Legacy IT Systems Weigh Down ‘Digital First’ Efforts of More Than Half of Enterprises—Everest Group

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80% of enterprises’ application modernization efforts are limited to ‘lift-and-shift’ rather than meaningful changes to the underlying architecture. Enterprises need to invest in intelligent sentient architecture if they are serious about digital transformation

With a traditional software architecture approach, the enterprise focus is on ‘how’—basing their software architecture on the technologies they want to adopt, Enterprises should focus on the ‘what’—user expectations and business outcomes—as they design and modernize their software architectures.

More than 54 percent of enterprises aspiring to digitally transform blame their slow-moving efforts on the constraints of legacy systems. A key, but too often disregarded, component of those legacy systems is the architecture of enterprise software, according to Everest Group, which reports that 80 percent of enterprise efforts to modernize their applications is limited to a “lift-and-shift” approach as opposed to the adoption of modern software architecture practices which would considerably accelerate digital journeys.

“With a traditional software architecture approach, the enterprise focus is on ‘how’—basing their software architecture on the technologies they want to adopt,” said Yugal Joshi, vice president at Everest Group. “Instead, enterprises should focus on the ‘what’—user expectations and business outcomes—as they design and modernize their software architectures. Unfortunately, enterprises aren’t hiring the right talent to accomplish this.”

Joshi explains that a wide chasm exists between the next-generation architecture aspirations of enterprises and the skills of their enterprise architects. Unfortunately enterprises are not moving fast enough to fill this gap. For example even for hiring next-generation architects, 5 percent of enterprise architects are expected to have expertise in containers, 10 percent in microservices, 15 percent in DevOps, and only 1 percent in serverless technologies.

These next-generation technologies and development approaches are key foundational elements for creating sentient architectures, software architectures that are agile and responsive to business needs. Sentient architecture systems are driven by the 3Ds of design centricity, dynamic adaptability and discrete structures:

  • Design centricity: Systems need to be intuitive and should be designed collaboratively rather than being the responsibility of the enterprise architect alone.
  • Dynamic adaptability: The architecture should be adaptable so that it can be easily refactored or re-architected, without requiring a massive time-consuming investment to deliver value to customers.
  • Discrete structures: Software should be composed of discrete components that are granular in nature and can be integrated with other components when required. This will require architects to break down application components into software-enabled services that are independent, distributed and loosely coupled.

These results and other findings are explored in a recently published Everest Group report: “Application Services—Annual Report 2018: The Future of Architecture is Intelligent.” This research provides fact-based analysis of buyer trends by geography, industry and revenue size. It analyzes major trends impacting the application services market and provides an outlook for the year ahead.

Key Findings About the Applications Services Market

  • Stand-alone application deals continued their upward trend, constituting two out of every three deals signed (67 percent). Bundled deals that combined application services and infrastructure services also witnessed a slight uptick (11 percent from 9 percent), suggesting that enterprises are beginning to find more value in the convergence of these layers than in the silos.
  • The declining deal size trend saw reversal, and the deal sizes for application services grew by over 25 percent this year, compared to the previous year. This is indicative of a vendor consolidation exercise where a lesser number of service providers are getting the larger share of client’s spend.
  • Application services deal duration continued to be dominated by deals with durations of less than three years (40 percent); deals with a duration over five years constituted only 16 percent of the deal volume.
  • New contracts took up a slight majority (52 percent) in contract type, suggesting that the trend of anti-incumbency and customer dissatisfaction prevails.
  • Surprisingly, deals with consulting in scope dropped sharply to 43 percent of the deal volume. However, 55 percent of deals included system integration in scope, suggesting that the precipitous drop in consulting deal volume might be an anomaly.

***Download the Complimentary 11-page Abstract*** (Registration required.)

About Everest Group
Everest Group is a consulting and research firm focused on strategic IT, business services, engineering services, and sourcing. We are trusted advisors to senior executives of leading enterprises, providers, and investors. Our firm helps clients improve operational and financial performance through a hands-on process that supports them in making well-informed decisions that deliver high-impact results and achieve sustained value. Our insight and guidance empowers clients to improve organizational efficiency, effectiveness, agility and responsiveness. What sets Everest Group apart is the integration of deep sourcing knowledge, problem-solving skills and original research. Details and in-depth content are available at https://www.everestgrp.com.

Contact:
Andrea M. Riffle, Everest Group
andrea.riffle(at)everestgrp.com

Jennifer Fowler, Cathey Communications for Everest Group
+1-865-405-6380
jennifer(at)cathey.co

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