The Importance of Application Modernization: Only Some Things Get Better With Time

Some things, like fine wines, whiskeys, art, and collectibles, get better or increase in value over time, but neither of these things can be said for IT systems. The older systems are, the more likely they need to be replaced as requirements change or new features are desired. As systems age, it is also likely they become more expensive and difficult to support and maintain. This affects companies to their core: 82% of executives say that legacy systems support critical parts of their businesses1.

So why isn’t application modernization a top priority for all organizations? In working with our clients, we find most understand that modernization can require a significant investment both in dollars and opportunity cost to effectively manage wide-scale change but often they have little focus on the advantages and possible return on the investment. Thus, the “if it’s not broken, don’t fix it” mentality becomes pervasive. But we believe this is a risky proposition. In our experience, application modernization creates business value by enabling a business to increase revenue and reduce risks.

Increase Revenue

• Innovate into new markets. Innovation is a key revenue generation tool that allows businesses to expand into new markets and become more efficient in existing ones. Innovation depends largely on an appetite of risk-taking and experimentation, then responsibly scaling that process for success. A modern application design allows for an iterative approach of testing, measuring, then adapting the application to meet desired requirements, which is often not possible with legacy applications. The rapid process of maturing an application can lead to increased revenue as businesses see improved efficiencies and move into new markets first.

• Respond quickly to market changes. Getting into new markets first is not always the primary concern (just ask AltaVista, Blockbuster, or BlackBerry), but being able to respond like a Google and Netflix will keep you competitive in the market. Competitors constantly evolve, giving customers what they want and attempting to steal your market share and bottom line if you don’t respond. But most organizations handicapped with legacy applications are limited in capability and have difficulty adapting to disruptions in the market. In fact, 85% of executives say that legacy technology hinders their ability to move to a more digital model1. Organizations that want to respond to the changing market must be willing to adopt approaches and systems that provide for flexibility and rapid response, which often leads to continual revenue growth.

• Grow existing markets. Modern applications are scalable to meet an expanding customer base. Depending on the organization, the scalability needs might vary by seasons or steady growth each month. Having the flexibility to scale when needed is important for sustained growth within a market segment.

In addition, organizations can grow existing markets through omnichannel engagement. It’s important to recognize the tremendous growth in mobile traffic over the past decade. In the last two years, the percentage of website traffic from a mobile device has surged to 53%. Furthermore, new devices (e.g., wearables, voice, etc.) are being launched daily. Given the explosive growth in these channels, businesses must meet customers and partners where they are with remote accessible applications and in doing so will boost their bottom line.

Reduce Risks

• Legacy systems are vulnerable. According to Symantec’s 2017 Internet Security Threat report, in the last eight years, more than 7.1 billion identities have been exposed in data breaches. This highlights the importance of system security. Legacy systems are often accompanied by many security flaws, which creates liability. Therefore, companies should mitigate this vulnerability and provide consumers the security required and demanded by the market today. Even at the largest organizations, we always run into some kind of glaring security issue. For example, we often find applications that still require Flash, Java Applets, or some software that will only run correctly on IE6/Windows XP. All organizations should be focused on modernizing application security to mitigate this risk.

• Legacy systems are unreliable. Organizations need to consider the potential loss of revenue when legacy systems fail to scale or encounter outages. Addressing the inability to scale to a large consumer base demands is one of the key areas of improvement within application modernization. We assist many of our clients with scalability and reliability concerns and have seen significant growth in this need as Black Friday sales have boomed online. Modernizing these systems has allowed our retail clients to experience multi-million dollar growth during this seasonal traffic, rather than struggle with uptime and face continual root cause analysis meetings. Modernizing creates greater scalability and reliability with reduced downtime and redundancy of data, thus reducing the potential for loss of revenue.

• Compliance standards are required. Compliance standards (SOX, HIPAA, PCI, and others) require organizations to modernize or pay a heavy penalty. Organizations no longer have an option to ignore these compliance standards, and by addressing them they reduce the risks for the organization, its partners, employees, and customers. Modern systems allow IT teams to easily adapt systems to the changing compliance standards in contrast to the binding and slow changing structure of older legacy systems. The ability to quickly modify systems to bring them into compliance or meet new compliance standards is highly desirable and reduces the risk and exposure many health and financial organizations face.

Other Benefits of Application Modernization

• Employee satisfaction and attraction. Employees, especially top talent, are not oblivious to change either. They are constantly seeking out and learning new processes and technology. Employees stuck on maintaining legacy systems may become disgruntled, unproductive, and influence the organization’s culture in a negative way. Legacy talent may be difficult to acquire after time as 83% of executives claim their organizations lack the proper talent to support legacy systems1. But when using tried and true systems, the recruiting pipeline can fill up much quicker with employees who can be trained rather than paying large costs for specialty legacy system knowledge.

• Organizational velocity. Another attribute associated with legacy systems includes operational inefficiencies where instead of technology aiding in operations, the business has conformed process to match technology. This often means the organization is operating slower than desired. With modern application design the entire business process can be improved with a holistic approach to change technology, process, people, and culture. The result is a more efficient and profitable organization that attracts and retains talent.

We hope this illustrates the real business value in modernizing legacy systems. Customers’ needs and technological advances are always changing, costs are increasing, and the talent pool is moving ahead. Make sure your technology roadmap includes application modernization to ensure you keep up with the pace of change, increase revenue, and reduce risks. In future blog posts we will discuss the 5 Rs of application modernization: retire, replace, rationalize, re-architect, and re-platform, and we’ll learn some specific strategies to address each.

Please feel free to contact us at findoutmore@credera.com if you have questions or would like more information on application modernization.

Source:

1 “From lead weight to launch pad: Realizing digital objectives while managing legacy optimization”, Accenture Strategy – 2016

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