PERSPECTIVES

Application Modernization: 10 Principles for a Successful Overhaul

2020-12-17


With digital capabilities more essential than ever, a heritage app infrastructure could seriously impede competitiveness. Using our experience and concrete examples, we show how established businesses can unlock trapped value and position themselves for the future.

Amidst rapid digitization accelerated by the ongoing COVID-19 pandemic, companies are doing everything possible to transform how they interact and transact with customers to meet evolving market requirements. Modern businesses need device-agnostic ways to serve customers consistently across channels. They also need to modernize their application portfolios to continuously improve user experience, flexibility, performance, security and turnaround times through short, frequent and sustainable release cycles for greater agility.

Companies that identify and effectively manage the challenges of application modernization are winning big when it comes to growth and market positioning. As the business world continually globalizes, IT agility and experience-centricity carry immense potential to help organizations invent new models and expand their market presence in the post-pandemic world.

Make no mistake: application modernization is a challenge for established companies that may look enviously at younger digital-native competitors. It requires a comprehensive approach involving both the front and back ends of applications, as well as the refreshing of data and the re-architecting of underlying code.

But this modernization is not optional; as the business world continually globalizes, IT agility and experience-centricity carry immense potential to help organizations invent new models and expand their market presence. With that in mind, we offer 10 principles that will help businesses keep their digital journey on track.

1    Align the application modernization roadmap with prioritized business capabilities.

To achieve this foremost principle of application modernization, we recommend capability indexing, which entails identifying and prioritizing business capabilities in alignment with business strategy. Capability indexing helps drive application modernization to create more immediate business value. While doing this, focus on new capabilities that could result in customer-centric solutions. This helps propel revenue growth without compromising on technological innovation.

For example, an insurance client identified claims processing as its highest business capability priority. Its goal was to modernize heritage applications and implement an innovative approach to accident and health claims processing that resulted in a real-time claims adjusting experience for new, digitally acquired customers of large accounts. In collaboration with the client, we modernized claims processing applications to include critical coverage areas such as accidents and hospitalization. We digitized services with features such as pay-per-ride options, one-click enrollment and claims payment.

This helped to reportedly reduce processing time from five days to three minutes, and heightened operational efficiency by enabling the organization to handle 50% more travel and property claims originating from new customers acquired through partners.

2    In application portfolio rationalization, balance business and technology factors.

Application portfolio rationalization (APR) involves categorizing applications and rationalizing them using techniques such as contain, maintain and invest (CMI) and 6R Analysis — rehost, replatform, refactor, rewrite, retain and retire. This is a key stage in deciding how to onboard apps to cloud infrastructure.

A CMI framework and 6R are complementary. “Contain” applications require minimal investment in support, enhancement and releases. “Maintain” applications are support-heavy, with high volumes of tickets, and require upgrades and major enhancements. “Invest” applications are strategic and revenue-generating; rewriting or reengineering such applications brings tangible benefits and return on investment (ROI). These apps can be significant drivers or value generators in the digital journey.

3    Enable the workforce on emerging technologies; adopt Agile/DevOps and transform into new ways of working.

Modern technologies such as cloud and microservices, and the principles of Agile, DevOps and Lean Startup, warrant a strategic focus on workforce enablement to adopt new ways of working. Cloud adoption and cloud-native development require investments in adequately skilled engineering teams. Application modernization is about updating portfolios to ensure frequent and short releases with DevOps tool chains and continuous delivery methods. This requires workforces to adopt new ways of working based on Agile principles and DevOps culture and techniques.

We helped a telecommunications client deliver new customer experiences by adopting new ways of working and delivering cloud-native solutions. In addition to proposing a customized Agile model aligned with the client’s vision, we enabled the workforce in new ways of functioning based on early delivery of a minimum viable product through value-driven iterative delivery with Lean and Agile engineering practices. This approach is said to have resulted in annual savings topping $10 million. Order processing capability reportedly increased twentyfold, resulting in a better client experience and easier access to the product portfolio across channels.

4    Establish an engineering culture with a focus on software craftsmanship and mastery.

Invest in engineering capabilities and nurture the right mindset in project teams. For application modernization to succeed, architecture, design and coding must be vendor-neutral, maintain open standards, and be security-compliant with measurable key performance indicators (KPIs) and IT outcomes.

