Critical Measures CIOs Should Consider Before Modernizing

Application modernization is considered among the top five priorities that will drive IT investments in 2024, according to the State of CIO survey 2024 by Foundry. The technology landscape within organizations is rapidly changing due to recent AI advancements and rising cybersecurity concerns. In addition to external factors, internal triggers such as achieving growth, meeting customer demands, and driving innovation to be future-ready have always made modernization a top priority for CIOs.  

However, today's app modernization programs are becoming increasingly complex and fraught with multiple risks due to the growing diversity of application portfolios and heterogeneous IT landscape. IDC predicts by 2027, 53% of enterprises in the US will have 500 or more applications. 

‘Persisting Risks' Challenge Most Modernization Journeys 

Organizations often run multiple modernization programs concurrently. Harmonizing these initiatives to generate value without disrupting existing business processes is a significant challenge. Insufficient planning and lack of support from senior leaders can derail modernization projects, especially the larger ones.  

This creates a case for better strategic alignment between IT and business while embarking on a modernization journey. Consequently, the CIO's role is evolving to act more as a strategic advisor and work more closely with LOBs to determine modernization objectives. As per the same study by IDG, 66% of organizations view the CIO as a consultant or strategic advisor and have a solid educational partnership with the CEO and other decision-makers. 

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Key Actions CIOs Must Take to Tackle the Above Challenges 

Modernization's focus is continuously shifting from being driven by technology adoption to driving business value creation. While there are a lot of mechanisms put in place for doing things right during a modernization journey, very little emphasis is placed on the pre-modernization phase which is extremely critical. And, as the trailblazers of organizations' modernization journey, CIOs must consider three key strategic factors before starting such a journey to maximize value and minimize risk. 

1. Build a robust business case before starting your modernization program:  

Organizations should define a robust business case keeping the end-state in mind. The business case should emphasize that modernization is beyond improving technology and has a direct impact on enhancing the customer experience, aiding business growth, and building IT resilience as it feeds into the larger business objectives. Presenting not only the features of the new technology but the benefits it brings along with it will help in putting forth a strong business case.  

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It should also comprise of a clear, honest cost-benefit analysis outlining the costs and potential return to draw the sponsor’s attention. Covering the key elements like initial investments required, current costs of legacy systems, maintenance costs of new systems and projected ROI as a part of the cost-benefit analysis will aid in getting that coveted buy-in from the sponsors.  

2. Learn from the past and fool-proof the future: 

Before kickstarting their modernization journey, organizations must tap into the treasure of learnings from all the previously executed modernization programs, small or large, within the company. Incorporating the positives of successful programs and avoiding the pitfalls of failed programs will help them tighten their strategy, incorporate best practices, and execute the program with minimal disruption and maximum business value.  

These learnings can be in the form of processes involved, choosing the right partner, and selecting the right technology at the right time to execute their modernization program. Organizations should not limit their learnings to themselves but also include the broader spectrum of their peers and other failed or successful programs across all industry segments.  

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3. Look at your existing talent estate and build a case for reskilling in advance:  

Modernization brings in newer technologies and, at times, unproven ones. Hence, another strategic aspect is to have the right skills and talent. Modernizing with new technologies without the right resources will result in long-term operational and maintenance challenges. As per IDC, through 2024, IT industry leaders' shortcomings in critical skills creation and training efforts will prevent 65% of businesses from achieving full value from digital transformation investments.  

A simple solution could be sourcing necessary talents from the market. However, hiring talent in large numbers is not feasible due to the limited availability. Also, organizations need to invest a significant amount of time and resources to train the newcomers on specific domains and assimilate them into the organizational culture. Hence, it becomes crucial to maintain a delicate equilibrium when addressing this issue.  

Organizations should also look at creating a strong techno-functional team with a mix of existing talent to cover the domain part and new talent who are technology experts. This will help in providing the required stability and de-risking the modernization program. Organizations can also leverage their partner ecosystems to bring the right skills and talent for these programs.  

Don't Wait for the Right Time to Modernize 

Modernization, like the stock market, can't be perfectly timed. Striking a balance between ‘no modernization' state and ‘complete modernization' involves establishing the groundwork for the future. This means using proof of concepts, pilot roll outs, and nurturing crucial talents, so when funds are available, the modernization journey can begin promptly. Organizations must start small and early and practice it as a continuous process.  

CIOs' roles and responsibilities are reshaping due to rapid technological advancements, volatile business environments, and changing customer expectations. CIOs, who are pivotal in spearheading modernization, must learn that it is not an all-or-nothing transformation. Instead, they should align it with overall business objectives and integrate it into the wider IT estate. To reach the desired state, CIOs must scope modernization beyond mere IT upgrades to drive organizational change and overall business impact.