Generative AI has business and tech leaders at a critical crossroad in their companies' modernization journeys: either fundamentally change the way their business transforms IT infrastructure or be left behind.

This necessary shift is not easy. While cloud migration isn't a new concept — and the agility, scalability, and customer-centric design of cloud platforms are all well-proven benefits — many companies still struggle to modernize. Switching core processing from centralized, consolidated, monolithic legacy systems to cloud is the most profound technological change since the start of the mainframe era in 1952.

It's important to note, that simply moving to the cloud or running parts of your business in the cloud is not the same as being cloud-powered. Only about 10% of companies surveyed have achieved this status, according to PwC's 2023 Cloud Business Survey. These companies have reinvented their businesses through cloud, report fewer barriers to realizing value and are doing so at a rate twice that of other companies — these are the businesses that are set up to succeed and get the most out of generative AI.

To fully take advantage of emerging technologies, companies need to ensure their infrastructure is set up for success. How and where to get apps into the cloud is unique to each organization's application portfolio and workload complexity, but there are some techniques that are better than others.

The Leading Ways to Modernize Apps for the Cloud

Several techniques are available when modernizing an app for the cloud — namely, rehost, refactor, re-architect, rebuild and replace. Oftentimes, a combination of these methods is required. What's optimal will depend on the organization's existing environment and the outcomes it's trying to achieve.

Overall, successful application modernization should increase business and IT agility and scalability. Additionally, replatforming and refactoring approaches take advantage of cloud services and solution patterns, making these the most frequently used and effective approaches.

Application modernization typically includes refactoring applications into microservices in containers or functions, leveraging advanced data platforms and services to advance information flow, as well as implementing infrastructure-as-code and DevOps pipelines to automate application development and deployment.

Refactoring Tops the List of Techniques

Refactoring entails a rewrite of both existing applications plus the business processes and rules that interact with the application. This comes with several advantages for realizing the true value of an application modernization effort. For example, with your data and applications in order, cloud-powered companies can turn their attention to leveraging machine learning and AI to reduce costs, add intelligence and overall get things done faster.

Here are the more fundamental benefits:

■ Operational cost: Trade in CapEx for OpEx as part of modernizing your mainframe; this pay-as-you-go model will help unlock incremental cost savings while reducing the size of the on-premise infrastructure footprint.

■ Maintainability: Managed services and serverless architecture of cloud platforms provide a low maintenance model, with little time spent on monitoring and patching runtime environments. Cloud and modern application development skill sets are easily found within the market with readily available training resources to upskill existing personnel.

■ Business agility: Redesigning a mainframe capability will allow you to modernize all three facets of the mainframe — platform, business process and technical debt — resulting in a significantly faster future SDLC and time to market.

■ Operational excellence: Modern cloud platforms can help to accelerate initiatives such as enhancing the customer experience, creating multi-channel contact centers, providing more real-time data, and automating operations through AI/ML processes.

Work Holistically to Modernize

A holistic approach across business and IT, one that is designed to provide accelerated, sustained business value while powering the digital reinvention, is the key to a successful app modernization initiative.

On the technical side of the application modernization strategy, contrast what portions of your application portfolios are table stakes and which applications are truly market differentiating. Link modernization to your most critical business challenges, this will help determine what's brand defining and sustainably differentiates you from your competition.

You may want to consider automation and orchestration from your native PaaS. This will enable an end-to-end digital journey across the entire application and supporting tool portfolio. It will help eliminate legacy redundancy, technical debt, stovepipe functionality, legacy architectures and business application “lock in” that have built up over the years.

Insource or Outsource: How to Decide

Insightful planning and diligent execution are critical to overcome the common challenges and uncertainty often involved in modernizing applications and moving workloads to the cloud. Determining the right move for your company isn't always a one size fits all answer, but there are a few key places to start.

Generally speaking, an experienced partner can bring industry modernization and migration leading practices with implementation experience to help deliver secure, accurate and business value grounded cloud transformations.

Take into account the following to determine if insource, outsource or a combination is right for you.

■ Create a business-first, iterative build approach: Start with your business goals, quickly zeroing in on how the right cloud modernization and migration strategy can deliver results.

■ Build the right plan from the start: Build a flexible cloud foundation that embeds security, compliance and efficiency. Applying iterative techniques that demonstrate value quickly, you'll be able to visualize tangible ROI from the start.

■ Ensure that the team understands cloud modernization and migration A to Z: Have prescriptive methodologies to help you achieve full-scope transformation from strategy through execution.

■ Maximize smart and secure automation: Take advantage of mature automation tools to simplify and expedite the process from infrastructure deployment and code release to data transfer, security validation and more.

Risk Versus Reward

Like all transformation and modernization initiatives, there are intrinsic and external challenges. It's important to have a realistic sense of risk management across the business and IT, and appropriately fund the right risk mitigation actions. Risks will span people, organization, process, technology and vendors or third parties.

The sign that an enterprise is well prepared for things not going as planned is a well thought out risk management plan, with appropriate funding in the budget.

Optimizing on emerging technologies like generational AI in a responsible manner and transforming IT into a truly customer-centric, agile and scalable cloud-based platform to ensure short time-to-market and global uniformity of services is vital. Not meeting these demands is a serious risk.