IT modernization is not about replacing your entire application and infrastructure portfolio with bright, shiny, new stuff. Any IT management team that adopts such a course of action would be fooling itself and leading its business units toward disaster. So, if IT modernization is not about upgrading to shiny, new technology, then what is it about? The core of IT modernization is twofold. It is:

1. A movement toward the re-establishment of IT strategic planning as a key driver of application strategy and modernization decisions
2. Specific best practices and strategies for moving toward a more modern application and infrastructure environment

This new demand on IT strategic planning is not a one-off exercise, but a continuous, persistent value system that will come to inform and underpin all IT decisions.

Calling IT modernization a "movement" is accurate, but it requires a more specific definition. IT modernization is a movement that recognizes the strategies for and approaches to managing the ongoing, coordinated evolution of the business process and application and supporting technology portfolios to achieve an optimized value, cost and risk objective. The key element is "managing the ongoing, coordinated evolution." This is not a one-off event; it is a substantive shift in focus. IT modernization requires a strategic balance between demand (business needs) and supply (IT-delivery-services needs, such as facilities — buildings, data centers and so on — application development, IT operational support requirements and budget constraints).

IT modernization is a generic response to a combination of drivers. Each enterprise will experience these drivers in different proportions, and will bring other drivers and benefits to the initiative. However, the core, common drivers are:

• The agility gap — IT teams are struggling to match business user demands for changes in services, particularly at the application level. The established set of asset portfolios was not necessarily designed for today's agility demands and, in fact, may be incapable of meeting yesterday's user demands, let alone tomorrow's. The fault is not in the way the current assets are run or managed, but may be in their fundamental architecture. This is quite a different issue if an application portfolio is only 10 to 15 years old versus one that may be several decades old. Agility may be an issue for younger portfolios, but the size of the agility gap and the pain of the solution for the decades-old portfolio are more dramatic. IT management teams must close the agility gap between IT responsiveness and user demands, and recognize that this will mean a different approach.
• Technology obsolescence/opportunity — The total stack of technology needed to deliver useful services to users is deep and wide. The user experiences an "application," but this application is dependent on many layers of software, hardware and network services, each one at a certain stage in its life cycle. Technology innovation delivers many benefits, but one negative impact is that older technologies can move out of support, as vendors focus their attention on fighting for market share with newer releases. Although it may be feasible to maintain a portfolio with some obsolete and unsupported components, the risks inherent in such an approach will eventually demand a response. It is equally true that newer technology options are more viable than ever before. Many platforms have proved themselves to be reliable and scale higher than in the past. Companies can no longer hide behind the "it's not good enough" mantra. With certain exceptions (for example, high-volume, mainframe-based transaction processing), many of the modern hardware and software platforms are good enough.
• The skills crisis — Eventually, all components of asset portfolios need to be managed by technologists. Enterprises worldwide are operating under circumstances in which a significant portion of the people who understand their mission-critical systems are all eligible to retire during the next five years. IT management teams once believed that they would be able to place such systems on life support by moving the maintenance function to outsourced service providers. However, the outsourcers themselves are struggling to find people with the right skills, or new staff to learn obsolete languages. Organizations should not be surprised to find that 25% to 30% of their employees with legacy skills will be eligible to retire in the next three years.
• Portfolio diversity — Most IT management teams are trying to manage too many different systems, incurring substantial additional costs through unnecessary diversity. For example, one Fortune 50 client found that, as a result of mergers and acquisitions, it has seven separate help-desk systems in use around the world, each with licensing costs, operational management costs, and maintenance and support costs. The portfolio diversity is responsible for substantial additional costs, without any real differentiated benefit from these costs (see "Application Leaders: Stop Eating Profits and Capital With Unnecessary Operational Expenses").

IT modernization requires a substantial culture change in the IT organization, and in the relationship between business users and IT. The traditional focus of IT and business management teams has tended to center around return on investment (ROI) as the justification for bringing IT solutions into the business. This focus on ROI means that management on both sides directs a lot of attention to the investment management process. However, after nearly 40 years of commercial IT, most enterprises have vast estates of IT assets across multiple portfolios. The key challenge for IT management and business users is to manage this total asset base to maximize the value derived from the current asset base, and to transform the asset base to more closely meet business needs across a wide range of measures, including cost, benefit and risk.

This transformation to a return on assets (ROA) value system will not be easy, because neither the IT management team nor the business users are used to thinking about or working with this model. Furthermore, the IT portfolio must be managed as a complete asset base — not individual assets for individual problems. All future decisions must take into account the whole base, and not just specific vertical projects, thus avoiding little islands of automation that are not synergistic with the entire IT modernization effort. You need to have a desired end state and to shift the portfolio toward this common destination. Otherwise, modernization efforts may create a more modern environment that suffers from many of the same problems as today's portfolio.

IT strategic planning cannot simply be reactivated from the strategic planning approaches of the 1970s and 1980s. Modern strategic planning faces a much broader set of challenges, and will require substantially different approaches to those of the past.

A key discipline of IT modernization will be portfolio management, to be applied to all significant classes of assets, especially applications and projects. One of the key challenges for IT strategic planning will be the coordination of portfolio plans.

The legacy ROI model predicts the potential value delivered by a system. However, over time, the value delivered changes from the anticipated model. The only way for the business to understand the value delivered by IT services is to begin to measure the current ROA.

IT modernization is a CIO leadership concern and an IT manager action issue. The importance of strategic planning for IT modernization cannot be denied, but at some point, IT managers will be faced with specific actions to implement modernization decisions.

Modernization is not just an application issue. Modernization choices have implications for the underlying IT infrastructure that serves as the platform for delivering applications. This Key Issue will focus on the effects of various modernization decisions on the IT infrastructure. Replicating the quality of service of established systems on new and dissimilar platforms requires strong focus and attention.

This research is directly applicable to IT and business professionals, including:

• IT architects/analysts
• Data architects/analysts
• System programmers
• Application developers
• Software service/component designers
• Database/data service designers
• Integration architects
• Operations staff

This research is also relevant to other IT professionals, including (but not limited to):

• Technical architects
• Enterprise architects
• Application managers
• CIOs