Managing IT costs amidst inflation pressures has many enterprises reshaping their IT plans and strategies. According to IDC’s Future Enterprise Resiliency & Spending Survey (September 2022), these organisations expect inflation will have the greatest impact on IT costs related to infrastructure and software applications.

Inflation has made accomplishing business priorities focused on improving operational efficiency, customer satisfaction, and business sustainability more challenging. To overcome these challenges, enterprises are migrating and modernising key applications that have direct linkages to boosting productivity and cash flow.

Goals for application modernisation and migration centre on productivity benefits

Application modernisation is a rising priority for enterprises. Many view application modernisation and migration as key tactics for building better business resiliency and operational efficiency. According to IDC’s Application Services Survey conducted in Q4 2021, application modernisation is rated as a high or top priority for nearly 60% of enterprises today; in the next 24 to 36 months, modernisation will be a high or top priority for nearly two thirds of enterprises. There are multiple drivers powering the prioritisation of application modernisation. However, many organisations see productivity gains as a primary benefit of and a key driver behind modernisation initiatives. In fact, more than 20% of enterprises rated improved resource productivity as the top primary goal they expect to achieve through application modernisation (see Figure 1).

Figure 1: Primary Goals with Application Modernisation

Q: Which of the following best represents the primary goal your organisation expects (or would expect) to achieve with application modernisation, regardless of what priority your organisation has with application modernisation?

Source: IDC’s Application Services Survey, 2021; n=1,022

Modernisation Pitfalls Can Derail Productivity Objectives

Modernising and migrating enterprise resource planning (ERP), customer relationship management (CRM), productivity, and collaboration applications to the cloud can help enterprises achieve higher productivity levels. In our interviews with clients regarding application modernisation and migration, IDC has found that some enterprises have fallen into modernisation traps and encountered key impediments like:

  • Lacking a long-term application and software vendor strategy. It’s not uncommon for organisations to move quickly with modernising their applications when the priorities to do so are high. However, such an approach can cause enterprises to execute modernisation initiatives without considering the long-term utility of the applications involved or assessing their role as going concerns for the organisation. Neglecting to build long-term application strategies can increase future application management costs, elevate business operations risk, and broaden the prospect of vendor lock-in for packaged applications.
  • Failing to thwart scope creep and increased modernisation costs. IDC’s research has shown that, on average, organisations have more than 120 applications in their portfolio, and disparate applications can be integrated with one another within the portfolio. What this means is that initiatives to modernise one set of applications may have significant impacts on other dependent or connected applications. As a result, modernisation scope can balloon and lead to greater costs than enterprises expect.
  • Modernising applications without evolving processes and culture. IDC interviews with application services buyers have revealed that modernisation initiatives went well beyond technology upgrades. Motivating employees for change and evolving and advancing the culture and business processes in their organisations proved to be greater tasks than implementing technology changes. Interviewees shared that neglecting to focus on cultural and process change in conjunction with modernisation initiatives caused modernisation initiatives to suffer setbacks.

Use Lessons Learned to Steer Clear of Modernisation Hazards

To avert common modernisation pitfalls, enterprises must bolster their strategic management and oversight of the process. Many organisations have modernised and migrated applications to the cloud. IDC has observed that companies were most successful when they leveraged lessons learned from their peers and paid particular attention to the following areas of management:

  • Strategy. Lessons learned here have centred on using business value to justify migration initiatives. By ensuring initiatives are rooted in business value, organisations can prove how cloud migration can generate cash that can allow them to self-fund innovation and additional modernisation and migration efforts.
  • Governance. Learnings around governance centre on using grassroot efforts to kickstart change fused with leadership support; devising the right organisational structure, governance model, and roles and responsibilities; and ensuring all parties have visibility and stakes in success criteria. By using a grassroots approach, change can be cultivated from within a team instead of being imposed upon a team by leadership. Setting up the right organisational structure is also key for success. Application teams need to have proper escalation paths and procedures to follow for issues management. The right structure can also improve coordination across team members through clearer accountability standards.
  • People. From a talent perspective, lessons learned focus on embracing change through communities of practice, making sure you have the right talent for the job, and emphasising ongoing training and education. Like many change management initiatives, cloud migration success depends on the mindsets of the people that are involved. Skills, training, and ongoing educational development are cornerstones to ensure that talent is equipped with the right tools to overcome change challenges. Moreover, by establishing a culture that promotes communities of practice, organisations can enact change at the grassroots level to build a groundswell of momentum from the bottom up.