Designing a Successful Modernization Approach for AI Readiness | Microsoft Azure Blog

This blog guides you through how to design an approach to modernization that combines strategy, process and technology.

In our last blog, I outlined what modernization really means and why it matters. This blog guides you through how to design an approach to modernization that combines strategy, process and technology. Getting these elements right will help your organization successfully embrace new innovations like AI. I’ll start by covering a few common modernization challenges and then use Forrester’s Application Modernization Checklist to show how a holistic modernization approach can help them.

But before we dive in, let’s recap what we’ve learned so far: modernization means updating and improving assets across all areas of the business to work well with evolving software and the cloud. Successful modernization goes beyond technology upgrades or cloud migration – it’s a holistic approach to modernizing people, processes and skills.

The result is technology that is more attuned to meaningful outcomes, especially when it comes to artificial intelligence. AI is worth considering as a catalyst and modernization accelerator. In fact, 61% of business leaders say their organization plans to invest the most in generative AI as they prepare to further develop generative AI-based applications.1.

Modernization for AI readiness has been complicated by organizational and technical obstacles

Modernization is necessary, but it is also complicated. On the technical side, businesses can depend on vast tracts of legacy applications. IDC research found that on average 50% of an organization’s application assets are legacy, often leading to fragile interdependencies and bottlenecks.2. This only gets worse as new technologies are added to the mix, increasing the complexity of the information technology (IT) environment.

On the operational side, things are just as frustrating. Many companies struggle with manual processes and security issues that slow down modernization, exacerbating the ongoing shortage of skilled IT professionals.3. Then there is the matter of recruiting management; because modernization can be costly, it is difficult to justify it to key decision-makers.

“For banks, this is a multi-million dollar exercise to modernize their core. And for big banks, it can be hundreds of millions of dollars and many years of effort. So a lot of banks are hesitant to go down the path of upgrading to the cloud or even to a newer core.”

Jeroen Unger, Director of Global Alliances, Backbase

Failure to address these challenges can have serious consequences, such as increased risk, platform-wide failures, and skyrocketing operational costs. Businesses can find themselves locked in a long-term game of catch-up that reduces agility and hinders innovation.

Checklist: Building a Holistic Approach to Modernization

Acceptance and holistic approach to modernization is critical. As we discussed in our last blog, businesses that successfully modernize their operations do so by unifying their organization from the top floor to the front line.4. But what exactly does it look like? Let’s walk through the three critical areas of focus recommended by Forrester’s Application Modernization Checklist: strategy, process, and technology.

1. Implement a clear technology strategy (especially around AI and training)

Where to start:

  • Make sure you have input from management.
  • Adopt a combination of broad and focused approaches to AI and generative AI.
  • Ensure that all organizational units and technology sets are well aligned.

Any modernization effort must be justifiable to your leadership team. Make sure your strategy is clearly aligned with specific business goals, as leadership often focuses on outcomes that directly impact performance. For example, if application security is one of your priorities, combine that goal with the cloud’s potential to reduce costs and exposure through built-in advanced security features and compliance tools.

It is also important that your strategy includes an approach to AI. Since AI is relatively new, pay close attention to emerging use cases that indicate its potential impact. From accelerating software development lifecycles, faster anomaly detection and intelligent code completion, AI can also accelerate process documentation by automatically generating reports, creating content or driving deeper personalization or smarter business processes. This was not lost on leading Australian supermarket brand Coles, which quickly got on board after realizing that AI could be used to predict what products needed to be in which store at what time.

Our entire supply chain is powered by a machine learning engine. So it provides insight at a super localized level. We also use it to ensure we schedule our team members based on customer demand and ensure our shelves are properly stocked.”

John Cox, Technical Director, Coles

A clear strategy also means creating a plan for implementing, measuring and tracking modernization and AI initiatives over time. Keep in mind that results in the first few months alone may not paint the full picture of success—benefits such as maintenance, monitoring, and reduced management costs may show up later. Instead, think creatively about measurement, especially when it comes to what’s important to your industry. You can use cross-team metrics or behavioral changes to evaluate how teams are adopting new tools. Or, if you’re in retail, maybe you could track how long it takes customers to move from purchase to purchase.

Last but not least, don’t forget to engage your workforce. Any holistic modernization strategy should include a plan to upskill employees across all departments to ensure broad adoption of new tools and technologies.

2. Adopt modern operational and technological processes

What to do first:

  • Map operational processes directly to modernization activities.
  • See cloud migration as a means, not an end, to realizing the value of AI.
  • Adopt modern operational approaches and watch the results of this shift.

Next, look at your processes. Whether it’s your governance or application development workflows, they should map directly to your modernization activities. For example, if you want to modernize your legacy applications, think about how new technologies like the cloud might affect your development process. This step is critical to getting the right result – many businesses report that the biggest barriers to modernization are organizational and political in nature. It is also particularly important to develop plans to incorporate AI specifically into your existing workflows, as European PayTech company Nexi has done.

“With the standardization and momentum that comes with the transition to (Microsoft) Azure, we’ve focused on automating more processes and taken another leap forward.”

Lars Einar Harberg, IT Director for eCommerce Payments, Nexi Group

Also, don’t forget to use metrics to track process updates. Modernization results are measurable when tracked against cross-business KPIs, cross-team (eg sales, marketing and product) KPIs (key performance indicators) and OKRs (objectives and key results). Let’s say you want to measure operational efficiency, time-to-resolution value, quality and depth of observability and manageability. You need to make sure that the method of measurement is not only meaningful to one group of stakeholders.

3. Update technology stacks supported by strategic partnerships

What to do first:

  • Limit technology proliferation and upgrade technology packs.
  • Organize your approach to security as soon as possible.
  • Look for strategic partners.

The last stop on our checklist is clear: technology. Your modernization strategy must include a plan to integrate your technology stacks with the support of strategic partners. Integrated technological stacks they are sets of software, platforms and tools that work together to avoid silos and point solutions that create inefficiencies. They can help businesses generate better data, unlock richer insights, and effectively incorporate artificial intelligence.

But because these stacks add complexity to the backend, make sure your efforts are guided by trusted advisors. Realizing this early on, Nexi developed a strategic partnership with Microsoft that provided comprehensive resources and support.

“We worked closely with Microsoft’s internal architects to re-examine the architectural decisions. Microsoft helped us move from a pure developer mindset to a DevOps mindset that adopted ‘you-build-it, you-run’ as a core philosophy.”

Jens Barnow, Senior Vice President, Group Technology, Nexi Group

Your plan should also include a strategy for addressing security issues early—waiting for issues can slow down upgrades at best and compromise security at worst.

Start your modernization journey today and lead your business into the future

When retrofitting is done right, the results can be transformative. We’ll look at the specific benefits in our next blog, but many organizations report results ranging from increased efficiency to improved technical capabilities. And of course, many were ready for AI. According to one study by Forrester, 75% of respondents agreed that migrating to the cloud is critical to the adoption of artificial intelligence and machine learning.5.

So are you ready to start modernizing your business? Start by reading the first blog in our series on Modernization Basics and check out Forrester Consulting’s Application Modernization Checklist commissioned by Microsoft. Be sure to follow our next blog and explore the following resources:


Resources:

1,3,4. Forrester Modernization Study | Microsoft Azure

2. IDC Application Migration White Paper | Microsoft Azure

5. Total Economic Impact™ of Microsoft Azure migration for AI-Readiness

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