Any non-startup or digitally born company has built up legacy ‘technology debt’ that limits success as a digital business. The costs of a brittle architecture are enumerated in higher maintenance dollars, greater risk of failure, and limited future use.
For many organizations, it is time to build a foundation for the future and thereby, eliminate one of the biggest drags on time to market. For this reasons, business modernization is an agenda item for CIOs and their enterprise architects. However, how do you tie modernization to the business agenda and prove the business value of making the investment. This is the question that I asked the #CIOChat.
What are the most typical drivers for business modernization?
CIOs are clear that the move to modernize is typically is attached to a ‘significant emotional event’. CIOs say that they rarely see aging technology being the driver all by itself. For too many organizations, the motto is if it still works don’t fix it. So, what are the drivers of modernization? CIOs say there are four.
CIOs say M&A drives modernization projects when the synergies are large enough to recoup some of the costs incurred in the deal. CIOs say, however, that way too often traditional CIOs leave systems in place far past the M&A after business integration funding has dried up.
A second driver of business modernization is what a former CIO of Yahoo, Mike Kail, calls the “fear of extinction”. Modernization efforts in many IT departments are started when long standing existential threats are noticed or ego driven change takes place. The problem is that most businesses don’t recognize existential threats until it’s too late to recovery.
CIOs suggest that nothing drives modernization faster than continued losses to a competitor. It’s much easier to get approval for a modernization project when losing deals due to the competitive technical advantages from a main competitor. For many organizations, a loss revenue or key customers represents the kind of ‘shot across the bow’ that causes the business to provide long needed modernization funding. And yet to be fair for some, the knee-jerk reaction to losing revenue is not to invest. Instead, it can consist of austerity measures and not investment in growth or modernization. CIOs suggest that better for executive teams to cut waste and then invest in the future. Unfortunately, at two former employers austerity and cutting became a way of life.
A third driver of modernization is a vendor dropping support for an ancient version of the product. And while there can often be financial motivations to displace aging, expensive legacy tech debt, this is typically not enough to make it through an investment committee.
The 4th driver is process optimization. Here, the business invests to create business differentiation. This is followed by automation and integration. This, of course, depends on company. It, also, depends upon the business leader. Here the drive to modernize is tied to business strategy. CIOs say growth and expansion opportunities often drive modernization. We sell A, but now we’ll also do B, which requires us to start operating with X, Y, and Z. Smart CIOs partner with business leaders to get things past the order talking phase into the strategic roadmap and planning/budget stages.
Is it the CIOs job to relate business modernization initiatives to business outcomes?
CIO say that IT leaders need to be able to do this. It is their job as company leaders. This doesn’t mean that the business can’t relate initiatives as well to business outcomes. In a perfect world, both should come up with initiatives and then partner on getting highest value completed.
But CIOs say they think IT leaders can facilitate this, but they suggest business owners need to be accountable for the measurable outcomes. CIOs to be clear say that a CIO can’t initiate an update, improvement, or modernization unless the businesses agrees they need it. CIO can’t sell something when there is no appetite for it in the line of business.
CIOs believe it is always been hard to predict a business outcome, but as one CIO said, “no one said that being a CIO was going to be easy”. CIOs clearly need to be involved early when there are new threats to their organization’s overall business model. The outcome of these conversations may require modernization combined with a new strategic model.
Aside from business outcomes, risks must be conveyed to the business. Legacy systems not only impact business performance when compared to their more modern counterparts but represent risk points in terms of maintenance and security. The CIO needs to be at the forefront of translating changing business opportunity and risk into opportunity assisted by appropriate technology solutions.
Look at this thru a digital lens, CIOs or CDOs must drive a New World Order which is customer focused through integrated systems delivering digital and traditional products and services. They need to help executives see the need to modernize now.
What should be in the scope for a business modernization initiative?
CIOs say start by optimizing the underlying business process and practices and then you can look at the technology stack. The first step needs to be ensuring there is a solid foundation that can evolve with the modernization and transformation initiatives. You can then start focusing on the more tactical areas. It’s like building or remodeling a house.
The scope should be defined to fit each project. Any CIO worth their salt will include modernizing the platform before building more on top of it. Regardless, CIOs suggest that is important to architect modernization projects so there are completed in manageable chunks. One CIO said it is better to build “dolphins instead of whales”. Clearly where there is technical debt, there will be burning fires. Systems should be first for fixing that are already impacting business and have high risk of stopping the presses. CIOs should find and modernize the burning fires. One CIO suggested here that a complexity/value/cost matrix to evaluate each of the items. Some might be quick hits or no brainers because of the end of contract/lifecycle. The rest need to be evaluated and put into priority waves based upon the matrix. CIOs stress, however, that it is hard to be strategic when your pants are on fire.
How important is change management to succeeding at business modernization?
Change management for communication planning and strategy is worth every hour you spend on it. CIOs say modernization can’t be done without it. Change, says one CIO, is a formal way of ensuring all the right people are involved and know what’s happening.
At the same time, CIOs stress that success isn’t about new technology and modernizing systems. It’s about changing people’s behaviors, workflows, and collaboration. Effective change management ensures that appropriate stakeholders are part of the conversations and that documented procedures including roll back steps are discussed. This serves not only as a record of change but a method for understanding the change and its impact.
One CIO said here I’m going to rank change management somewhere just below air to breath but above food and shelter. They said I’ll go with it is essential. Any change or modernization effort changes people’s jobs. You will fail without well thought out change management. Change management and constant culture management are key to moving forward. Finally, it is important to measure changes against outcomes and adjust the overall modernization priorities as a result.
Is modernization the foundation for creating a digital business?
CIOs say that they go hand in hand and can feed off each other in a virtuous (or vicious) cycle. Whether it is the CIO, CTO, or CDO that initiates modernization depends on the organization, but CIO/IT is probably the fulcrum on which it all turns. CIOs believe that modernization is often linked to digital experience. However, in many cases the cultural and organizational improvements reap the biggest rewards so full IT upgrade not critical.
Modernization, however, must be addressed to enable a digital success. CIOs view things here in terms of time and complexity. For example, modernization is a short-term project such as an application upgrade and digital transformation is complex and long term like moving towards a more integrated ERP. Eliminating technical debt needs to be a component of creating a digital business strategy. And from a management perspective, like any large program can be made up of a number of smaller projects some of these might be pure modernization, but if well architected they can move an organization towards the end goal. CIOs, for this reason, view modernization as one tactic in transformation. More often you are building something completely new and legacy processes and technology needs to be sunset.
Modernization can be pursued for multiple business reasons. However, without the business, the potential of a modernization initiative is limited. And as well, without the business and business justification, it simply will not take place. It is time to take action because the competition is not sitting still.