How to Decide What Not to Modernize

Most modernization programs start with the wrong question. They ask which system is oldest or ugliest, when the question that protects the budget is which capabilities are worth modernizing at all. Score what the business does on value, performance, and risk, and a business capability heat map shows you where to invest. More usefully, it shows you where to stop: capabilities that already perform well and don’t set you apart in the market only need to keep running as cheaply as possible.

Leaders skip this step in legacy application modernization all the time, and it’s why multi-year programs run over budget and leave the business with the same problems. Saying no with a capability map behind you is a very different conversation from saying no on gut feel. The map also puts the judgment behind each score in the open, where the business can argue about it.

Video Transcript

Stacy
If there is a leader who has budget, he’s got some money and his instinct is to rewrite, “I’m going to go tackle the oldest, ugliest system first because I got my money. I’ve been putting business cases together for this for the last nine months.” What would you tell them they do before they ever touch a line of code?

Melissa
Stop.

Stacy
Your last article argued most modernization efforts fail because organizations lack a decision framework. what does that failure actually look like inside a company and what’s the cost of getting it wrong?

Melissa
So it looks like a multi-year program that is over budget, that when it finally delivers, doesn’t really deliver what the business needs. So what does that mean? Teams are rebuilding the applications. They’re building them in the cloud. They’re swapping out a database. They’re migrating his stack. Six months later, the business has the same issues. So the business is continuing to put in requests to make things work better. You’re not moving your market share like the strategy suggested that you would be doing. So what’s happened is nobody, it’s not a business decision at that point. It became the technology decision. And that’s the heart of it. Organizations are going to confuse. We need to modernize technology with, we need to improve the business. Those are not the same thing.

Stacy
One of the things I loved you open your piece with the bowl of spaghetti image. You talk about pull one noodle and four others break. Why is that interconnectivity the thing that makes modernization so hard to scope?

Melissa
The legacy system was never built with boundaries in mind. So they grew organically, either through a business request or technology needs. And over time, they started quietly depending on each other. And no one really knew that. So the moment you go to scope your technology modernization effort and you try to move one piece, three other things have broken and you don’t know why. There’s no documentation. No person is there anymore that started your legacy systems. So that’s why you pull one noodle and four others fall apart. So capabilities allow you to reason about that business problem. First, you can figure out what systems are entangled to help solve it.

Stacy
You talk about heat maps. And so help walk me through the heat map. You assess capabilities on value, performance and risk. How do these three dimensions combine to tell an executive where to spend the money and where to leave well enough alone? Well,

Melissa
So each dimension is asking a different question. So when you’re talking about the value, it tells you how strategic the capability is. So does it differentiate you in the market? So don’t take strategic as meaning like your HR system’s not strategic. It’s strategic because you cannot operate without it, but it doesn’t differentiate you in the market. You’re also looking at your performance. How well is it being delivered today? Is it fully automated? Does it need to be fully automated? Do you have the right people in place? Are your processes okay? And then you have that third dimension of risk. And that’s simply how flexible or inflexible it is to move. So think of your bowl of spaghetti. If that bowl of spaghetti, if that legacy application is inflexible and it breaks every time you try to change something, it’s a high risk. When you combine all three of these together, let’s say you have a very strategic capability like customer service and your legacy system is a bowl of spaghetti. When you try to change something, that’s high risk, but you have to change it because it differentiates yourself. That’s a capability in the heat map that your executive is going to hone in on and is going to want to change. But if you have something like HR, it doesn’t differentiate you in your market. And it may not be flexible, but you’re not going to invest that much in it because it doesn’t move your market. It doesn’t move your strategy. It doesn’t move whatever business goals you have.

Stacy
So ultimately you’re saying it gives you, instead of a list, you get a picture. So it’s a better way to kind of look at how all the things interact together. It’s almost like on a matrix, right? Of when you start pinpointing those items.

Melissa
Absolutely. Yeah.

Stacy
Well, I start to see why that would be a much better way to approach this at the beginning. And Melissa, you talk a little bit about strategic versus utility items. And so when you tell a leader that a capability is just utility, how do they take that? We talked a lot before about how ego plays a big part in this as executives continue to walk down the same path as people before them and these application modernizations fail. So knowing that there’s some ego here, is this a hard conversation to have?

Melissa
It can be a very hard conversation, especially if that leader has spent years building and championing that system. But I try to reframe it before I go in and before it becomes personal. So utility doesn’t mean it’s that important. It just means that’s not where you differentiate. Every business needs utility capabilities like HR or like payroll. They all have to work. So the question isn’t, is the capability good or bad? It’s, is this where we win in the market? And if it’s not, then we just need to keep it humming and moving along as cheaply as we can.

Stacy
So if we were to look at some counterintuitive points in this piece, the heat map tells you where not to invest. But in my experience, most firms are actually pitching you to do more, not deliberately less. So what are your thoughts on that?

Melissa
So I think it’s the most valuable and the most underused part of the exercise. But the real value of your heat map is giving you permission to stop. If the capability is already performing well and it isn’t strategically differentiating it, then why continue pouring your money in a modernization budget? That’s just a waste. It’s not moving you where you need to be. Organizations tend to hemorrhage money on exactly that pattern, improving things that don’t need to be improved because nobody had the data that they needed to say to leave it alone. Saying

Stacy
No

Melissa
To a modernization request with a heat map behind you is a very different conversation than saying no to a gut feel.

Stacy
But I’m going to challenge you a little bit on the heat map concept. So the heat map scores value performance and risk, but ultimately it’s based on people’s judgment. So you have two architects in a room. They could rate that same capability very differently. So how is this genuinely supposed to be more objective than those gut feel decisions that we were just talking about?

Melissa
I won’t pretend that the heat map is going to remove judgment entirely. It doesn’t. But it’s important to keep in mind that it’s not just two architects in an ivory tower doing this. It’s the business coming together and scoring it. The heat map does make the judgment visible, structured and comparable. And what’s really, really cool is when you start scoring these and folks say, “Oh, I think this is strategic,” or, “Oh, I think this is high risk.” You have a conversation of things that were inside the person’s head that were never brought up before. So yes, it’s subjective, but that objectivity isn’t eliminating the subjectivity. It’s forcing the subjectivity into a consistent framework.

Stacy
If there is a leader who has budget, he’s got some money and his instinct is to rewrite, “I’m going to go tackle the oldest, ugliest system first because I got my money. I’ve been putting business cases together for this for the last nine months.” What would you tell them they do before they ever touch a line of code?

Melissa
Stop. Put the brakes on. If you don’t have your capability map, which like we said, most organizations don’t, what is that business problem you’re trying to solve? What is the value prop you’re going after? What is that strategic need that needs to be met? Then hone into those business capabilities. If you’re customer service, if you need to get more market, then look at that customer aspect and find out. If it’s for whatever reason HR, probably not strategic, so you don’t need to refactor that right now unless you’re out of compliance, then you might need to. So it’s asking those right questions and determining where you actually need to go. Not the whole, it’s all ugly and I have to do it right away.

Stacy
From your lips to God’s ears, girl, I hope everybody heard that. The answer is stop.