Outlook Series | Top Priority: Modernize Legacy Applications

Top Priority: Modernize Legacy Applications

June 8, 2009

Modernizing key legacy applications is the top software initiative for businesses this yea. A survey of more than 2,200 IT executives and technology decision-makers in North America and Europe is Forrester's largest annual study of software spending and adoption trends for both enterprises and small and medium-size businesses (SMBs) and is part of Forrester's Business Data Services (BDS) series. BDS provides an extensive data set for B2B Market Research professionals' go-to-market strategy assessments.

"The costs of operating monolithic legacy applications makes them unsustainable, and these survey results show that firms are seeking efficient ways to modernize," said Jean-Pierre Garbani, vice president and principal analyst at Forrester. "Companies are willing to adapt their business processes to cheaper packaged software solutions rather than wait for custom applications. Automation is the key to IT's future."

"By freeing up money from software budgets, IT departments will be able to support more innovative projects across their organizations," added R "Ray" Wang, vice president and principal analyst at Forrester. "Right now, every bit of competitive advantage can help, so focusing on activities that cut overall operations costs or develop better customer offerings is paramount."

Updating key legacy applications was cited as the top initiative for both enterprises and SMBs at 64 percent and 55 percent, respectively. More than one-quarter of enterprises and more than one-fifth of SMBs said that updating and modernizing key legacy applications is very important. Other key highlights of the survey include:

Software budgets will hold relatively steady. Enterprises allocated 16 percent of their IT operating budgets toward expensed software costs in 2008 and plan to allocate 17 percent over the next year. SMBs allocated 19 percent toward expensed software costs in 2008 and plan to allocate 19 percent in the next 12 months.
Reducing IT costs and improving integration are top goals. Eighty-one percent of enterprises consider reducing IT costs to be an important goal, with improving integration between applications not too far behind at 77 percent. Seventy-one percent of SMBs consider improving integration to be important, with reducing IT costs and using information technologies to increase innovation next.
Software-as-a-service (SaaS) concerns and barriers have diminished. Compared with 2008, the 2009 landscape for SaaS is looking brighter, but there are still some bumps along the road to adoption. Currently, at 31 percent, security concerns are the most commonly cited reason why enterprises aren't interested in SaaS. At 39 percent, total ownership costs represent the top concern for SMBs that aren't interested in SaaS.
Packaged applications are preferred. When implementing a major application, a packaged application or application modules are the most preferred deployment options for 33 percent of enterprises and 45 percent of SMBs. The next preferred option for both is a tailored solution assembled from existing custom and packaged application modules. Few firms prefer to turn to SaaS or a hosted solution.