasingly considers technology modernization an imperative to enable strategic change, pioneering IT leaders are embracing new approaches, technologies, and business cases to revitalize core assets. In the current economic climate, it’s more strategically important than ever for legacy core systems to support the agility, innovation, and new modes of working that fuel competitiveness in the digital world.
Source: Core Revival: New Strategies to Drive Modernization
Yet the costs associated with popular approaches to core modernization—particularly those used with custom-coded business transaction systems such as application rewrites and cloud migrations—can give some organizations pause.
Faced with pandemic-related uncertainty and tight budgets, many IT leaders and their C-suite peers have been looking for new ways to fund modernization initiatives. At the same time, they are seeking more from these investments than mere improvements to the enterprise IT plumbing—they want to create a lasting foundation for innovation and competitive advantage. As such, over the next 18 to 24 months, many organizations will embrace new approaches and technologies to revitalize their core assets.
Making a Fresh Business Case
There’s renewed interest in cloud migration during these uncertain times, particularly among organizations seeking an efficient, cost-effective way to move rigid yet essential core assets. Revitalized in the cloud, these assets can provide a strong foundation for mission-critical innovation and growth strategies in areas such as AI, edge computing, and quantum.
In the coming months, a number of creative approaches for financially reengineering the core modernization business case will likely gain traction in the marketplace. A few examples:
- Operate and transform. Organizations are exploring “operate-to-transform” agreements with implementation partners that combine modernization and innovation investments, holding those partners accountable for migrating and/or upgrading systems, and utilizing powerful tools. In fact, some organizations are able to secure agreements whereby their systems will be modernized to cloud-native platforms in a few years even as organizational operating expenses stay neutral.
- More bang for fewer bucks. During the last few years, many vendors have made significant improvements in proprietary tools that support transition to the cloud. By simplifying the process, these tools are giving rise to some compelling business cases in which migrations can be cost neutral or lead to cost savings.
- System rationalization. In many organizations, systems have sprung up over time to compensate for other limitations, leaving in their wake burdens of technical debt, outdated applications, and workarounds. Transitioning collections of systems to the cloud may enable (or force) the long-overdue process of rationalizing redundant systems, eliminating unnecessary dependencies, and modernizing capabilities. Modernizing a collection of related systems—or retiring some of them altogether—can lower care-and-feeding costs, increase efficiencies, and enhance system performance, all of which may bolster the business case for a core revival initiative.
Hyperscalers are increasingly willing to chip in funding to help organizations transition to cloud offerings with the expectation of recouping their investments over time. Professional services firms are often willing to invest in back-loaded arrangements that offer rewards for long-term impact while easing immediate cash-flow burdens. In some cases, all upfront fees can be deferred in exchange for a share on the upside of the business case.
Transforming Custom Code
New and improved technologies can help organizations revitalize legacy systems to either spruce up or retire core systems:
- Improved low-code platforms. Low-code platforms are dramatically more capable than they were even a few years ago, enabling systems designers to carry out complex tasks and integrations by pointing and clicking rather than having to write code. The list of industry-specific low-code platform opportunities continues to grow, and vendors are racing to integrate advanced AI and machine learning (ML) capabilities. Moreover, “case” and contact management—often an area of great need for agility in legacy platforms—are a core function in many of the low-code platforms.
- Modernized business rule extraction. Traditionally, the process of identifying and extracting business rules from custom code in legacy applications has required an extensive, manual effort and an army of specialized resources. Today, improved mining technologies and approaches make it possible to peer inside legacy code—regardless of language—and extract its business logic with less effort and higher fidelity. By scanning the code of an application that is a candidate for modernization, a company can identify both essential business logic and also any hot spots where a system issue is taking place, making it possible to refactor the code in question, remove it, or replace the application itself with a microservice.
- Improved incremental modernization. Another novel approach to application modernization involves a process known as core mapping. Using a set of increasingly sophisticated mapping tools, legacy systems can be visualized as a connected graph of constituent parts. By identifying logical subgroupings, system engineers can identify and sever legacy interfaces, replacing them with modern API- and service-based techniques. Over time, these services can then be modernized individually as needed in a more predictable, consistent way.
Revitalizing Legacy ERP Systems
Finally, if financially reengineering business cases and transforming custom code represent core modernization’s yin, then deploying more efficient, cost-effective approaches for cleaning up nonessential code in ERP systems and addressing years of technical debt can be considered its yang. Both share a couple of important goals. First, they advance a platform-first strategy for the development of business-critical software designed to create competitive advantage. Moreover, they both increase agility by reducing ERP technical debt. Technical debt in ERP systems is typically a symptom of business complexity, outdated business and IT operational models, and a company culture grounded in the business priorities of yesteryear. Addressing these challenges can have the net effect of jettisoning unneeded ballast.
As they look for ways to revitalize their core assets, monetize technical debt, and move existing capabilities to the cloud or low-code/no-code platforms, companies can consider the following:
- Is that all there is? Organizations with significant long-term investments in ERP assets have begun questioning the wisdom of spending seven or eight figures on a major ERP upgrade. Will these expensive, complex undertakings deliver lasting material benefit? Will enhanced ERP assets then support ongoing innovation and enable long-term business strategy?
- Refactor, remove, or replatform. In the preplatform era, some companies used ERP as a development environment. Today, the residue of outdated requirements and governance often lives on in a tangle of complexity that confounds system engineers and stymies digital transformation efforts. The process of upgrading an entire legacy ERP system can be extremely expensive and time-consuming, but what if it were possible to identify the ERP components that would make the biggest impact on the strategy or bottom line and upgrade only those? Using advanced tools, companies may be able to recode critical targeted capabilities while leaving them operating within the existing ERP system. Or they can move non-ERP capabilities to platforms on which they can create competitive advantage, thus monetizing technical debt. Either way, the result can increase agility and improve the business’s ability to evolve.
*****
Enhancing legacy core assets is not a one-time task—it’s an ongoing opportunity. Core application scope is decomposing across platform ecosystems: What used to be a simple, all-in-one ERP suite or individual core module is becoming a decentralized, cloud-enabled, API-orchestrated collection of capabilities made cohesive by a simplified user experience. As this type of welcome innovative change continues its disruptive march into the future, organizations participating in the core revival trend will have a road map not only for adapting valuable core assets to new technological realities but also for funding this work in creative new ways.
Related Content
- Core revival
- Albemarle Takes on the Core—and More
- Core Transformation: Reinventing the Back Office
- Tech Trends 2021