The state of application modernization

Nearly all respondents believe modernization is essential and that they have the resources and tools needed to be successful.

People are a critical factor in all IT initiatives, and application modernization is no different. In this year’s survey, we wanted to find out more about respondents’ overall experience with and attitudes toward application modernization. Across both regions and roles, respondents report generally positive experiences. 95% of respondents believe that application modernization is essential for their organization’s success. Software architects were more likely to feel strongly that modernization is critical and that they have access to the resources and tools they need to be successful. At the same time, ITDMs value external support from vendors and community forums more highly than other roles. Even so, 95% of respondents across roles do believe they have what they need to support modernization in their role.

Attitudes across regions were fairly consistent with 2 notable differences. APAC respondents reported significantly stronger support from vendors than either U.S. and U.K companies. These respondents were also more likely to feel that access to community forums for questions and support is critical for their success than U.K. respondents.

Overall, this is good news. Positive attitudes generally mean that staff are on board with application modernization initiatives and have the support they need to move projects forward.

Companies plan for more than half of their custom applications to be modernized within the next year.

Organizations continue to be optimistic about their application modernization timelines, and we didn’t see much change from the 2021 results for this question. Companies still aim to modernize more than half (51%) of their custom applications during the next year, and an additional 28% of their applications during the following year. They expect only 21% of applications to take more than 2 years to modernize.

75% of organizations have already completed at least small-scale modernization projects. 

Application modernization is a journey, and organizations tend to progress through several stages on their way to becoming modernization experts. In this year’s survey, we wanted to learn more about where organizations were in their modernization life cycles. We found that organizations were fairly evenly split across each phase, from early learning to small-scale, large-scale, and continuous modernization. While 24% of organizations were still in the learning phase, 18% have progressed all the way to continuous modernization. The majority of companies are in the middle life cycle phases, with 30% having completed small-scale projects and another 28% having completed large-scale projects.

Application modernization is strongly associated with improving CI/CD pipelines and data modernization.

The term modernization continues to describe many different initiatives and actions, so we asked respondents how they define application modernization again this year. Most respondents—across regions, roles, and modernization stages—associate application modernization with improving continuous integration/continuous deployment (CI/CD) pipelines (68%) and data modernization (66%). This makes sense, as CI/CD pipelines play a key role in speeding development and deployment of the applications and services that organizations rely on to stay competitive. Pipelines are fundamental technologies, and organizations continue to add new capabilities to them. Organizations are also preparing to adopt artificial intelligence and machine learning (AI/ML) technologies, which require significant investments in data infrastructure, tools, and practices.

Companies see security, reliability, and scalability as reasons to modernize, metrics to measure efforts, and overall benefits of application modernization. 

The primary reasons organizations choose to modernize—security, reliability, and scalability—are familiar. They appear often in surveys about expected benefits of digital transformation and related initiatives. Nearly all respondents cited these factors as extremely or very important reasons for application modernization within their organization. In fact, more than 70% of organizations use these same 3 factors as key metrics for measuring the success of their modernization efforts, though there is no consensus on the single best indicator of success.

Respondents expect external partners to be involved with modernizing their applications, either handling the process completely or leading in-house staff.

On average, only 34% of each organization’s applications will be completely modernized by in-house staff. The rest of their application portfolios will either be handled completely by external partners (31%) or modernized by in-house staff led by external partners (35%). The allocation of these approaches changed only slightly from our 2021 survey. We saw a small shift away from modernization led by external partners but executed in-house and toward in-house staff completely handling modernization efforts.

Modernization strategies are diverse and most commonly involve multiple steps.

When we asked respondents about their modernization strategies last year, we found that organizations planned to use a variety of methods to modernize their legacy applications and that they were selecting the strategy that aligns best to each individual workload, rather than taking a single approach for all workloads. The same trend continues this year, with organizations using varied strategies depending on the specific application being modernized.

As before, we presented survey respondents with 6 choices, the widely used 6Rs:

• Retire. Decommission applications that are no longer needed.
• Retain. Leave critical applications as-is until refactoring is required.
• Rehost. “Lift and shift” applications to a cloud with minimal changes.
• Replatform. Optimize applications to run in a cloud, without changing the core application code or architecture.
• Refactor. Rearchitect applications to be cloud-native by containerizing workloads or moving them to a serverless architecture, for example.
• Repurchase. Move from perpetual application licenses to a Software-as-a-Service (SaaS) model.

Organizations are shifting budget to modernization efforts and focusing on core business, data, and analytics applications.

Compared to our last survey, organizations are shifting more of their modernization budget from delivering new infrastructure, cloud services, and modern applications (41% of budget) to modernizing their existing legacy infrastructure and applications (59% of budget). These results were nearly identical across regions. This makes sense, as a shift in budget aligns well with organizations moving forward on their modernization journey to transform more of their applications.

We also saw a shift in the types of applications organizations are focusing on. While core backend applications (41%) remained the top priority, data, analytics, and business intelligence (BI) applications (35%) moved into second, replacing customer-facing applications, which dropped from 25% to 14%. Employee productivity applications also declined as a modernization priority, from 19% in 2021 to 11% in 2023.

These results show that companies are focusing on the applications that run their business and the data that informs their business decisions, rather than customer-facing services. While this may seem counterintuitive, it makes sense, as many customer-facing applications likely have either already been modernized or simply developed with more modern or cloud-ready architectures.

Most organizations are already using artificial intelligence (AI) to support their application modernization processes.

Over the past several years, we’ve seen organizations adopt AI for an increasing number of use cases. In fact, 63% of companies have AI and machine learning (ML) workloads in place today, and 77% expect to have them in place within the next 2 years. For example, companies currently use AI in IT operations (76%), data analytics and management (66%), and cybersecurity (62%), to name a few. 

78% organizations are applying AI to their modernization efforts as well. Overall, 53% of respondents say that their company is using AI to aid application modernization processes, and 42% say that their company is adding AI to legacy applications to modernize them. Only 22% of respondents reported that their organization is not using AI to support modernization. 

These results vary a bit across regions. U.S. companies are considerably more likely to add AI to existing legacy applications than any other region. Meanwhile, U.K. respondents said their organization is less likely to use AI to assist in their modernization processes.