NeuEon Insights / Business & IT Strategy, Technology Selection & Program Management

Navigating The Complex Maze of IT Modernization: The First Step

As you’d expect, there was much discussion about the latest IT trends and emerging technologies at a recent CIO conference we attended — those fancy topics everyone seems to be writing and talking about these days like cloud computing, artificial intelligence, machine learning and robotic process automation, among others.

But I’ve found there’s a stark contrast between what CIOs want to do and what they’re actually doing today. Legacy IT continues to be an anchor around the necks of many CIOs, keeping them from making substantial progress toward the digital, smart, agile future they envision for their companies.

The CIO’s New Reality

This is the new reality for many CIOs: Their companies still execute much of their mission-critical workloads on 20- to 30-year-old mainframes running custom-built programs written in arcane languages on legacy operating systems. Their business processes are “hard-wired” in the technology and difficult to change. The people who have the skills to support these systems are retiring in droves, and the heaviest users are resistant to change.

IT modernization for companies like these — updating the platforms, processes and people that run a company’s business capabilities — is a huge, risky undertaking. But the benefits are compelling: improved productivity, lower costs, agility, and the ability to easily scale up and down, as well as the ability to take advantage of the powerful emerging technologies CIOs talk about. In many cases, companies must modernize or risk being left behind in their competitors’ dust.

How do CIOs in this position define the right modernization strategy for their company? It’s not easy. Here are some of the biggest challenges we’ve encountered over the last several years:

  • There are many paths forward. Gartner, Inc. highlights replatforming, rehosting, recoding, rearchitecting, reengineering, replacement and retirement as potential approaches. An architect at Amazon Web Services describes them as rehost (“lift and shift”), replatform (“lift and reshape”), repurchase (replace or “drop and shop”) and rearchitect (rewrite and/or decouple applications). Decisions must be made: Build or buy? Configure or customize? Private, public or hybrid cloud and cloud-native development? On-premise or off-premise?
  • Financial considerations come into play. Moving solutions to the cloud, software as a service and infrastructure as a service impose changes in financial management because costs move from periodic capital expenditures (capex) to monthly operating expenses (opex). Many organizations have sunk costs in capex that have been amortized over a number of years. They have a difficult time justifying replacing something that still works despite the potential forward-looking business value.
  • Major change can bring on years of strife and anguish. Whether completely replacing a legacy solution or keeping certain legacy components and building around them, most companies look for suitable off-the-shelf solutions to meet business needs. However, a “we will bend our business to that system” approach is rarely successful with users who have been spoiled by decades of customization of their current solutions.
  • The right skill sets can be hard to find. When companies choose to keep legacy components, it’s challenging to find people to maintain them. People with the right knowledge and skills are retiring, and schools aren’t producing people to replace them. When companies decide to replace legacy solutions with more modern components, they have to decide whether to reskill current employees or find new ones. These hiring challenges can be particularly acute for companies in certain geographies — for example, in states and smaller cities that are far from large metropolitan areas.

IT modernization is important to enable future growth, but rightsizing for today’s business operations is also important. There’s a lot of inertia to overcome, and today’s CIOs have to find a way to get started and gain momentum.

The First Step: Go Back To The Business Case

From my experience, many CIOs are at a significant inflection point; technology advances continue, and no one wants to lag behind. But legacy IT is a reality. CIOs need to find a path forward as quickly as possible to define the right modernization strategy for their organization. And I believe the most important first step is to go back to the business case.

CIOs need to work with their business partners and other stakeholders to answer a few key questions as they consider any IT modernization initiative:

  • What is driving the need for modernization? Are customers demanding capabilities that depend on more modern technologies? Is our company losing business or not growing fast enough because the competition is more advanced? Is the desire for modernization driven by the lack of skills to support our current platform or the high cost of supporting older technology and creating manual workarounds? Understanding the business drivers sets the foundation for making further decisions.
  • What’s the current and future state of the business? Is the line of business declining and likely to be sold or closed down in the next three to five years? Is it stable? Or is it projected to grow? Taking a look forward helps companies frame the most appropriate planning horizon for their strategy development.
  • What constraints and risks do we face? What resources are available? What might happen if we don’t modernize? What’s the tolerance of the organization for change? What’s our transition plan, and how will we manage risks? Being upfront and transparent about constraints and risks when planning a major modernization initiative increases the chances of long-term success.

Developing the right IT modernization strategy for an organization may be one of the most important jobs today’s CIOs take on. It will establish the foundation to support current and future business capabilities, which are likely to change rapidly. Going back to the business case ensures that the organization won’t spend valuable resources on work that doesn’t make the most business sense, and it will help CIOs leave a legacy that sets their companies up to thrive.

Need help facing the new reality? Contact us today.