Making enterprise modernization a reality

With many businesses reeling from the impact of the previous year and the outlook still uncertain, 2021 may not seem like the best year to put ambitious plans in motion. But the events of 2020 have, in some respects, created an opportunity by providing a massive impetus for enterprise modernization.

Organizations have seen that measured approaches to change aren’t sufficient when business models and practices need to be rewritten almost overnight. So, they’re tackling transformation with new speed and vigor. A recent survey of boards of directors by Gartner found 69% had accelerated digital initiatives in response to COVID 19-driven disruption, with enhancing operational excellence and optimizing costs among the main goals.

Boards of directors responses to pandemic-related disruption

“There are so many people working from home now who need to access to the same systems, so security is struggling to keep up while allowing people to work productively,” says Sarah Taraporewalla, Director of Enterprise Modernization, Platforms and Cloud for Australia at Thoughtworks. “At the same time, with customers in the same position, there’s a need for people to transact with businesses through digital touchpoints. There’s a clear differentiator between businesses that have been able to pivot to offer that, and those that are lagging behind - which is why we’re seeing a real digital push.”

“2020 lit an even bigger fire under organizations that were already struggling,” agrees Rachel Laycock, Global Managing Director of Enterprise Modernization, Platforms and Cloud at Thoughtworks. “The ones that had already gone through modernization efforts and built strong digital capabilities were able to respond faster, while those who didn’t are struggling to get the business back on track. It was a reminder of what enterprises need to get done - and that the longer you leave things as is, the worse it can get.”

By underlining the urgent need to base businesses on more flexible and resilient technology infrastructure, the pandemic effectively dismantled what’s often proven the biggest single barrier to enterprise modernization - a lack of funding.

For many enterprises COVID-19 opened the floodgates, prompting what consultancy Harvey Nash and KPMG have called “one of the biggest surges in technology investment in history.” By their estimates, companies splashed out roughly US$15 billion extra a week during the pandemic to support remote working. Security, customer experience and cloud are the top areas of investment focus.

Technology investment priorities post-pandemic

These are also areas set to be reshaped in the years ahead by emerging technologies such as virtual assistants and edge computing, according to Thoughtworks’ new Looking Glass report, which breaks down the technology-driven forces that businesses will benefit from - and grapple with - in the near future.

“Up until now companies were focused on bits and pieces of the modernization journey,” says Ashok Subramanian, Head of Technology, UK at Thoughtworks. “Now every second or third CIO is talking about how their workforce won’t ever go back to the same shape. It’s become an existential issue; organizations are building for a completely new future. You no longer have to ‘sell’ anyone on the value of new technologies. It’s more about the approach, the underlying principles and practices, that are needed to make the change.”

Practices are important because regardless of how well they’re funded, or how sincere the intentions, research indicates around three-quarters of legacy modernization projects are never completed - often for reasons that have little to do with the technology itself.

So how can business leaders not only tackle modernization this year, but set themselves up to see it through? In this issue of Perspectives Thoughtworks experts address the big, and tricky, questions that can hold modernization back. 

1. Enterprise modernization seems like a huge task and our systems are complicated. Where do I start?

One of the main challenges with modernization is that “there is no playbook,” says Subramanian. “We’d all like to believe you can just go in with a standard set of processes from the beginning, but at least in our experience, that isn’t how it works.”

This makes it essential to first come up with a clear strategy and execution plan that “incorporates asking and answering the real why - the end goal of your product,” Laycock notes.

“The ‘why’ dictates the ‘how’,” agrees Taraporewalla. “If you need to phase out aging technology in order to compete as a business, the implementation and strategy will be completely different than it would be if the goal is to expand into different markets, risk reduction or produce a new innovation. The ‘why’ affects timelines as well. Someone whose house is on fire has different demands than someone who can see kindling lying around.” 

The plan should recognize that modernization is multi-dimensional and outline how change will be managed across several fronts. While technology plays a huge role, Taraporewalla points out there are also people, processes and products to consider. Product being both what the business is built on today and what it aims to deliver to customers tomorrow; people, the development of skills and team structures to advance towards that goal; and process, new methodologies that need to be adopted and old ways of doing things that need to be “kicked out the door.”

