Focusing Your Technology Modernization Investment Strategy

• Do we have a clear understanding of the lessons learned from our modernization investments over the last five years? Lessons learned begin with understanding the extent to which the promised returns were delivered and, most importantly, why or why not.
• Have we balanced our long- and short-term perspectives? The long-term narrative should provide a clear architectural strategy regarding where management's IT investments are taking the company, how emerging or unanticipated technological developments will be considered (creating a need for modularity and flexibility) and what the enterprise is expected to look like in, say, five years. As for the short-term, management should articulate principles that enable business agility and continuous modernization, considering that new technologies will emerge, so systems can meet changing needs without having to rip and replace critical components.
• Do we have the right partners? Most organizations have discovered - some the hard way - that choosing between cloud providers can be a complex task, as each offers unique advantages and has different approaches with respect to similar issues. The key is to balance a vendor's innovation path with the company's overall strategy.
• Do we have the right skills, and are we connecting with the business? Building capabilities without the skillsets needed to leverage modernization investments and maximize their value over time is a common issue. As for connecting with the business, a strong majority of organizations have started a legacy system modernization project but failed to complete it. Directors should satisfy themselves that there isn't a disconnect of priorities between technical and business leadership teams.
• Do we buy, build or deploy a hybrid approach? Beyond the obvious factors such as the organization's specific needs, resources, skills and strategic objectives, other considerations include cost, extent of required customization, scalability of design, ongoing maintenance and support, and speed to market. In addition, the decision isn't always either/or.
• Can we break down massive investments into discrete components? Much less willing to cut the $100 million check, companies are leaning into discrete investments to generate value from smaller increments of work.
• Do we have the data we need to sustain a strong customer focus? Companies have learned that to put the customer first, they need real-time data. Without it, how can management know whether the customer experience is getting the expected results?
• Are we thinking outside the box? Stepping out of the confines of the traditional sandbox in which technology executives play can make a difference. For example, some organizations may see the benefit of starting from a digital-first clean slate to deploy new infrastructure based on modern technologies - separate and apart from the legacy environment - to support new products or markets.
• Have we raised the business case bar to the right level? Business case development should begin with the premise that an organization (and its investors) can earn attractive rates in an inflation-adjusted bond with minimal risk. Thus, the business case supporting selected use cases must help answer the why, when and what questions, e.g., why make this investment now, when is the right time to invest, and what is the expected outcome and projected ROI?
• Are we undertaking the best approach to modernize? Once the value proposition is defined and the business case approved, navigating the technology modernization journey requires a meticulously charted course that encompasses due diligence, discovery and the establishment of waypoints to ensure key milestones are achieved. The technology modernization process often involves adopting a standardized approach that addresses specific organizational needs while remaining flexible enough to integrate various solutions.

Technology modernization can present a tough conversation in the boardroom. It boils down to the opportunity cost of allocating capital - a cost that is as high as it has been since the turn of the century. With the longer-term strategic narrative and ROI the primary focus for go-forward decisions on technology modernization projects, it is critical to focus on four interrelated drivers that can deliver the expected value - lowering costs, gaining more flexibility and power in deals with strategic vendors, overcoming the inability to build new functionality into current applications and meeting regulatory-compliance requirements. These drivers are fundamental to defining and communicating a clear value proposition to the board.

(Board Perspectives - Issue 183)

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