Companies everywhere are in the midst of preparing for 2019, defining projects, allocating budgets, and getting ready to kick them off come January. And if your company is like most, you’re concerned about legacy technology modernization. Some estimates say legacy systems still consume as much as 75% of IT budgets, and CIOs today are under intense pressure to replace old technology with more modern solutions to improve efficiency, enable growth, and drive innovation.
While the demand for transformation is high, CIOs know the risk is equally high, particularly when a core technology solution is involved. ERP, CRM, supply chain management, and other mission-critical systems touch many functional areas in the company and support crucial operational workflows. Replacing them can take years, cost millions, and go way off track. Nike experienced this firsthand in 2000, when it lost more than $100 million in sales and its share price took a 20 percent hit due to a software “glitch” after a $400 million upgrade that was supposed to unite its ERP, supply chain, and CRM systems into one superstar solution.
In addition to the sheer magnitude of most legacy modernization initiatives, a newer challenge faces CIOs: the markets for software, infrastructure, and service offerings have exploded with new options, changing the way companies select technology solutions. In the past, a company might have expected to go with one of a handful of well-known options, but today, that might not be their best choice. And unfortunately, it can be a full-time job to stay up-to-date on the available vendors and products and their capabilities, strengths, and weaknesses. Making the best decisions is essential because mistakes can be costly, but it’s tough to ensure this happens, particularly when pressures to move quickly constrain timelines.
Five Steps to Take Now to Set Legacy Modernization Efforts Up for Success
We work with CIOs and other company leaders who face these legacy modernization challenges every day. Some of our clients already have large, transformational initiatives underway. Some are just beginning to assess the size and scope of the task and define their approach. And others don’t yet fully understand the limitations being imposed by current implementations, often having outgrown a solution that was chosen a long time ago when the needs were vastly different.
And while there’s usually pressure to jump quickly into technology selection mode, smart leaders never underestimate the critical nature of thorough upfront planning. The actions taken before kicking off a legacy modernization project are among the most important. Here are five steps to take now to mitigate risk and ensure your 2019 efforts are positioned for success.
1. Define a strong business case
Legacy technology modernization is intended to drive business results, so its goals should be centered on clear, detailed business needs. Define what business leaders hope to achieve with this transformation in quantifiable, business-focused terms. What business benefits are you seeking? Where are the gaps that keep you from achieving them? Defining and aligning on a strong business case and communicating this case to everyone involved provides the foundation for good decision-making as the project moves forward.
2. Thoroughly analyze and document the landscape
Legacy technology modernization initiatives vary in size and complexity, but most touch multiple functional areas, impact many processes, and affect numerous, interconnected systems both inside and outside the organization. Take time now to identify all internal and external stakeholders and understand how they will be affected by the change you’re planning. Begin thinking about how to involve them in the initiative. The goal is not only to keep them informed, but to leverage their skills and knowledge to improve outcomes. Analyze and document the technologies and vendors that support current workflows, identifying touchpoints and dependencies. And if relevant business processes aren’t documented, bring together cross-functional teams to record them.
This up-front analysis helps organizations develop a common, thorough understanding of the scope of work and its potential impacts and sets realistic expectations of the true level of effort involved. It provides the information needed to identify gaps and improvement opportunities and to break down a large project into more consumable, semi-independent phases for implementation. Don’t get bogged down in “analysis paralysis,” because your understanding of the needs will improve as you learn about possible solutions, but do your due diligence to paint a clear, holistic picture of the people, processes, and technologies involved in the modernization initiative.
3. Build in process improvement
Technology solutions are supposed to automate business processes, but existing processes built around your legacy systems likely don’t match well with current offerings. Modern technology solutions and old business processes simply don’t mix. As you define your new technology platform, invest time to identify process improvements. Take advantage of opportunities to boost efficiency and automate manual processes in order to improve productivity and quality. Resist the pressure to save time by skipping this important step. Planning for process improvement before moving forward with technology selection and implementation increases the likelihood that the people, processes, and technology will work in concert long-term.
We facilitate collaborative, cross-functional workshops with our clients to both document current business processes and to identify areas for improvement. Getting key stakeholders together in one room provides many “Aha!” moments as people begin to understand how workflows progress through the organization from start to finish. As we rework processes, we’re able to test changes “on paper,” walking through them with the team to design clear future-state workflows, which provide a common understanding of what the organization needs from its technology solutions.
4. Accurately estimate the effort
While pressure to deliver quickly may be high, the company needs an accurate understanding of the actual level of effort required. Define the time and resources needed for planning (including these first five steps), technology evaluation and selection, implementation, and operational readiness. Identify dependencies that may lengthen timelines, and lay out the requirements for ongoing operational support. Create a high-level resource plan with timelines, milestones, and budget allocation by fiscal year. This is the map of your legacy modernization journey.
It’s important to keep in mind, however, that as business needs evolve, the journey will change and so should the map. The ability to pivot quickly in today’s fast-moving business environment – whether that’s to take advantage of new technologies, seize a new growth opportunity, or mitigate the risk of unforeseen challenges – is key to keeping a large, multi-year initiative from going off track. Build in checkpoints at least every three months to evaluate what may have changed in your environment and adapt the plan accordingly.
5. Evaluate capacity realistically
Assess your internal resources to identify availability and readiness to support what is likely to be a lengthy technology selection and implementation process. Depending on the scope of the effort, it could take months to select a new solution and months to years from the time you sign contracts to the time you’re ready to flip the switch and activate it. During that time, resources will need to work with vendors to do process analysis, implementation, configuration, and customization of the system – all of which are high-demand activities. Be realistic about what your teams can and cannot provide while continuing to do their day-to-day jobs, and identify where third parties can help. Outsiders can provide specialized expertise, overcome bandwidth limitations, or deliver an objective assessment of your situation.
Additionally, consider engaging an experienced firm to guide your organization through the five important steps we’ve outlined here. A trusted partner with expertise gained from engagements across a diverse set of clients can bring to the table deep knowledge of current best practices, trends, and technologies, helping you set the foundation for a successful modernization project by taking these five steps and then providing guidance through the technology selection and implementation processes.
We’ve also recently published a comprehensive guide for leaders, which provides an objective, data-driven approach to selecting business-critical technology solutions. We hope you’ll download it to learn how we’ve helped many companies make the best decisions. And if you think you might benefit from our team’s deep experience and strategic guidance to lay a sound foundation for your 2019 projects, feel free to contact me directly, or go to our contact us form to learn how we can be of assistance.