As a business transformation partner, we often see organizations struggle to hit evolving business goals with legacy applications that just can’t keep up. Though their strategic objectives might vary, these organizations can all benefit from application modernization. In fact, a 2023 worldwide survey showed a wide range of drivers for application modernization across different enterprises, from adoption of more advanced technology to improved efficiency and cost reduction. It may be easy to identify the need for application modernization. But, getting started can present unexpected challenges. 

First, many organizations struggle to build a consensus around which applications should be the focus of their modernization initiatives, stalling the process before it’s begun. Budget constraints are another common roadblock. Whether they’re navigating one or both challenges, the way forward starts with a close look at the problem you’re trying to solve.

Understanding the business problem

For leaders and IT experts alike, it’s easy to skip ahead to picturing the ideal, feature-packed future state when updating systems. But everyone in the organization has their own version of this ideal, and extra features add up fast. To reach consensus and control the costs of application modernization initiatives, it’s important to start with the problem an organization is trying to solve.

Are they trying to streamline and inefficient process? Do they need to improve the customer experience to stay competitive? With a clearly defined problem, leaders and IT teams have a clear view of the applications they need to modernize and the critical features that need to be built into them. Moreover, it allows them to establish the value of the initiative to the business and understand the opportunity cost of technical debt.  

Reducing the costs of application modernization 

As technology advances and resources get tighter, organizations must find the right balance between keeping systems up to date and reducing costs. This challenges leaders and IT experts to look for strategies for reducing costs in application modernization. Fortunately, there are a few. 

Focus on the essentials

Perhaps the most obvious strategy to reduce costs is to reduce features, but doing so effectively hinges on a deep understanding of the business problems that must be solved. Leaders and IT teams who have taken the all-important step to really understand the challenges they’re addressing with their application modernization initiatives are better positioned to determine which features are critical to the success of the project, and which ones are simply nice to have. 

A focus on the essentials enables efficient development, simultaneously keeping costs in check, reducing complexity, and speeding the time to launch. 

Use a collaborative engineering approach

A collaborative engineering approach that engages stakeholders across and beyond the organization, empowers leaders and IT teams to support the strategic direction the business is moving in. Enterprises who invest in this approach seek to create consensus with an eye to the future success of the organization, improving the chances that their modernization initiatives will be well-received at launch and ensuring their longevity.

At its core, collaborative engineering combines a focus on current business challenges with stakeholder engagement and a forward-looking mindset. In addition to reducing costs over the short term by keeping features closely tied to solving current problems, this approach ensures modernized applications will support the future of the organization and minimize the need for additional modernization over the long term. 

Plan project resources strategically

Most application modernization projects require new or additional resources. With a strategic approach to resource planning, companies can reduce the costs of these resources. That approach starts with an assessment of the skills current team members already have. By distributing app modernization related tasks and day-to-day tasks according to each employee’s highest value skills, organizations can lower costs by bringing in junior resources and contractors to cover outstanding tasks. 

In many cases, temporary senior resources and even expert transformation partners can provide leadership for efficient application modernization.  

Other strategies for navigating budget constraints

In addition to reducing the costs of application modernization, there are other ways to manage budget constraints. These methods allow decision-makers to use budget cycles strategically to meet current needs while planning to address future ones. This approach helps organizations escape the vicious cycle of technical debt, which a McKinsey survey of CIOs found eats up 20% of budgets for new products.

Prioritize mission-critical features

While a focus on essential features reduces the costs of application modernization, prioritizing mission-critical features with a plan to build additional features as more funding becomes available allows organizations to work within the constraints of current budgets while building flexibility for the future. For organizations that must stretch development over multiple years, categorizing features in priority sequence creates a foundation for future planning.

Lay out a phased approach

For enterprises with shorter or predictable budget cycles, laying out a phased approach that earmarks future funding for additional creates a clear roadmap for meeting current business needs while supporting their overall strategic direction. While it requires a lot of planning, this approach sets organizations up to respond to emerging trends and remain competitive as the business landscape continues to shift. In addition, it amplifies the value of technology investments by making them part of a foundation for future modernization.