The Real Reason 79% of App Modernizations Fail
Nearly 80% of enterprise application modernization efforts fail, and the reason has nothing to do with choosing the wrong technology. In this conversation, Melissa Roberts, business architect and value engineer at LiminalArc, explains why modernization programs are designed to produce technology outcomes instead of business results, and why that design flaw is what kills them.
Melissa and Stacy Gordon walk through the four primary drivers forcing enterprises to modernize, the IT/business alignment problem that stalls most programs before they start, and how a capabilities-driven strategy changes what a modernization program is designed to deliver. If you’re leading or influencing a legacy modernization initiative, this is the diagnostic you’ve been missing.
Video Transcript
Melissa Roberts
I’ve worked with companies that did not even create benefits cases. They didn’t have strategic goals. They didn’t have your OKRs and KPIs and they just funded whatever they thought was the best thing to fund because they had feelings that it was a good thing to do. And that’s both on the business side and the IT side. And I’ve been in organizations where business is pretty solid. They may not have their business capabilities. That’s easy to do for them. But what isn’t there on the IT side is that connection because they have their own goals. So those goals and business goals don’t come together. So you’re at odds there. So that also makes the modernization difficult if you can’t get on the same page of what you’re trying to solve.
Stacy Gordon
Hi everybody. My name is Stacy Gordon and I lead our strategic growth initiatives at Liminal Arc. Today I’m joined by my colleague, Melissa Roberts, one of our business architects and value engineers at Liminal Arc who wrote an awesome new article titled Why Most Application Modernization Efforts Fail and How a Capabilities Driven Strategy Can Stop the Billion Dollar Bleed. I don’t know about you, but whenever I hear a billion dollar bleed that an organization is suffering, I’m going to stop and take note. Sounds pretty stressful. I’m going to kick us off, Melissa, by focusing on a pretty startling statistic that you call out at the beginning of your article and it states nearly 80% of modernization efforts fail. You’ve got to help me here. Why do you think organizations keep spending billions of dollars on something that fails way more often than it ends in success?
Melissa Roberts
Right. So that is the billion dollar question. So the reasons for modernization really don’t change. So an organization will try it, it fails, it’s spent a lot of money, but they still need to modernize. So they have to try it again and they have to try it again. So you either try it, you succeed, or you don’t exist as a business.
Stacy Gordon
Okay. That is just crazy to me that they keep repeating the same old patterns. So I think let’s kind of get into that a little bit. I picked up on a theme in your article and it really resonated with me, to be honest, because I think I do this a lot. But when it comes to modernization, the theme was most organizations seem to start with the end tech result. So the answer to our problems must be, let’s move all of our stuff to the cloud. Or now with everybody talking about AI, we’ve got to do AI. Let’s implement some AI. I don’t know where we’re going to do it, but let’s do it. Let’s just make it happen, everybody. So why do you think so many companies seem to start with the perceived solution, the solve to all of our problems versus, okay, wait a minute, why don’t we start with the problems that we actually are trying to solve and go from there?
Melissa Roberts
So the short answer is it’s easy to do it that way. It’s easy to hear, oh, AI is the new thing that’s going to fix everything. So we’re going to do that or cloud. We got to move things up to the cloud because we were told that’s the thing we have to do. But what’s really occurring is traditionally IT is considered not part of the business. So if they’re not part of the business, why do they care about business outcomes? Therefore, the technology and the technology says to move to AI, technology says move to cloud. So you couple that with this whole innovation of the marketing of the hype around everything and it’s not surprising that they just go for it. They go for the solution and not the business value.
Stacy Gordon
I do think it’s interesting that you talk about IT not being part of the business. I’ve only been at Luminal Arc for a short amount of time, but I hear us talk a lot about silos. And in my mind walking in, a silo meant often more about data. Data is in silos and that makes sense to me. So help me understand, is this a silo problem based on how the organization is set up that allows IT to operate over here without thinking about the whole of the business?
Melissa Roberts
Yeah, I think it can be a constructed silo. So culturally it’s a silo. Your IT, you’re in the back of the office. You don’t help us do anything. We are the business. We’re the important ones is what I’ve heard in the past.
