- Generative AI is unlike any technology that has come before. It’s swiftly disrupting business and society, forcing leaders to rethink their assumptions, plans, and strategies in real time.
- To help CEOs stay on top of the fast-shifting changes, the IBM Institute for Business Value is releasing a series of targeted, research-backed guides to generative AI, on topics from data cybersecurity to tech investment strategy to customer experience.
- This is part three: Application modernization.
Generative AI is unlike any technology that has come before. It’s swiftly disrupting business and society, forcing leaders to rethink their assumptions, plans, and strategies in real time.
To help CEOs stay on top of the fast-shifting changes, the IBM Institute for Business Value is releasing a series of targeted, research-backed guides to generative AI, on topics from data cybersecurity to tech investment strategy to customer experience.
This is part three: Application modernization.
Generative AI is unlike any technology that has come before. It’s swiftly disrupting business and society, forcing leaders to rethink their assumptions, plans, and strategies in real time.
To help CEOs stay on top of the fast-shifting changes, the IBM Institute for Business Value is releasing a series of targeted, research-backed guides to generative AI, on topics from data cybersecurity to tech investment strategy to customer experience.
This is part three: Application modernization.
Some apps might be in the “don’t touch what’s working” category—but for how long and at what cost? Generative AI is changing that, but it’s not straightforward.
64% of executives say they need to modernize apps to use generative AI. And at the same time, generative AI has the power to transform app modernization. Two sides of the same coin.
Rapidly evolving generative AI use cases demand a level of speed, flexibility, and connectedness that traditional IT platforms just can’t handle. Yet everyone wants to leverage the promise that generative AI can make modernization faster, easier, and more affordable.
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Originally published 15 August 2023
Application modernization—the process of updating traditional systems and apps to incorporate modern technologies and architectures—is a precondition for business agility. Rather than bolting modern apps onto legacy systems, making the technical environment ever more complex, businesses can use generative AI to speed app modernization for digital transformation organization-wide.
CEOs who embrace agile practices are 49% more likely to outperform their peers on revenue growth. And today, 79% of executives say using generative AI in app modernization projects will increase business agility.
With generative AI, businesses are able to use resources more effectively by automating and streamlining parts of the application modernization process. It can generate code snippets and application components, and automate testing to make sure apps perform as expected.
Although generative AI is key to all of this progress, only 27% of executives say their organization has modernized major workflows. Three in four say their organizations remain unmodernized with disparate systems using fragmented technologies and tools.
What you need to do
Grab low-hanging fruit by applying generative AI to apps that have already been modernized
Everyone likes a quick win. Apply generative AI to already-modernized applications to showcase its potential—and overcome the inertia that plagues some modernization initiatives.
- Emphasize low-risk, high-visibility opportunities. Use generative AI to modernize specific business systems and applications, such as an already-modernized production manufacturing system or service delivery operation.
- Track and measure the impacts of generative AI on developer productivity. Use this data to demonstrate the value proposition to other business unit leaders and build buy-in.
- Seed new teams with experienced talent to serve as cross-functional guides and advocates. Extend generative AI modernization to opportunities across the enterprise to broadly expand value.
Getting the biggest wins from generative AI requires reaching for fruit on higher branches.
Application modernization is a big phrase for a complex process—one that few executives are excited to sponsor or spearhead. But top business leaders agree it’s time to stop passing the buck. Today, 83% of C-suite executives say modernizing apps and data is central to their organization’s business strategy. And 89% say using generative AI in app modernization projects will drive growth by improving existing products and services and building new capabilities.
When advanced in tandem, app modernization and generative AI place opportunities that once seemed overly ambitious within reach. How? Some organizations are using generative AI to build or refactor applications, create workflows for migrating legacy ERP systems to SaaS versions, or develop functional requirements for new digital products built to run in the cloud. Generative AI can help organizations cope with skills gaps and reduce mundane, tedious tasks so staff members and teams can work more efficiently. Addressing these challenges improves productivity and scales quickly with decreased costs via code conversion, code generation, transformation planning, and knowledge management.
