Why Modernization Is Easier Than You Think

Author: Todd Slind, VP, Technology
Reduce risk and lower costs with an incremental approach to your next IT project.

It’s a modernizing world

Across commercial industries, from consumer products to retail, banking, telecommunications, and healthcare, more enterprise organizations today are looking to exploit the ever-increasing onslaught of available data as a competitive edge. And for many—the question of when and how to modernize and take full advantage of the new data and analytics arises.

While companies recognize the need to modernize, they often hesitate for a good reason. Nearly three quarters (74%) of modernization projects fail. They often fail to deliver on expectations and value, go over budget and time, and eventually go unused by the organization. Indeed, one report estimates that one in six IT projects has a cost overrun of 200%.

Business in 2022 and beyond means developing data-driven internal processes that operate leaner, faster, and with greater productivity. In addition, internal stakeholders and the end customer have modern expectations. Intuitive experiences, thanks to the “Amazon Effect,” and data-driven insights are the new normal.

Yet today, many businesses are held hostage by their homegrown systems and legacy IT platforms. Having developed patchwork architectures, databases, applications, and data pipelines, they can’t create new business models, onboard new products, or scale and grow. Instead, they are left with the unfulfilled promise of data centralization, which includes data warehouses and lakes that often prove difficult to maintain and increase data redundancy and governance complexity.

Even companies looking to streamline and modernize systems face the daunting challenge of successful deployment because of the scale and enormity of looking under the proverbial “hood” of their own IT department. And the idea of overhauling their infrastructure seems too large, costly, and time-consuming.

The answer for many businesses, from midsized companies to global brands, involves an iterative approach to the IT modernization project. By incrementally making technology improvements that begin with APIs and user experience/user interfaces (UX/UI), you can bring old data to the same level of performance and accessibility as modern expectations. And it allows you to transition backend systems at a pace that fits your organization’s needs, ensuring a more cost-effective, secure, and timely deployment.

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The cost of inaction

If you’re in a competitive business or don’t operate in a highly regulated market, you risk losing a competitive advantage if you don’t modernize. After decreasing by 5% in 2020, IT budgets grew 8% in 2021. And the momentum continues, with more than half (53%) of businesses estimated to increase IT spending in 2022. More companies today are also planning to automate and improve business processes using AI, with the global AI market valued at 93.5 billion in 2021 and projected to expand at a compound annual growth rate (CAGR) of 38.1% from 2022 to 2030.

Frequently, major business initiatives drive modernization efforts. For example, the transition from 4G to 5G has been the impetus to transform operations digitally in the wireless industry. Freely available customer location data in retail has driven store site selection and marketing campaigns. In a post-pandemic world, consumer packaged goods companies are doing more to deliver directly to customers, meaning home delivery and supply chain management increase in importance.

New geospatial and location-based questions need to be answered in all these scenarios. And if you lack location-based tools, you can place stores, goods, and services in the wrong place, target the wrong audience, and roll out the wrong products. Likewise, you can’t support new use cases, business models, or market disruption if you operate using obsolete tech. And you won’t be able to support mobile apps that scale from hundreds to thousands of users, assess data in a granular way, or understand and communicate what’s happening to the business over time.

That’s why, despite the understood trepidation, putting off modernization ultimately increases cost, not defers it. The simple reality is—the price to move to modern capabilities increases the more you put off a modernization project. Not only do you fail to take advantage of the best decision-support tools available, but you end up spending your resources, time, and budget on simply maintaining your aging IT ecosystem. Indeed, large enterprises can spend as much as 80% of their IT budget on operating legacy systems.

And in the 21st century, as an aging workforce heads into retirement, companies face many risks associated with knowledge walking out the door.

You want to ensure that you have modernization projects timed well with talent turnover to retain valuable “tribal knowledge.” You also want to employ the same technology that the next generation of IT professionals and technologists are familiar with and have used in their training and education.

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The incremental approach

Most companies will take a “rip and replace” approach for any significant IT initiative, thinking the most effective method involves full scope, planning, implementation, testing, and launch. But that’s often not the optimum solution. Indeed, recent research highlights that only 27% of companies choosing a rip and replace strategy saw a high return, with 41% reporting a low return on their investment.

For many, an incremental approach ensures the greatest chance for success and offers several benefits. To do this, you’ll want to begin with a strategic assessment upfront, ensuring you have a clear and comprehensive understanding of your existing infrastructure, including all the granular technical audit details, including current data, applications, backend technology, and more.

This can help identify where existing gaps in data and metadata are causing resources not to support the organization as they should be. And it will surface significant pain points, such as brittle integration points that constantly break and cause outages.

Then, you’ll want to accurately identify current goals, roles, and objectives and catalog what you see as use cases coming down the pike. You’ll consider questions like:

  • What are internal stakeholders across departments asking for now that will solve immediate needs?
  • What’s the business plan over the next 3-5 years that will require a new business capability?
  • How do we understand competitors, cohorts, or any other measurement that tracks threats to the business?

You want to ensure that you’re gathering intelligence from multiple sources, with an eye toward the future. This will inform your iterative priorities for modernization, so that when you invest, you’ll do so at the correct sequence and scale and in the right places that consider external threats to your business.

This can be done using several techniques, including:

  1. SWOT analysis – a baseline assessment for how you stack up relative to your industry and competitors
  2. Heuristics analysis (UX/UI) – a systematic method for evaluating the quality of your user experiences
  3. Information resource catalog – assets and their key attributes captured in a database
  4. Data inventory – data sets metadata and context

Once you have gathered your intelligence, you can look at how to include existing resources in your new digital architecture, as well as the right sequence that will provide the greatest business gains early on to prove the concept and keep going. This will allow you to build new tools while taking advantage of the correct legacy data and applications IT. You can document metadata using a catalog that lists gaps and issues, as well as enabling people to find the data they need. You can also review and record data structures and integration gaps.

You can use an open architecture and components-based technologies to create lightweight tools in a fast, efficient manner while only replacing modules that are obsolete or in need of an upgrade. And with the use of cloud-based capabilities, you can increase scalability and develop pay-as-you-go or consumption-based costing to focus on specific aspects of modernization to lower cost and risk.

Yet the real key involves designing your strategy from “the middle out.” You can create and launch APIs (or middle tier) with a modern interface, but your internal business users still use legacy data sources. You build a brand-new application or interface to those data sources so that the end users can benefit from a modernized experience early while giving yourself time and budget to develop backend technologies and processes as needed. Using your previously captured heuristic analysis, you can address usability issues and improve experiences using a set of predefined design standards and components.

And several available tactics make it easier to begin using new tools while interactively building and improving the enterprise IT environment. For example, you can run systems in parallel for a certain amount of time or do a weekend cut-over and have on-call support available to make sure things are mitigated as possible in terms of risk. In addition, you can back up data in ice-cold storage to ensure you never put yourself in a position where you suffer data loss.

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The right strategy means everything

As more and more commercial businesses look to modernize as a critical competitive advantage, the right digital strategy makes all the difference. When you take an incremental approach that leverages existing investments, even from older, more legacy applications and data, you realize the benefits of modernization.

The result? You provide better tools to create better applications that deliver better business outcomes and more efficient operations in a meaningful time for your organization.

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