Stacy Gordon
Yeah. I’ve read tons of articles just as I kind of sit forward with CIOs and CTOs and kind on the sales front of things. I hear and read articles about this clash between IT and business. And I know that at Luminal Arc, we’re constantly trying to educate people about how you can’t keep these two entities apart, that if you really want to do change and obviously modernization, you can’t keep them apart. They have to be talking to one another, aware of what other people’s pain points and concerns are and issues are to really pull things together. So that kind of leans me into, okay, you’re telling me we have to modernize. If the business is going to survive, be competitive, grow in the future, they have to modernize. And you even estimated that over the next five years they’re going to be spending 51, again, billion dollars on application modernization. And you talk about there’s four primary drivers that organizations are looking at that says, these are problems that we have we’ve got to modernize. Help me understand what this is and talk to me a little bit about more these four core things that organizations are challenged with and why they have to modernize.
Melissa Roberts
Sure. I think they’re all equally important, but some may ring bells with an IT department more than others. So cost. Cost is the one that IT is going to focus on most and probably the entire business. The older or more inflexible your application is, so you can’t make changes quickly, you have technical debt is going to cost you a lot of money and that’s your budget that’s being eaten away that you could be spending on something else. So the other is the scale. I briefly mentioned that when I said it was inflexible. So as market changes and it changes quickly, you can’t change because you’ve got this huge legacy application or this huge, I’ll call spaghetti we’ll talk about in a few minutes, I’m sure, applications that it just doesn’t move at all. You’re losing your market share there. Then another—
Stacy Gordon
One question real quick, what you said I thought was interesting. And I think maybe this is what you’re talking about from a competitive set. You’re like, there’s lots of legacy debt so they can’t change quickly. So it’s like if I’m a retailer and my competitor just implemented a new feature for a better user experience and I’m sitting here as the CEO going, “Okay guys, I’m calling my IT department.” I’m going, “Hey, why aren’t we doing this? I need you guys to figure out how to get this implemented.” Is these the types of problems that you’re talking about when you say they can’t scale or change?
Melissa Roberts
Absolutely. It’s like being, you should be the A team, but you’re really the Z team and you can’t get to A.
Stacy Gordon
Okay, that would be a problem. Definitely. So what about, you talk a little bit about technical debt, do you believe, I thought this was really interesting that you said in your article that once an application is launched from that moment on, it’s considered legacy. Now, okay, that stood out to me. And my question to you is, do you think most organizations realize that literally the moment that they put it into production, they should already start to think about it acquiring technical debt and being a legacy application and now being a maintenance cost center for them moving forward?
Melissa Roberts
Yeah, no, I don’t think they really do. They think they’ve got this great new application that they launched and it meets every single one of their needs right now. So they put it in and then they tend to forget, “Oh yeah, I got to keep looking at this. I got to keep seeing what’s changing in the market. I got to keep seeing what’s the new security feature I have to look out for.” And it just sits there and it just keeps adding onto that debt.
Stacy Gordon
How about on some of the elements and I know you said maybe they are or not all created equal. What do you think about that user experience? So much has changed since I 20 or 30 years ago started using digital applications for online shopping or managing my home finances or whatever and we’ve come to expect a certain type of customer experience. Do you think that that is kind one of the core drivers for why people recognize again, if their organization’s going to stay in business, they better have the best experience?
Melissa Roberts
Absolutely. So this younger generation, they want those same experiences that were shaped by what they’re using every day. So if you have an application that let’s say was built in the ’90s even, you can even build it in 2015 and it’s not that cool slit, you can move from this, you can move from that, you can go to Slack, you can go to Reddit, you can go all that seamlessly, you’re going to lose those potential customers because they just don’t have time for, “I got to click this button, I got to click that button, I got to go over here.” Yeah, you’re going to lose that.
Stacy Gordon
Gotcha. Yeah, I can see that one is one that rings true for me just because I get frustrated all the time when I have a bad user experience and it will cause you to literally take time out of your day to go find a replacement for that service that you’re using in your home. So I can see why that would be a huge driver for an organization to make sure that they can adapt and move quickly and change to stay ahead from a competitive landscape. We’ve talked a lot about why organizations must modernize. What is driving them to fortunately or unfortunately go down the path of modernizing their application, hoping that they are one of the 20% that actually successfully put something new into production. So I want to talk a little bit about why do these modernizations fail. So let’s give people the answer to the test. Why in the world do so many of these modernizations fail? In your article, you focus on a number of different things. I wanted to start first with, I think you called it boiling the ocean, the boiling the ocean problem. This is one I definitely do not understand. Why do organizations try to modernize everything all at once? What is it about this giant transformation program that seems to them that sounds like, oh my gosh, this is an amazing idea. I mean, go big or go home, catapult your personal success and I’m going to get a big raise and a new job and every person in the world is going to want me to come work for them. I mean, you tell me, what is it?