“There’s a lot out there on good technology strategies to approach modernization, when the biggest challenges are actually on the people and process side,” agrees Laycock. “If you don’t have a plan to manage the changes in your organization alongside the system changes, it’s highly likely that you’ll fail, because that’s what really gets in the way. People can both intentionally and unintentionally put the brakes on a modernization effort.”

“It’s very easy to adopt the ceremonies; much harder to change your actual principles and working practices,” says Subramanian. “Where organizations tend to fail isn’t in the strategy, but in getting to the level of detail that’s necessary to effectively execute.”

If, as Subramanian says, “execution is where it falls down,” it’s time to explore in detail how the enterprise can remain upright.

2. Does modernization mean replacing everything? 

Modernization isn’t limited to technological change, but it is based on technology underpinnings. The first big decision many enterprises are confronted with is whether to work with the technology infrastructure they have, overhaul it completely, or aim for something in between.

According to Taraporewalla, the ‘lift and shift’ approach - in which systems are simply picked up and migrated to the cloud more or less intact - is the default recommended by many tech service providers. But best modernization practice is more selective.

“Our recommendation is to replace systems gradually - but not everything,” she says. “It’s a bit like when you move house. If you cull before you pack up, and get rid of a whole bunch of stuff that’s not used, then you’re packing and moving fewer boxes, so the process isn’t as hard.”

Patterns of cloud migration

Subramanian urges organizations to think about what kind of ‘legacy’ technology they’re aiming to update. Systems that were designed decades ago for an entirely different era of consumer expectations, or that are no longer supported, may be destined for the scrap heap. But legacy isn’t always a dirty word, and can also be viewed as the enterprise’s inheritance. 

“One of the key assets that exists in legacy technology is the information enterprises have about their customers and their own operations,” he explains. “Especially if you’re working across multiple markets or complying with regulations, there are definitely processes that you’re going to borrow in a modernization that might change at a slower cadence because they’re a key differentiator for the business.” 

Yet modernization should represent a genuine break with some parts of the past, and go beyond replicating existing systems and processes in new guises. “A key thing to remember is that you’ve got the opportunity to significantly simplify processes and systems, rather than simply copying the same old things,” Subramanian says. “Technologies like machine learning mean experiences like customer onboarding can be completely reimagined. Modernization is about leaving the old ways of working. People shouldn’t end up looking for every single feature and option that existed in the old system or they’ll never learn to let go.”

According to Laycock, enterprises should aim for a ‘Goldilocks’ strategy. “You can remediate applications and platforms, make sure they’re more stable, and lift and shift them to the cloud, but you won’t really get the benefits of a cloud native architecture with only that strategy On the other extreme, trying to rebuild everything from scratch has been described as the equivalent of giving your competitors a few free years to get ahead.”

“It’s not necessarily a one or the other decision; it’s more of a system by system one, looking at variables like what you want to do with the system, how often it’s used, how often you want to change it, and whether it’s what you’re betting your business on for the next few years,” she explains. “The answers play into whether you throw the old system out and start again, versus just making sure it doesn’t cause any more problems, or breaking it up into pieces that can be deployed and scaled independently - creating the opportunity to be eventually treated as separate businesses or sold.”

There’s a frequent and understandable urge to break modernization down to small, manageable chunks, pursuing the same kind of ‘minimum viable product’ approach often adhered to in product development (that is, creating something just finished enough to solicit feedback for future improvements). But according to Taraporewalla “that just doesn’t work for modernization projects,” which by definition have to be wide-ranging and ambitious.

“The best value is found when you’re incremental, but not as incremental as in greenfield development,” she explains. “What you’re looking for is the shortest path to value. You will need to chunk off large portions of your system in order to migrate from one technology to another - but you can do it in different ways, dividing by market share or segmentation.”

Some more common approaches are “the strangle method, where you're just removing back-end bits, or ‘lipstick on a pig,’ which is offering new customer touchpoints,” she adds. “The choice comes back to the motivation. If you're losing customers really rapidly because they can't get the information that they need, lipstick on a pig might be the first step to retaining those customers and winning new market share.”

“In agile we tend to talk about two-week iterations, and in a modernization that’s not realistic,” Laycock notes. “But it’s also not right to go a year and a half without producing any end results. We advocate an approach where you can demonstrate some value along the way - perhaps not in weeks or years, but in months. And value is the variable, because different businesses will want to drive different results.”