But companies can’t plug sensitive information or private data into a generative AI model in a public cloud environment because it becomes accessible. To fine-tune models with proprietary data—and get more targeted recommendations—they need to work in an environment that is both modern and private.
Business leaders expect generative AI to break down traditional barriers to app modernization. More than half of executives cite financial or technical challenges as hurdles to delivering strategic outcomes with modernization projects. But many executives now say generative AI offers opportunities to break down those technical (57%) and financial (46%) barriers.
Where to begin? Executives expect generative AI to have the biggest impact on app modernization projects in marketing, customer service, and information security.
What you need to do
Go after opportunities that were previously “off limits”—such as applications and processes in core systems
Generative AI empowers CEOs to run their business in entirely new ways. But only if they reach beyond low-hanging fruit to high-value opportunities: applications or processes in core systems that were either too difficult or too scary to attempt modernizing before. It’s time to urgently advance modernization efforts in the core business systems—such as product lifecycle management systems in manufacturing or flight scheduling systems in airlines—where generative AI is expected to deliver the biggest, most strategic results.
- Find missed opportunities. Get a list from your CIO/CTO of modernization initiatives that represented the most business value but were abandoned due to the estimated cost or level of difficulty. Tackle those priorities and build a running list of new modernization targets.
- Update the operating model to align with new generative AI capabilities. Adopt modern architectural practices, such as composability, to enable scalability.
- Engage your ecosystem of tech service partners as full participants in strategic generative AI adoption. Open communication channels with customers and potential partners. Avoid unwelcome surprises by ramping up marketplace intelligence and honestly assessing the competition in the generative AI arena.
It’s no longer IT or the business. Finally, IT is the business. With generative AI, technology drives innovation, and the business propels the technology. That means to get the most value from generative AI, CEOs must break down traditional divisions and integrate functions more holistically.
64% of executives believe that generative AI will bridge the gap between IT and business roles. But what will that look like? It starts with a shared understanding of business goals and enhanced collaboration. This makes it easier for teams to identify opportunities for innovation and improvement, and work more effectively toward common objectives.
Tight-knit integration with IT helps leaders ensure that the apps providing the most business value are getting the most support—and that low-performing apps aren’t monopolizing IT resources. Generative AI can correlate KPIs to the app performance and support requirements, which helps CEOs make faster, smarter decisions about IT spend.
And better decisions lead to greater strategic alignment. Part of it is attitudinal. 60% of leaders who believe their generative AI investments are critical have already made significant progress in aligning their enterprise IT architecture with business activities and process. That’s 40% higher than their peers.
Although organizations are split on which roles IT and the business should play in app modernization—half say leadership should be with IT, while the other half say it should be with the business—generative AI can bring them together.
What you need to do
Stop measuring business and IT goals separately—explicitly prioritize IT projects with the strongest links to business value
Strengthen and lengthen the handshake between IT and the business. Rather than crafting alliances of convenience, form firm and unyielding partnerships. Go beyond establishing innovation squads for generative AI by holding all leaders accountable for both technology modernization and business performance, irrespective of roles.
- Make a statement with who you appoint to lead your generative AI application modernization initiatives. These individuals should plausibly be two promotions away from a C-suite position.
- Urgency and speed-to-value should be the mantra you share with your generative AI teams. Require, reward, and celebrate fast cycles of modernization, where each iteration pushes toward better business outcomes.
- Shut down any conflicting, competing, or siloed incentives among teams. Steer recognition and rewards into one consistent program that encompasses all business objectives and applies to every team member.
The statistics informing the insights on this page are sourced from four proprietary surveys conducted by the IBM Institute for Business Value in collaboration with Oxford Economics around application modernization, generative AI, and broader business challenges. The first was answered by 100 US-based executives in July 2023. The second was answered by 400 US-based executives in August 2022. The third was answered by 2,000 US-based executives in April–July 2023. The fourth was answered by 3,000 global CEOs from January–April 2023.
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Originally published 15 August 2023