Melissa Roberts
Right. I mean, yeah, it’s appealing. What you said is appealing. Wow, I did this and my organization can reap the benefits for years, but it’s really more nuanced than that. I think there’s a lack of understanding of the impact that these giant transformations mean to the organization, especially if you’re replacing huge chunks of your application, your software systems, then you’re pulling it out, you’re changing your organization itself, you’re changing how the users interact, you’re changing everything all at once and it’s just a hard thing to do.
Stacy Gordon
So it is on one end, this appeal to being the savior and saving the day. How about on the other end? Is there a pressure that’s put on these stakeholders to say, “You’ve got to get in there and fix this problem and I want you to fix it now. I don’t want to take no for your answer.” And so going back to what you’ve stated already, they only know one way to do it. It’s an IT thing. I’m going to go put the pressure on my IT team to say, modernize this stack because I have to have a better customer experience. I’m assuming that has to be as much of a thing or in a back of a person’s mind as the, I’m going to be the big winner.
Melissa Roberts
And now you’re starting to get into how do we put the brakes on this? How do we go back to our leaders and say, “Yes, I know you want to do this and we can do this, but here’s data that’s going to show you what we should be doing first.”
Stacy Gordon
And does that go into this framework discussion? Because again, it’s like I bet you have a lot of the people that are responsible for these transformations and they know that it’s not the right thing and they’re throwing out these questions and they’re throwing out these propositions, but it’s like if you don’t have a framework to anchor it around, that creates a lack of understanding for perhaps people on that side of the business.
Melissa Roberts
That and it’s the loudest voice wins. I say, “I need this. I’m the loudest voice. I’m going to get it.” It doesn’t matter how much it’s going to cost.
Stacy Gordon
So Melissa, paint me a picture of what it feels like to be that person in an organization that has to start this giant transformation or he is charged with modernizing this application. Help me understand what he’s feeling each and every day.
Melissa Roberts
Right. Well, the first thing they would be feeling is it’s stressful. It’s stressful. Like you said, it fails, modernization fails all the time. So it’s on your shoulders to tell your team, this is the right direction, this is the way we’re going. And from an SVP, CIO all the way down to hands-on keyboard, your identity is wrapped up into your career and if this fails, you fail. So there’s a lot of pressure on yourself as well.
Stacy Gordon
And then if you’ve talked a lot about how organizations are structured, if you feel like you’re over here on an island, I mean, it’s got to even exasperate what you feel like you’re going through. Do you find that these leaders feel like they’re carrying this around in a backpack and it’s all on them? Do they feel like they can reach out to their peers within the organization to get support and feedback or do they just further isolate themselves? What have you seen in your experience?
Melissa Roberts
Well, it really depends on the organization itself. I’ve worked in organizations where if you went and asked for help, that meant you weren’t good at your job and you were going to get fired. So you did hold it all. You had to do everything. And then I’ve worked in extremes where it’s open. Everyone’s like, “Yeah, let’s talk about this. Let’s get it done. You have a great idea. Let me help with that idea.” So those are two extremes. I think most of the time you fall in the middle, you have to find out who you can talk to and who you feel you can trust with this. But I still think that most people are going to carry this on their own. They think they can solve this or they have to solve it.
Stacy Gordon
Right. Yeah, that’s a lot of pressure. I guess that’s why they get paid the big bucks to be able to support the weight of the world or the weight of their organization and the success of their organization, which is why it’s hopeful that people are starting to see that there are new ways of thinking or new approaches that they can consider a new journey rather than doing the way that they’ve done things all the time. And so thinking about that, you talk a lot about business-driven capabilities and you talked something about that’s a new way of thinking. So that’s hard. That’s hard for people to start doing things differently and thinking differently. How does someone start to embark on that journey to say, “I know the way that people have been doing it has failed. I don’t want to be that person. I’m going to try something different.” How does that seem to get into someone’s body and say, “We’re going to go down this way.”
