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.

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

Priorities for Application Migration and Modernisation Are Rising

Enterprises are grappling with how to address inflationary pressures while managing their digital transformation initiatives. Along these lines, application modernisation and migration have emerged as key tactics for building better business resiliency and operational efficiency. In fact, 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 (IDC’s Application Services Survey, Q4 2021).

Figure 1: Priority of Application Modernisation

Q: Using the following scale, please rate how much of a strategic priority application modernisation is at your company, both today and in the next three years.

Source: IDC’s Application Services Survey, 2021; n=411

Steer Clear of Modernisation Pitfalls

Modernisation and migration can help enterprises to sidestep or withstand the impacts of economic uncertainty. However, there are several pitfalls that can cause modernisation efforts to derail, and, in turn, undermine modernisation objectives. These pitfalls include:

  • 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 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 five key steps to enhance chances for Oracle modernisation success

IDC’s 2022 application services survey found that 50% of U.S. enterprises polled utilise Oracle for their ERP/ERM workloads, 30% utilise Oracle for their CRM workloads, and 45% utilise Oracle for their SCM workloads. These workloads represent significant elements of business operations, and workload migration and modernisation can create significant risks to these ongoing activities. Through dozens of client interviews, IDC has learned that migration and modernisation to the cloud is much more than simple technology upgrades. Organisations must deftly mesh strategy, execution, and cultural transformation together to best mitigate risks and deliver value from their modernisation programs. As a result, IDC has found that there are five key building blocks that strengthen chances for achieving benefits with modernisation:

1.    Spend more time addressing management areas like process, strategy, and people. In more than two dozen buyer interviews, IDC found that application modernisation success doesn’t rely largely on technology deployment and replacement. Rather, successful organisations had to develop comprehensive modernisation initiatives that linked technology upgrades to business value as well as process evolution, change management, and cultural transformation. Interview feedback indicated that technology change was the easy part. Devising long-term application strategies, ensuring modernised applications generated business value, evolving IT and business culture, and implementing communication plans and effective change management were where organisations placed more time and attention for management.

2.    Build a robust governance model. A key component to application modernisation success is establishing leadership and change management procedures as well as structured governance to ensure modernisation initiatives move forward and don’t get derailed when impediments or issues arise. Spearheading modernisation using business sponsorship and leadership, partnered with IT leadership, ensures that a joint coalition is responsible and vested in the modernisation program’s success.

3.    Ensure testing is at the core of transformation. Productivity gains are a key benefit that enterprises anticipate achieving through application modernisation. Along these lines, organisations have told IDC that continuous user testing is a key facet that mustn’t be overlooked. Organisations recommend that regularly involving users in application testing throughout modernisation stages helps ensure that value generation is captured, and that when modernised applications are rolled out into production, they are, in fact, helping users be more productive in their daily roles through simplifying tasks or enhancing work throughput.

4.    Regularly perform modernisation postmortems. Reviewing the strengths and weaknesses of each modernisation effort helps surface key lessons learned that, in turn, can be applied to future initiatives to help organisations wring more value out of application modernisation investments.

5.    Leverage change management best practices to backstop application modernisation initiatives. Change management is extremely important to navigate risks and ensure smooth transitions with modernisation programs. Consider establishing formal change management programs, led by PMOs and supported by C-level executives, to drive modernisation programs and projects and provide accountability for program delivery.