Application modernization initiatives can span a year or two and require an engineering culture that values modernizing value streams rather than merely addressing specific applications. In addition, engineering teams need to understand and master software craftsmanship by adopting extreme programming practices such as refactoring, test-driven development, continuous integration/delivery and the principles of cloud-native development.

5    Streamline processes to eliminate redundant functionalities and invest in new features.

Application modernization is an opportunity to eliminate redundancies and invest in new features based on human-centric design principles. This requires a systematic approach or process to identify and eliminate redundant functionalities early on. The benefit of this principle is about optimizing modernization efforts toward meaningful new features and user experiences, resulting in a long-term increase in the value of application portfolios.

A life and annuity insurer wanted to modernize its heritage print system. The system involved several manual processes, and we focused on eliminating redundancies and consolidating the print solution and templates across subsidiaries. In addition, we identified new features related to reprinting and processing. Our approach helped reduce maintenance costs; standardize forms and templates; cut down form and template design efforts; automate print cycles; and decrease manual interventions. This reportedly resulted in a 20% performance improvement and 50% faster new product rollouts.

6    Identify performance baselines and KPIs to measure outcomes.

Modernization initiatives involve investment in workforce enablement, business revitalization, application portfolio assessment and uplifting code to modern platforms. Measuring the IT outcomes of such initiatives is best accomplished by using performance baselines of heritage systems to inform modernization efforts. In addition, performance indicators must be aligned with digital business goals. Examples include number of active users, user segments, geographies, revenue impacts, customer satisfaction scores, scalability and uptime.

In addition, problems and challenges that necessitate application modernization must be identified and mapped to goals that are clear, specific and measurable. This helps inform cost-benefit analysis, as well as goal-specific monitoring and timely course corrections.

7    Define a maturity path to measure and upgrade initiatives.

Among the key principles of application modernization is to define a maturity path to measure the influence level of application renovation initiatives. This helps determine whether modernization programs align with and positively reinforce the overall digital strategy. For example, a program may begin by addressing problems specific to lines of business; then solve problems at an organizational level; enable the organization to enter new markets; and, finally, allow the launch of new business models.

Defining a maturity path helps identify new opportunities and maximize the ROI of application modernization programs.

8    Modernize data.

Data modernization entails updating the data architecture, certifying data security, redesigning schema, eliminating redundancy, resolving data quality issues and tuning performance. This modernization creates a robust foundation that facilitates data analysis and leads to business insights and intelligence.

One client, a global digital agency, experienced challenges with its existing customer engagement platform on several fronts, all of which forced it to take a customization route. This extended the timelines for new product rollouts and didn’t support real-time use cases or the ability to add customers from new industry verticals.

In response, we built a platform that provided a 360-degree view of customers to deliver personalization services in real time. This SaaS platform uses a modern architecture that is multi-tenant, secure, highly scalable, high performance, configurable and simple to operate. The result: faster time-to-market with continuous DevOps integration and deployment capabilities.

9    Elevate systems of record to systems of engagement or systems of insight, thus creating opportunities to kick-start new business models.

Application modernization initiatives provide an opportunity to identify systems of record that may have the potential to become systems of engagement. Likewise, a system of engagement application may have the potential to result in a system of insight application or product. These are opportunities to unlock business value.

For one healthcare customer, we elevated a system of record into a system of engagement that resulted in a digital product. The goal was to provide the best care to members at home or abroad —conveniently and cost-effectively – from doctors they trusted. We collaborated with our client to build this product ecosystem, a mobile app with server components and data in the back-end systems. The app was said to deliver a 76% avoidance of further care, savings of an average of two and a half hours per consultation, and a positive increase in doctor ratings.

10    Identify white spaces and build new digital products.

Business capabilities map to value streams, which provide an end-to-end business flow enabled by one or more applications aligning in a sequence and delivering value to stakeholders. Mapping each business capability provides an opportunity to identify redundant applications as well as white spaces that require new digital products to optimize and strengthen the value stream. Application modernization is not limited to updating existing applications; it also must focus on identifying white spaces that could result in new “killer” digital products that even yield new business models.

For more information, read our white paper, “10 Application Modernization Principles that Enhance the Digital Journey,” or visit the Digital Engineering section of our website.