IT Modernization: Addressing legacy systems
“That’s not innovation. That’s future debt with a launch party.”
Most organizations remain overcommitted to “run the business” or “keeping the lights on”. In 2025, Gartner explicitly stated that many CIOs were pausing new funding because of uncertainty and that too much (70–85%) of IT spending remains locked in recurring and legacy-heavy operating costs, while innovation capacity is being squeezed even in years when overall IT budgets increase.
Too much IT spend is still trapped in recurring/legacy “run” costs, while the growth in budget is increasingly being eaten by price increases, Cloud/SaaS commitments and now AI-related costs. Companies are increasing & expanding the use of ERP, CRM, productivity, service and platform stack. On top of this AI premiums, automation add-ons, data requirements and new infrastructure add costs. While total IT budgets are increasing by 8–10%, this increase is not directly tied to additional value. Due to this, new initiatives funding is under pressure. A good rationalization process ensures that every application decision is driven by business value to justify the spending.
Root of the problem
How can you break this cycle and move towards a healthy balance between running, growing, transforming and differentiating?
First, we need to look at the root causes of this situation. We tend to focus on new and improved technology with AI being the main impactful technology today. Thinking about what its primary role is, its effects on value and its position within the operational landscape are topics which are often left behind. This is a re-occurring and well-known problem and applies to all modern technologies.
At its core, the four most important causes of legacy are:
Local optimization above Enterprise optimization: Older systems become interconnected with numerous applications, databases and workflows. The more dependencies exist, the harder it becomes to modernize or retire them. Many companies choose to maintain aging systems rather than undertake large transformation projects. Temporary fixes, customizations and outdated architectures build up over time.
Lack of Continuous Modernization governance & investment: Organizations often lack clear policies, governance, funding models and accountability for routinely retiring or upgrading aging systems. Also, they prioritize speed and short-term business needs over modernization.
Organizational debt: Organizations often have not implemented the right organizational structures to sustain the landscape. Different business units acquire and build solutions independently, creating a patchwork of systems over time. This often results in overlapping platform functionality, unclear ownership and a project-based approach instead of active lifecycle management.
Mergers and acquisitions: Companies inherit multiple overlapping platforms and applications that are never fully consolidated.
Break the cycle
To start breaking the cycle, modernization should start with business relevance. Not all complexity should be removed. Organizations assume the application portfolio is the problem and therefore many application rationalization programs fail because they start with applications instead of problems. First determine whether you are trying to reduce complexity, lower costs and risks, improve agility, or enable a new operating model.
When the added business value of rationalization is clear, successful modernization programs typically follow a proven structure for modernization. We summarize this in four core patterns:
1. Simplify by reduction and complexity allocation: Reduce complexity by retiring, consolidating, or rationalizing applications and technologies.
Apply when: the organization has accumulated too many applications, duplicate capabilities, or technology from years of organic growth and acquisitions. Business is usually the driving force of complexity and should be structurally involved in this process. However, some complexity is irreducible because it reflects the complexity of the business itself (laws, global supply chains, health processes etc.). It should be concentrated and managed, while reducible complexity should be removed.
2. Optimize where there is a positive fit for purpose: Not all applications can be identified as legacy. Improve the efficiency, scalability and reliability of existing applications without fundamentally changing the value and function towards the business.
Apply when: applications still meet business needs, but the underlying infrastructure, platform, or operations are costly, outdated, or difficult to maintain.
3. Transform: Modernize (replace) strategic applications so they can support faster innovation, greater agility and new business requirements.
Apply when: the organization is being slowed down by core systems that remain business-critical but have become barriers to growth and change.
4. Reinvent the business: Rethink and redesign a business capability rather than modernizing the existing solution that supports it.
Apply when: the supporting IT does not provide an out-of-the-box solution and custom-made solutions do not result in a positive business case. We suggest adopting new operating models or fundamentally change how a business process is delivered.
Eventually, the goal of this process is to enable a simpler, faster, more resilient and more competitive business with fit-for-purpose IT.
When engaging in such efforts, a successful modernization should not be measured by what application has undergone change. Instead, measure by what should improve:
Business Agility & Value: Can the business change faster and deliver more value than before?
Financial Impact: Did the investment create measurable value?
Portfolio Efficiency: Did the technology estate become simpler?
Technology Health: Did technical debt decrease?
Operational Resilience: Did reliability improve?
When all five move in the right direction, modernization is creating real value rather than simply consuming budget.
What can you do tomorrow?
Start with a small set of disciplined actions that create visibility, accountability and momentum.
1. Create transparency on IT spend and value
Understand where IT budget is being consumed and what business value it delivers.
2. Identify the top modernization candidates
Focus on the applications that combine high cost, high risk, or poor technical health with limited business value.
3. Make modernization a continuous discipline
Treat modernization as an ongoing portfolio management activity and implement assessment measures.
4. Protect modernization funding
Reserve a dedicated portion of the IT budget for modernization and technical renewal.
5. Establish clear ownership and accountability
Every application should have both a business owner and an IT owner who can justify its value, cost, risks and future direction.
IT modernization enables a simpler, faster, more resilient and more competitive business. Our team helps organizations translate strategic ambitions into actionable modernization roadmaps and thereby define the right modernization path and support them in portfolio decisions, execution and value realization.
Author: Arturo Bets
Want to chat about your IT’s future? Get in touch
Niels van Lieshout
Principal Director Technology
+31 650657444
