Modernising Legacy Infrastructure to Increase Competitiveness: The Board’s Role

By the numbers: To understand how IT organisations are ushering legacy infrastructure into the digital era to enable the innovation that will fuel long-term value creation, Protiviti undertook a global survey of more than 1,000 technology leaders. The survey found that:

• A majority of organisations (79%) have clearly defined their innovation goals.
• Only 29% of respondents indicate that innovation leaders align innovation goals with the business effectively.
• Organisations are spending an average of 31% of their IT budgets and investing, on average, 21% of their resources on managing technical debt.
• 69% of survey respondents rate the impact of technical debt on the ability to innovate as higher than a moderate impact.

Why it matters: In an environment dominated by emerging technologies, disruption of business models and universal acknowledgement of the importance of agility and resiliency to corporate success, innovation is a strategic imperative. Unfortunately, all efforts to inculcate an innovative culture can be frustrated when technical debt has “accrued” to such a level that it slows organisational response to emerging market opportunities and stifles the ability to compete in a digital world.

A call to action: The aforementioned research offers a call to action to increase agility and sustain the company’s innovation and transformation journey successfully over the long term.

• Modernise legacy applications. Address accumulated technical debt to drive efficiency in business and IT systems, reduce infrastructure costs by streamlining services and moving core applications to the cloud, and improve capacity to innovate to enrich customer experiences, digitalise products and services, inform decision-making, and compete with “born digital” players.

  There are several tactical approaches for mitigating technical debt, depending on the current state of an organisation’s technical debt, existing documentation, institutional knowledge, appetite for risk and the resources available.

• Improve agility through rapid response and strong operational resilience. Orchestrate the building of resilience across existing domains such as business continuity, disaster recovery, technical recovery, cyber resilience and third-party asset management so that organisations can readily respond to outages, crises and other threats.
• Capitalise on the emergence of advanced technology platforms and capabilities. Leverage new platforms and architectures for building and running business applications to enable better access to data, provide flexibility and faster time to market, and support digital capabilities to deliver differentiated experiences. Deploy greater process automation and intelligent technologies such as AI, machine learning, and augmented and virtual reality to reimagine existing processes and alleviate risks arising from the inevitable shifts in labor availability and costs.
• Maximise customer engagement. Focus on the experiences of users and consumers (both positive and negative) to drive interaction through a modern, innovative operating model. Decisions based on insightful customer and sufficiently advanced user analytics and AI are likelier to achieve business success.
• Prioritise cybersecurity and data privacy in innovation activities — but avoid creating bottlenecks. Proper cyber hygiene is foundational to managing security risks and maintaining the resilience of business services.
• Make your talent your customer. A focus on the customer experience should extend to the organisation’s people and talent. Retention of key people requires efforts to keep them engaged for the long term. That’s why an advocate for the preservation of talent and culture should have a seat at the decision-making table as the organisation focuses on sustaining its financial health.

The bottom line: Directors should consider the above call to action when discussing innovation goals and strategies. By listening to the voices of customers, employees and other stakeholders, businesses can identify technical debt issues and prioritise their infrastructure modernisation efforts.

From the board’s perspective, it is essential to address constraints on critical innovation initiatives in a timely manner — before the limitations placed on improving operational efficiency and adjusting business models become so egregious that they impair the organisation’s competitive position.

Go deeper: For more information on this topic, including suggested questions for directors to raise in discussions with management, click HERE.

(Board Perspectives — Issue 164)

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