3. I can’t necessarily keep investing in the latest, greatest technology – how am I supposed to keep up?

Modernization is often associated with – even mistaken for – technologies like cloud and AI, but according to Taraporewalla, has less to do with a certain kind of tech than “the solutions and processes that help the ability to evolve your technology over time in a stable and structured manner.”

Subramanian sees cloud infrastructure as a prerequisite for modernization, simply because the need for on-demand computing resources has become a given. However, he adds, “technology itself is not a differentiator. We’ve seen many organizations try and jump on the bandwagon of using the latest technology, when it’s probably not relevant to the business problem they’re trying to solve. If you don’t have the capabilities to understand and adopt new technology, it’s not going to allow you to modernize.”

Artificial intelligence (AI) is a prime example. With many cloud vendors now offering AI solutions ‘out of the box’ and one study finding 90% of organizations plan to have some kind of AI implementation in progress by 2022, it’s increasingly perceived as part of the bedrock of any modernization initiative. AI is also, Laycock points out, one of the “cool” technologies companies tend to get excited about – but won’t automatically make an enterprise more ‘modern,’ or effective.

“Machine learning and AI are great, but will they actually allow you to access the data that you need, so different parts of the organization can leverage it to gain insights?” she says. “You often need a lot more work on the back end to try to get the data infrastructure and assets exposed in a way that supports your business needs. People aren’t as excited about data engineering and data platforms, but AI has to sit on top of the data platform the organization currently has, which may not be suitable. Modernizing your data is a huge undertaking in and of itself.” 

It follows that investments in modernization shouldn’t prioritize the latest technologies, but tools and processes that will clearly help the enterprise know itself and its customers better.

“There used to be a lot of focus on software itself as valuable, where over time we’ve come to see the information and data you end up collecting can be monetized a lot more,” Subramanian says. “The key differentiator for most organizations isn’t technology, but getting timely access to information that they can trust to group, analyze and understand their performance – not just commercially, but in terms of internal operational metrics, so they can proactively take steps to mitigate risks or identify new opportunities.”

4. How is this going to impact my teams – and how do I get them on board?

The fact that modernization entails organizational as well technological change means it will inevitably have a major impact on the way people work – and if it doesn’t, it’s most likely incomplete.

“Legacy systems don’t exist in a vacuum, they’re a product of an organization, structures, processes and people,” says Subramanian. “If modernization focuses solely on tech, you’re likely creating the same negative feedback cycles that created the mess in the first place.”

Despite its importance, the people change management aspect of modernization is “under baked, under planned for, and often not even included in the scope,” Taraporewalla says. “There’s a hope that when the technology language is changing people are just going to pick it up, and work with the new stuff.”

Unlike “unopinionated” technology, people can and do resist change for a variety of reasons, from force of habit to fears of obsolescence. Consequently, in any modernization plan, “the people growth piece should be as prominent as the technology roadmap,” she adds.

Consistent, open communication, particularly from the company’s leadership is an important first step to fostering support. But according to Laycock communication alone won’t prop up change management, and doesn’t guarantee buy-in at all levels of the organization.

“You can communicate until you’re blue in the face, but if you haven’t identified why people are resisting, you’re not addressing the problem,” she says. “Some executives may be completely bought in, others won’t think modernization matters to them, developers on the ground may even be upset about the changes. You’ve got different behaviors throughout the organization, which is why you have to identify where resistance is actually happening. As you look at the architecture that’s going to drive value, you have to look at the different players involved – who will be doing the actual work, who will be impacted, which parts of the organization could be potential obstacles – and plan to manage that.”

One way to overcome resistance is to demonstrate early on that modernization will drive tangible improvements not just for the organization or bottom line, but to everyday working lives. “If people don’t see any value in it, they lose interest,” Laycock says. “You have to consider the politics – how invested are the stakeholders in the business that need to remove obstacles? Does the pain of this aging IT estate really hurt them, or do they at least have empathy for those it is hurting?” 

It’s almost inevitable that for the owners of some systems and spreadsheets, modernization will be interpreted as a loss of power, and that playing along will seem like, in Laycock’s words, “helping build their own exit.” Providing these people a clear path to develop along with the modernization can win them over, by giving them a stake in the outcome. In fact, according to Gartner, cultural issues, skill gaps and the struggle of some teams to keep up are among the biggest challenges thrown up by transformation projects.

