Financial Benefits of IT Modernization
Like it or not, the unavoidable fact is that any IT transformation effort will cost money. Some investment will be required, which entails an opportunity cost: Money spent on modernizing an IT system must be spent on something other than new product development, service expansion, or other worthy initiatives.
So, when your organization’s leadership and finance teams ask the inevitable question—”What’s the expected return on this investment?—you, as an IT leader, had better have a good answer, backed up by solid data. Having a good argument won’t guarantee that your project will be funded, but having a flawed argument guarantees that it won’t.
This article describes some of the financial benefits of IT modernization projects.
Cost Control
Many, if not most, IT modernization projects will see financial benefits in the form of cost control. Here are some examples:
● Some older legacy applications can run only on outdated hardware. Elderly hardware will eventually fail, so investing in a modernization effort now will avoid high recovery costs later.
● In a similar way, legacy applications may be written in obsolete programming languages or rely on outdated software frameworks. As time goes by, it will become harder and more expensive to find programmers with the necessary expertise to maintain the software. Migrating to a modern software architecture enables you to draw on less-expensive resources for ongoing maintenance.
● Applications hosted in your on-premise data center run on hardware that must be procured, configured, deployed, maintained, powered, and cooled, all of which cost money. The hardware also depreciates over time and has a limited useful life. Migrating to a cloud computing environment replaces all these costs with a lower subscription cost.
● An additional benefit of migrating to the cloud involves disaster recovery. If a disaster befalls your facility (natural disaster, extended power outage, cyberattack, or some other calamity), having most or all of your computing and storage resources safely in the cloud will make a recovery faster and less expensive.
That said, you must be careful and stay focused on cloud migration. Depending on the subscription model, you can be charged by the minute while a cloud server is running. If it’s only used occasionally or during business hours, you could end up throwing money away. Cloud migration requires strong governance to optimize costs.
Revenue Growth
Although much IT modernization involves back-office systems with no customer-facing interfaces, they can contribute to revenue growth. For example, modernizing systems that enable customer-facing teams (such as sales, order entry, and technical support) to do their jobs better or more efficiently can improve the customer experience and drive revenue growth.
Quantifying the effect on revenue for modernization projects such as these is often difficult, so you may not want to make “revenue growth” the main thrust of your funding argument. An exception here involves customer-facing systems like the company website, e-commerce site, or mobile apps. You should be able to develop solid revenue numbers based on market research for these initiatives.
How Solution Machine Can Help
Solution Machine’s consultants have extensive experience with IT modernization projects, including application upgrades, cloud migrations, and more. By staying connected with our clients, we’ve been able to quantify the financial benefits, on both the cost and revenue sides, for projects we have helped execute.
If you are planning an IT modernization project, contact Solution Machine today to learn how we can help you estimate the financial impact of your initiative.