Melissa Roberts
I think first you have to sit in that discomfort of failing. You have to acknowledge that I failed, it’s okay. It’s time to try something else. And that’s a really hard step for a lot of people. Once you get past this, you’re like, “Okay, so if somebody is telling me a capabilities-driven approach is the way I need to go, I need to figure out what that is. So what is that capability? What our capabilities makes no sense to me. I don’t understand that. Capability is simply what you do as an organization, not how you do it, the how is your technology, what. I’m running a donut shop and I want to make sure my customers come in and can select it on a kiosk, their donuts, and then check out. Your what is service management, customer service management is your what. How you do it is that kiosk and the technology under it.
Stacy Gordon
Gotcha, gotcha, gotcha.
Melissa Roberts
So those are some—
Stacy Gordon
I think starting with the tech solution rather than the business capability. I see where you’re going with that. That’s a good example.
Melissa Roberts
Yeah. So understanding that. And then another really difficult thing for people to do is what is business value? What am I trying to achieve? So is it I want to increase my market share? Is it I want to have new customers coming in that are the younger generation? Is it I want my internal people to have what they call a single pane of glass when they’re doing customer service, which is on screen where all the information is. What is it that I need to do? So finding that out and how are you going to measure it? What are the success measures for this? What is the cost benefit analysis?
Stacy Gordon
Do you believe organizations have actually … They have that information, but it’s on the business side and it doesn’t get translated to the technical side? Or do you find that even sometimes some of the best businesses seem to get away from the foundational components that they should be doing each and every day? These things sound relatively simple to me on the way that you should be thinking about your business, but people aren’t doing it. So is it one or both? What do you think?
Melissa Roberts
I think it’s both. I mean, I’ve worked with companies that did not even create benefits cases. They didn’t have strategic goals. They didn’t have your OKRs and KPIs and they just funded whatever they thought was the best thing to fund because they had feelings that it was a good thing to do. And then I’ve been in … And that’s both on the business side and the IT side. And I’ve been in organizations where business is pretty solid. They may not have their business capabilities. That’s easy to do for them, but what isn’t there on the IT side is that connection because they have their own goals. So those goals and business goals don’t come together so you’re at odds there. So that also makes the modernization difficult if you can’t get on the same page of what you’re trying to solve.
Stacy Gordon
The interesting thing too, I think probably, and you tell me if I’m right or wrong here, is that you have this modernization, you have an executive that’s willing to think differently and say, “I want to align with business goals so I can determine what to do.” And we talk a lot about frameworks and roadmaps. How do you determine what you should do? You started the process on a new way of thinking, but what’s next? How do you make sure that what you’re deciding to do is the right thing to do?
Melissa Roberts
How do you make it real?
Stacy Gordon
Yeah.
Melissa Roberts
So that’s part two of my article.
Stacy Gordon
No, I always like to go straight for the good stuff. Okay. Well, now you’ve teased it. So everybody, please take note that there will be a part two of this amazing conversation for you to tune into. But before we let you go, if you were going to leave some lessons for leadership, so the biggest takeaways from our conversation today, what would those be? And maybe if there’s one thing that a leader who’s listening to this today that wants to do something different, what should they do today to try to make an impact in changing how they’re going to approach a modernization project in the future?
Melissa Roberts
Well, besides reaching out to you, Stacy?
Stacy Gordon
Well, yes, please call me. Yeah.
Melissa Roberts
I would say take a look back at how you’re approaching your modernization. Do you have a data-driven roadmap? Is it connected to all your spending and then all of the benefits that you should be seeing from that spend? Are your investment options grounded in real data or is it the loudest voice first? If not, then you probably should reach out to us, but also more importantly, you’re not alone. This application modernization is not easy if it was. Stacy and I would not be talking to you right now.
Stacy Gordon
Well, I think one of the things that you wrote in your article that I want to close with is you said the longer you wait to modernize, the further behind your organization falls. So please, everybody, if you’re looking to dive into this topic a little bit further, you can always go to our website and read Melissa’s article, Why Most Application Modernization Efforts Fail and how a capabilities driven strategy can stop the billion dollar bleed. So definitely go check us out and make sure to tune into part two of this interview to where we help you understand how to bring this to reality and put it into practice. I’m Stacy and that is Melissa, and thanks so much for joining us.
Read Melissa’s Article: Why Most App Modernization Efforts Fail, and How a Capabilities-Driven Strategy Can Stop the Billion-Dollar Bleed