Application Modernization

Application Modernization

Chief information officers have multiple options for application modernization, including incremental re-architecting to service-oriented architecture, the redevelopment of applications, and outsourcing and divestiture. This requires business intelligence about the application portfolio to identify, prioritize, and execute the re-alignment of applications with corporate goals.

North American manufacturers have faced years of intense, globalized competition. This onslaught compelled them to modernize their manufacturing processes to compete effectively. The result has been that many plants have become models of efficiency and agility. This modernization allowed manufacturers to more quickly adjust production to address shifts in demand and business goals.

Business Intelligence Supports Modernization

This drive toward modernization was built on business intelligence. The cost, risk, and value of aging machinery were evaluated to determine whether it should be retained or replaced with more modern equipment. In many cases, older -- but still hyper-productive -- machinery operates in conjunction with state-of-the-art equipment. After all, what matters is whether the machine is operating as expected and as efficiently as is required by the business.

Similarly, manufacturing processes were assessed to determine where unnecessary or nonstandard steps could be eliminated to minimize dependencies between steps. Adjusted processes were put into place, integrating existing and new machinery with better formulated production plans. All the while, rigorous measurements were established to identify flaws in processes and machinery to drive further efficiencies.

Not only manufacturers, but all industries face a related opportunity. A key part of 'production' for, say, a bank, is its ability to process interest payments, balance transfers and other financial transactions. The 'factory' that processes these transactions is a network of sophisticated applications. The bank, insurer, or any major organization -- must modernize these factories to ensure that it can rapidly adapt to address new business goals with low cost and risk.

How Do You Choose a Modernization Path?

Modernization for the manufacturer required business intelligence. For instance, how manufacturing processes could be improved and where machinery should be replaced. Our example bank must also start from a position of understanding. It must determine the structure and behavior of its application portfolio and how it can be made to support the priorities of the business.

Business Intelligence about the Application Portfolio

As outlined in previous papers, understanding requires both technical analysis of the application portfolio (e.g., which programs relate to which data stores) and the ability to view applications by business groupings (e.g., by geography, business process, outsourcing provider, etc.). By overlaying such business context we can understand how these systems are architected from a business perspective.

We will want to understand how the order management system depends on the product catalog and client management systems. Or perhaps we will want to understand how software managed by one development team connects to that managed by a separate team. Minimizing dependencies between logical groupings can be a smart modernization strategy to lower risks and communication. This understanding can also have a significant impact on the modernization path that we select.

By linking these logical groupings with your organization's key performance indicators, we also gain a valuable tool for modernization. If our bank values the availability of its currency trading system, then measures of its risk and uptime will matter. If the CIO is concerned about adaptability, then comparisons of its complexity and software quality against standards will be relevant.

For instance, we may see that a highly customized application automates a proprietary investment banking process. The value of the system and its frequency of change may lead us to incrementally modernize it. While a core banking application that changes infrequently and has a commoditized set of functionality may be a candidate for replacement with a packaged application.

Managers can better determine modernization priorities through application portfolio management dashboards that present these cost, value and risk trends.

Selecting a Modernization Alternative

There are many modernization options available to a CIO. Now that we have determined what the priority areas are within our portfolio, we need to determine the path to modernization. Choosing the right path will depend on factors like cost and risk of modernization, available skills and future plans for technology environment.

Next Steps

Modernization is fundamentally about returning applications to best support the needs of the business. This requires that we locate which systems are most misaligned with our key performance indicators, and prioritize realignment activities based on their value to the company. If software no longer serves a key need for the business, then replacement or divestiture should be considered. Much as a manufacturer may shed unnecessary or inefficient steps.

For those systems that are deemed core and should be retained, modernization must play another role. We must take advantage of the business value that has been embedded within these systems. This may involve isolating and reusing logic in an SOA, or a newly developed or packaged application. It could be by eliminating inefficient architectures and code that have led to inflexible and risky applications. This is like our manufacturer assessing how the production process currently is, comparing it to the ideal, and making adaptations to improve agility.

Lastly, modernization is not a "one-off" activity. We must continually assess our application portfolio to locate trends that are eroding its ability to support the business. New priorities for modernization will emerge, and we should be ready to allocate resources accordingly. We must ensure that we retain a current, accurate, and detailed warehouse of business intelligence about our portfolio to help choose the highest value modernization activities.