Modernization: An approach to what works

With digital disruptors eating away at market share and profits hurting from prolonged, intensive cost wars between traditional competitors, businesses had been looking to reduce their cost-to-income ratios even before COVID-19. When the pandemic happened, the urgency hit a new high. On top of that came the scramble to digitize pervasively in order to survive.

But there was a problem. Legacy infrastructure, being cost-inefficient and inflexible, hindered both objectives. The need for technology modernization was never clearer. However, what wasn’t so clear was the path to this modernization.  

Should the enterprise rip up and replace the entire system or upgrade it in parts? Should the transformation go “big bang” or proceed incrementally, in phases? To what extent and to which type of cloud should they shift to? And so on.

The Infosys Modernization Radar 2022 addresses these and other questions. 

The state of the landscape

Currently, 88% of technology assets are legacy systems, half of which are business-critical. An additional concern is that many organizations lack the skills to adapt to the requirements of the digital era. This is why enterprises are rushing to modernize: The report found that 70% to 90% of the legacy estate will be modernized within five years.

Approaches to modernization

Different modernization approaches have different impacts. For example, non-invasive (or less invasive) approaches involve superficial changes to a few technology components and impact the enterprise in select pockets. These methods may be considered when the IT architecture is still acceptable, the system is not overly complex, and the interfaces and integration logic are adequate. Hence they entail less expenditure.

But since these approaches modernize minimally, they are only a stepping stone to a more comprehensive future initiative. Some examples of less and non-invasive modernization include migrating technology frameworks to the cloud, migrating to open-source application servers, and rehosting mainframes.

Invasive strategies modernize thoroughly, making a sizable impact on multiple stakeholders, application layers and processes. Because they involve big changes, like implementing a new package or re-engineering, they take more time and cost more money than non-invasive approaches and carry a higher risk of disruption, but also promise more value.

When an organization’s IT snarl starts to stifle growth, it should look at invasive modernization by way of re-architecting legacy applications to cloud-native infrastructure, migrating traditional relational database management systems to NoSQL-type systems, or simplifying app development and delivery with low-code/no-code platforms. 

The right choice question

From the above discussion, it is apparent that not all consequences of modernization are intentional or even desirable. So that brings us back to the earlier question: What is the best modernization strategy for an enterprise?

The truth is that there’s no single answer to this question because the choice of strategy depends on the organization’s context, resources, existing technology landscape, business objectives. However, if the goal is to minimize risk and business disruption, then some approaches are clearly better than others.

In the Infosys Modernization Radar 2022 report, 51% of respondents taking the big-bang approach frequently suffered high levels of disruption, compared to 21% of those who modernized incrementally in phases. This is because big-bang calls for completely rewriting enterprise core systems, an approach that has been very often likened to changing an aircraft engine mid-flight. 

Therefore big-bang modernization makes sense only when the applications are small and easily replaceable. But most transformations entail bigger changes, tilting the balance in favor of phased and coexistence approaches, which are less disruptive and support business continuity.

Slower but much steadier

Phased modernization progresses towards microservices architecture and could take the coexistence approach. As the name suggests, this entails the parallel runs of legacy and new systems until the entire modernization — of people, processes and technology — is complete. This requires new cloud locations for managing data transfers between old and new systems.

The modernized stack points to a new location with a routing façade, an abstraction that talks to both modernized and legacy systems. To embrace this path, organizations need to analyze applications in-depth and perform security checks to ensure risks don’t surface in the new architecture. 

Strategies such as the Infosys zero-disruption method frequently take the coexistence approach since it is suited to more invasive types of modernization. Planning the parallel operation of both old and new systems until IT infrastructure and applications make their transition is extremely critical.

The coexistence approach enables a complete transformation to make the application scalable, flexible, modular and decoupled, utilizing microservices architecture. A big advantage is that the coexistence method leverages the best cloud offerings and gives the organization access to a rich partner ecosystem. 

An example of zero-disruption modernization that I have led is the transformation of the point-of-sale systems of an insurer. More than 50,000 rules (business and UI) involving more than 10 million lines of code were transformed using micro-change management. This reduced ticket inventory by 70%, improved maintenance productivity by about 10% and shortened new policy rollout time by about 30%. 

Summing up

Technology modernization is imperative for meeting consumer expectations, lowering costs, increasing scalability and agility, and competing against nimble, innovative next-generation players. In other words, it is the ticket to future survival. 

There are many modernization approaches, and not all of them are equal. For example, the big-bang approach, while quick and sometimes even more affordable, carries a very significant risk of disruption. Since a single hour of critical system downtime could cost as much as $300,000, maintaining business continuity during transformation is a very big priority for enterprises.

The phased coexistence approach mitigates disruption to ensure a seamless and successful transformation. 

Gautam Khanna is the vice president and global head of the modernization practice at Infosys.