Why LatAm Enterprises Must Modernize Legacy Systems

The definition of a “digital enterprise” continues to evolve, and the high level of market hype doesn’t help clarifying things. But this concept is generally understood to be a combination of newer technology trends — like cloud, social, analytics, mobility, and others — and IT modernization. Together, these arm the enterprise with a set of tools and processes with which it can improve its interactions with customers and employees, analyze data collected via the technology, and create value from new products and services associated with new technologies.

Digital technologies such as social, mobile, analytics, cloud, and the Internet of Things are fundamentally changing how businesses interact with end-consumers and employees. They are impacting everything from corporate brand perception to the business’ top and bottom lines. Virtually no business can escape the disruption and heightened competition wrought by digitally savvy and legacy-light competitors in the market, not to mention the proliferation of new devices, platforms and IT delivery methods in the workplace. As a result, traditional enterprises need to evolve into digital business or risk obsolescence.

This is especially true for Latin American enterprises. Ovum’s ICT Enterprise Insights 2014/15, a global survey of over 6,500 IT decision makers, found that LatAm enterprises consider it their top priority to improve customer satisfaction and are turning to digital technologies to drive customer engagement.

Figure 1 – Customer Satisfaction Is Top Priority

Source: Ovum ICT Enterprise Insights Survey 2014/15

But to effectively leverage digital technologies, it is important for enterprises to be agile, adaptable, and responsive to changing market trends. This need is only going to gain urgency over the next few years as an increasing number of Generation Z-ers (those born around the mid- to late-1990s compared to Millennials who were born in the 1980s) begin to influence the adoption of technology in the market and the office. Technology is an integral part of their lives. They rely on it to “get the job done,” and they are simultaneously more connected, eager to share, and easily influenced by internet and social media than any other generation before them.

As the commercial and consumer landscapes change, it is vital for LatAm businesses to engage with customers across multiple channels and platforms. There is a reason that “digital transformation” is becoming the key watchword in the C-suite. Still, not all enterprises are well positioned to leverage digital technologies across their business, as the legacy IT estates are not conducive for supporting the demands that these new technologies place on them.

In Ovum’s ICT Enterprise Insights 2014/15 survey, we asked IT decision makers to rate a number of IT imperatives (including modernization of legacy systems and building a customer adaptive enterprise) on the importance of each for their organization’s IT strategy. Except for North Asia, which is going through a technology refresh cycle, almost every other geographical area, including Latin America, rated “building the adaptive enterprise” as higher in priority compared to “modernizing legacy systems.” This data shows a general disconnect in the way organizations are approaching the whole adaptive enterprise concept where they end up “chasing the shiny new thing” with little regard for the existing core investments that underpin the success of digital initiatives.

Figure 2 – Modernization Is Ignored in Favor of Transformation

Source: Ovum ICT Enterprise Insights Survey 2014/15

Why Modernizing Legacy Systems Is Critical for Success

We live in an Information Age where competitive advantage depends heavily on an enterprise’s ability to mine and analyze data to find patterns in customer behavior that can then be used to predict trends around spending. Enterprises need their IT organizations to be responsive and adaptable to cope with the demands that dealing with changing customer requirements place on the infrastructure and application estates.

Moreover, the disruption that many traditional businesses are facing from digital upstarts that leverage new technology to level the playing field are shaking up industries across the globe. Coping with the reality of an ever-changing digital economy requires traditional organizations to build agility at the core of the business.

To facilitate this organizational change the underlying platforms and applications have to be mobile, or rather “any device” enabled, and deliverable via the cloud to provide the flexibility, scalability, and agility needed for an adaptive enterprise. Unfortunately, most enterprises spend more time and money on ensuring that existing applications keep running — what is termed “Run IT.”

Figure 3 – A Major Part of the IT Budget Is Spent on “Run IT”

Source: Ovum ICT Enterprise Insights 2014/15

Modernization goes well beyond the simple conversion or migration of code from an older language to newer ones. Most modernization initiatives continue to focus on cost reduction and resolving pressing technical problems. Though this method would resolve the most apparent and immediate needs of the organization, it does not address the underlying constraints unless a top-down approach followed.

Modernization should instead be viewed as a holistic approach that analyzes existing application and infrastructure investments in the context of business issues. This step is essential in order to derive a technology and transformation roadmap to ensure the business is able to leverage relevant, flexible, and cost-effective technologies to attain its goals.

Building agile and adaptable applications is not possible without a simultaneous transformation of the delivery of IT — including the increased adoption of agile or iterative development methodologies and the rapid spread of DevOps, continuous integration, test-driven development, et al. Just as it is not enough to change the wheels if the suspension is shot, not paying enough attention to modernizing core systems and infrastructure so that it can keep up with the demands that the new systems will place on them will almost always degrade the results of a transformation initiative.