Six barriers to scaling digital initiatives

“Create opportunities for continuous improvement,” advises Taraporewalla. “For skills that people want to learn and pick up, identify champions within your organization who can foster communities, talk to experts and bring the thought leadership into the company, pair with others and share it. Make that explicit as part of the talent journey, so it’s visible to everyone when they do their professional development plans how they’re going to fit in with the new organization, and what support they’re going to get to transform themselves as you transform your business.”

Even if they’re not setting the overall direction, people need to feel like they have a voice in how the enterprise is evolving, Taraporewalla says, which means the leadership should be checking in regularly with a broad cross-section of the organization. A multi-functional steering committee can enhance transparency and institutionalize this kind of engagement – even if the tone ultimately comes from the top. 

“(Modernization) is a journey that the leadership team needs to make with their people,” she explains. “You need to elicit feedback because the people maintaining a system are often the same ones who can recommend or identify problems with it. Now, they’re not necessarily the same people who understand what the future of the business should look like, because they’re often so ingrained in the day to day. But you should be listening to them nonetheless.” 

5. How do I know I’m succeeding – and when is it okay to stop?

Progress with modernization will be measured in different ways depending on the ‘why’ or overarching organizational goal. The main thing is that it is assessed regularly and rigorously, according to metrics that cover both the ‘inward’ (i.e. operational performance) and ‘outward’ (business or customer value) aspects of business performance.

Traditional measures of value like return on investment have their place, and indeed research indicates that for many businesses, modernization produces positive financial outcomes. But at the same time fixating on ‘hard’ financial metrics can be counterproductive.

“A lot of projects run out of steam because they’ve lost their ROI, or don’t know what the ROI is,” says Taraporewalla. “At the same time, when leadership is constantly forced to justify the cost and engage in bean-counting, it promotes different behaviors which don’t benefit the actual modernization.” 

Rather than a handful of hard data, says Subramanian, modernization should be gauged by a holistic “scorecard to help understand and evaluate the fitness of the organization – how quickly you can respond to things that are thrown at you, absorb and react. So at the C-suite level, there’s an understanding of the pace of change and to what extent the necessary capability and culture that’s needed is in your business.”

Examples might include technology metrics such as release times, mean time to recovery, and incident response - but also robust indicators “that are less metrics than business benefits,” Laycock says, such as the speed of change, ability to innovate, customer acquisition or employee retention.

An enterprise modernization scorecard

Measurement also needs to be an ongoing process, in keeping with the reality that modernization doesn’t come to a defined ‘stop’ in the way of technology projects past.

“Rather than operating in the fixed mindset of delivering this project and then the next one, you become a technology organization that supports any change the business needs – which will change faster all the time, if history has shown us anything,” says Laycock. “You’re developing the systems, processes and people that can support constant change, while remaining resilient and secure.”

Given modernization can go on for a long time, the overarching strategy, no matter how strong, can’t be viewed as set in stone. Any roadmap should allow for a degree of flexibility, as well as check-ins to appraise honestly when a change in direction is warranted.

“It helps not to be entirely constrained by what exists in the past,” says Subramanian. “It’s the organizations that can effectively spot where changes are needed and disrupt themselves from within, rather than being disrupted externally, that see modernization work.” 

“Not only do you need to set the strategy at the beginning – you need to continually question it, and question the ‘why,’ to make sure you’re still delivering the value you need from the transformation,” Taraporewalla agrees.

Emerging technologies and practices or cloud-delivered capabilities have significant potential to help the modernization journey, but Laycock cautions against adjusting modernization plans to incorporate every promising technology shift.

“There are incremental improvements all the time,” she says. “But I tend to think less about how they help enterprises modernize faster, and more about how easy they make it for new entrants to get up and running. Organizations often overestimate how much work it would be for a new entrant to come after their business.”

The best basis for modernization, then, is never getting too complacent. Ongoing volatility and rising competition provide ample reason for enterprises to be nervous and question long-cherished practices. Those that channel this unease into positive change, introducing more flexibility and speed where warranted, while retaining the skills and practices that continue to create value for the business, will be poised to make the most of the new ways of working and transacting that have emerged from a transformative year, and the recovery.

Any modernization push in 2021 will require considerable commitment and resources, but the payoff is “changing the way that the organization operates to support constant change” says Laycock. “Continuous improvement factored into the budget will keep your estate flexible, keep it adaptable, keep it resilient and ready for what’s next.”