Shifting the 80:20 IT Budget Paradigm

Man working in data centerCEOs are always challenging CIOs to do better with less. They expect CIOs to deliver on business objectives, improve agility, leverage mobility, guarantee security and drive operational improvements. Yet in reality, CIOs have limited options when the majority of their budget is spent on maintaining legacy systems. For some companies, this spending is estimated as high as 80% of their IT budget.

Spending so much on the maintenance of existing application software might be acceptable if those applications were aligned to and delivering on a company’s growth strategy. All too often, however, they are not. Many companies are therefore squandering their budget on running and maintaining a legacy environment that is under-performing.

Organizations need to face the reality that supporting legacy systems is not only expensive, it could also be holding them back from growing. Many clients ask us how they can reduce the significant costs of maintaining legacy systems and thereby free up investment to transform their applications landscape, thereby shifting the budget paradigm towards a target budget where the majority of expenditure is focused on moving the business forwards.

One realistic answer to this critical business question is application modernization. With a well thought out approach, companies could achieve IT budget savings from 20% to 60% while enjoying greater productivity from a suite of software applications better suited to the business’ current needs — and with the agility to respond to tomorrow’s business challenges. Companies can reinvest these savings into innovation and re-architecting the IT environment to support the next-generation enterprise — an enterprise that can seamlessly orchestrate systems, applications and processes by leveraging a mix of traditional and cloud-based infrastructure, as-a-service consumption capabilities and continuous innovation.

For any application modernization program, we recommend an iterative lifecycle approach where the focus is on strategic alignment and rapid return on investment. CIOs can quickly and prudently leverage the application modernization approach to realize incremental and yet dramatic savings, driving down operating costs and freeing up budget for investment in the next cycle of innovation projects. Not only can many legacy applications be rationalized from the portfolio, but also as much as 80% of the retained portfolio workloads can typically be migrated directly to a cloud environment, whilst the remainder can be moved using a variety of innovative modernization treatments.

And therein lies the true beauty of application modernization. It frees up cash that CIOs can redirect to initiatives of a higher strategic value — projects that support the business strategy with innovation and differentiation.

In other words, when done correctly, an application modernization program self-funds the improvement cycle. And the result is one that both CIOs and CEOs can love: an optimized applications portfolio, aligned to the board’s strategy for growth.

By Mike G. Williams, General Manager, Application Modernization and Cloud, CSC

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