Progressive Modernization: Funding Transformation through Managed Services

Summary

Organizations the world over are directing their time, energy, and resources toward modernizing their legacy systems and outdated processes in order to build new digital capabilities at speed and scale. Government and public sector organizations have also identified legacy modernization as the key to streamlining operations, unlocking new data streams, and delivering improved services and experiences to their constituents.

While it is apparent that adopting modern-day technologies and processes is the need of the hour, modernization and digital transformation initiatives are capital and effort intensive. Struggling with budget and staffing constraints, public sector organizations find it difficult to execute these transformation programs.

Adopting a managed services model as the approach for transformation can ensure a smooth and seamless transition toward a modernized government. This blog discusses this new progressive modernization approach to transformation.

Why Do Over 50% of Government IT Systems Still Run on Legacy Technologies?

Legacy systems limit public sector organizations’ ability to execute their core mission and serve constituents cost-effectively. They increase operational risk, cause business disruptions, and lock data which can help generate valuable insights.

So, why do public sector organizations continue to operate on legacy systems? Because modernization is capital and effort-intensive and isn’t limited to a simple update of technology platform or incorporation of new-age digital tools. It involves an agency-wide transformation of people, processes, and technology, with an aim to adapt and survive in an ever-changing market and regulatory environment. Public sector organizations face several challenges as they plan and execute their legacy modernization programs. The most common include:

• Budgetary Limitations
  Most organizations spend a disproportionate amount – roughly 80% – of their IT budget on maintaining existing legacy systems. In June 2019, the US Government Accountability Office (GAO) recorded an expenditure of about $100 billion in IT operations. This imbalance in investments makes it extremely difficult to allocate the funds necessary for modernization or other digital transformation programs.
• Limited Resources
  Executing a legacy application modernization program is a complex exercise and requires a high level of expertise in modern technologies. A qualified team of Subject Matter Experts (SMEs) must guide the transition in various aspects, including cloud computing, scalable architecture and network design, virtualization, and cybersecurity. Already struggling with staffing issues, public sector organizations lack the in-house capabilities necessary to drive a successful modernization program.
  On the other hand, the experts who run the O&M for these legacy systems and applications are retiring at a rapid rate. This leaves agencies with administrative overhead in acquiring new talent for the upkeep of these systems. It can also be very difficult to find people who know this legacy code.
• Difficulties Migrating to New Systems
  While modern systems and processes can streamline workflows and speed up processes, employees hesitate to move away from established practices and embrace new technology. A prudent strategy ensures that the experience of modernization is not jarring or too complex to handle. Such an approach minimizes organizational impact and the need for extensive training and change management.

These issues can make legacy system modernization an extremely daunting proposition for many organizations. It’s no surprise that over 50% of IT systems across half of the US states still run on legacy technologies.

Also Read - What is Legacy Modernization - Glossary

Funding Modernization Through Savings From Operational Excellence: A Progressive Modernization Approach

Agencies are adopting a new progressive modernization approach to address legacy modernization challenges. This approach to modernization involves leveraging a third-party service provider to cost-effectively manage an organization’s IT infrastructure and end-user systems in a managed services model. Managed service providers (MSPs) offer various services, including handling networks and the associated infrastructure, maintenance of IT and analytics applications, monitoring, and security. They enable public sector organizations to access skilled experts across different technologies. Leveraging automation and innovative technology solutions, MSPs can optimize maintenance and operations, generating 30% to 40% in savings.

As a result, public sector organizations get a new source of funding for their transformational initiatives. The managed services provider can help public sector organizations re-direct these savings to their modernization programs. They can identify right solutions that can help chip the technical debt away, enable cloud adoption, and scale analytics in a progressive manner.

This approach also offers an opportunity to rethink analytics through improved data access; i.e., analyzing the data that legacy systems produce and building solutions to generate richer insights from this data.

Lastly, a managed services provider handles the testing and implementation of these new systems and trains and familiarizes the staff with the latest technology, facilitating adoption.

Benefits of the Managed Services or Progressive Modernization Approach

Leading with managed services results in greater gains over a longer period while also establishing a strategic construct for executing legacy modernization projects. It helps realize –

• Lower TCO and operating expense
• Enhanced staff productivity
• Shift to a variable, consumption-based spend

A progressive digital transformation through a managed services approach also improves an organization’s analytics capabilities, data accuracy, and accessibility.

Conclusion

The managed services model is a proven and relatively low-risk approach for organizations and agencies that lack the necessary resources or in-house expertise to manage their IT portfolio. It can now be used by organizations to drive their legacy application modernization efforts. The model helps save money on the maintenance of legacy IT infrastructure, allowing these funds to be directed at modernizing systems over time in a systematic and non-invasive manner.

Our future blogs will explain the mechanics of this approach and discuss examples of how public sector organizations are leveraging this approach to fund and accelerate their transformation programs.

Additional Reading:

Legacy Systems Vs Modern Systems

Author Details

Alex Yang

Alex Yang is a Principal Consultant and Head of Modernization Practice with Infosys Public Services.