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The Legacy Application Modernization Benchmark Report

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The Legacy Application Modernization Benchmark Report

  1. 1. The Legacy Application Modernization Benchmark Report Transforming Mainframe, AS/400, and Unix Applications in an SOA World September 2006
  2. 2. The Legacy Application Modernization Benchmark Report Publication Partners This research report was made possible, in part, with assists from the following media organizations that helped distribute the survey to their readers and web site visitors. Through its industry-respected publications Insider Weekly for iSeries Managers and iSeries 400 Experts Journal, and now with an exclusive series of in-depth technical an- thologies covering topics like i5/OS, secu- rity, WebSphere, SQL, and RPG, iSeries 400 Experts provides you with practical, how-to advice and important management data and insight you need to keep your technical skills and market knowledge up to date. For more information, call 1-781-751-8696 or visit http://www.iseries400experts.com. Business Integration Journal is the only publication that focuses on using technology to optimize business proc- esses, which include both human and application interactions, from process analysis to end-to-end monitoring. For more information, visit: http://www.bijonline.com. z/Journal is the leading publication that focuses solely on providing how-to infor- mation for users of IBM mainframe com- puter systems. For more information, visit: http://www.zjournal.com. All print and electronic rights are the property of Aberdeen Group © 2006. Aberdeen Group • i
  3. 3. The Legacy Application Modernization Benchmark Report Executive Summary B usinesses have discovered the service-oriented architecture (SOA) as the future technological underpinning of enterprise information technology. In fact, 90% of respondents to Aberdeen’s survey for the recent benchmark report, Enterprise Service Bus and SOA Middleware, said they will end this year with experience in SOA planning, design, or programming. While SOA is revolutionizing how distributed computing is organized and delivered, it opens up both opportunities and challenges in extending the life of legacy application investments. The global economy runs on legacy systems ─ both the software and hard- ware ─ that represent hundreds of billions of dollars in investments that enterprises have made over decades. This leads to two major pressures on technology executives: • They want to squeeze all the value they can out of this technology, especially those that are mission-critical, and • They need to integrate legacy applications to improve business process visibility. However, the first pressure complicates the second. And enterprises face additional pres- sures, such as extending business processes over the Internet to B2B customers, suppli- ers, and business partners, as well as pressures associated with competition, globaliza- tion, and regulatory compliance. Yet, the key reasons for moving to SOA, as well as the approaches companies use in in- corporating their legacy applications in an SOA, vary depending on the hardware plat- forms they use: IBM System z mainframes, mid-range System i and AS/400, and Unix. As a point of clarification for this report, legacy modernization has two different mean- ings: (1) modernizing a legacy application’s software so that it’s no longer considered a legacy, and (2) the SOA enablement of a legacy application. While the chief focus of this report is on the second definition, readers must be aware that some in both the user and vendor communities can treat these meanings as being mutually exclusive. Key Business Value Findings Here are some notable findings from Aberdeen’s survey: • Two-thirds of Best in Class companies are working on incorporating legacy ap- plications and data into their SOAs, compared with only 37% of all survey re- spondents. • The Best in Class also exhibit a stronger commitment to SOA as an IT strategy, as well as a commitment to keeping as much of the SOA enablement work in- house as possible. • The ROI for Best in Class companies is more than two-thirds higher than that of Industry Average performers. • Close to 30% of enterprises running on mainframe platforms reported very good results in modernizing their applications for SOA while only 6% reported poor All print and electronic rights are the property of Aberdeen Group © 2006. ii • Aberdeen Group
  4. 4. The Legacy Application Modernization Benchmark Report results. However, none of the survey participants in mainframe shops reported very good results in overall service delivery improvement to the business. • Among mid-range System i and AS/400 companies, one-quarter cited very good results in modernizing their applications for SOA and 43% reported very good results in overall IT service delivery. More than a quarter of System i respon- dents delivered very good service delivery results to the business, the best of the three platforms examined. • About half of survey respondents whose companies use Unix platforms reported very good results in modernizing their applications at the IT level, with 29% achieving very good results in service delivery. Implications & Analysis • Most enterprises, especially in the mid-market, opt for an “extend/surround” leg- acy approach. In this strategy, applications that cannot be modernized for eco- nomic, technological, or risk reasons, are “extended” or “surrounded” with new SOA middleware. • Enterprises must measure success through the metrics that correspond closest to the chief drivers behind their strategies. • SOA modernization challenges and lessons learned relate to company size and industry segment. Recommendations for Action • Enterprises must tailor their legacy application strategies based on their applica- tions’ hardware platform and maturity level within Aberdeen’s Competitive Framework. There is no “one size fits all” modernization strategy. • Best in Class companies must focus application modernization on lowering long- term IT integration costs as those costs represent 40% of the IT budget. • Industry Average companies need to prioritize their modernization initiatives by the value an application delivers to the business. • Laggard companies must determine whether they’re allocating enough budget. Close to half of the companies represented in the survey will spend at least $500,000 of their IT budgets on legacy application modernizations. All print and electronic rights are the property of Aberdeen Group © 2006. Aberdeen Group • iii
  5. 5. The Legacy Application Modernization Benchmark Report Table of Contents Publication Partners .............................................................................................. i Executive Summary ............................................................................................. ii Key Business Value Findings......................................................................... ii Implications & Analysis ..................................................................................iii Recommendations for Action.........................................................................iii Chapter One: Issue at Hand.................................................................................1 Legacy Modernization Strategies...................................................................2 Technology Modernization....................................................................... 2 Replace................................................................................................... 3 Aberdeen’s Maturity Framework for Legacy Modernization...........................3 Learning from the Best in Class.....................................................................4 Chapter Two: Key Business Value Findings .........................................................5 Modernization Strategies by Platform ............................................................8 Mainframes ............................................................................................. 8 Mid-Range System i and AS/400 ............................................................ 9 Midrange Unix ....................................................................................... 10 Chapter Three: Implications & Analysis............................................................. 12 What’s the Defining IT Metric for SOA Modernization?................................ 12 Modernization Project Challenges by Company Size and Industry.............. 14 Modernization Lessons Learned.................................................................. 14 How Application Modernization Experiences Differ...................................... 15 Chapter Four: Recommendations for Action ...................................................... 17 Technology Considerations by Approach..................................................... 17 Recommended Actions by Organizational Maturity ..................................... 18 Appendix A: Research Methodology .................................................................. 21 All print and electronic rights are the property of Aberdeen Group © 2006. Aberdeen Group
  6. 6. The Legacy Application Modernization Benchmark Report Table of Contents Figures Figure 1: Timeframes for Finishing Legacy Application and Data Modernizations ....................................................................................5 Figure 2: Top Business Processes Targeted for Initial Legacy Modernizations ....6 Figure 3: Strategic Actions in Addressing and Implementing Legacy SOA...........7 Figure 4: Respondents’ Choices of Legacy Modernization Approaches............. 12 Figure 5: Key Legacy Modernization Drivers, by Industry Group ....................... 13 Figure 6: Success Ratings in Service Improvements ......................................... 13 Figure 7: Modernization Project Challenges by Company Size.......................... 14 Tables Table 1: Top Drivers for Embracing SOA..............................................................1 Table 2: Top Drivers by Hardware Platform (Multiple Choice) ..............................2 Table 3: Competitive Framework for Legacy Application Modernization for SOA ..........................................................7 Table 4: Legacy Modernization Strategies for IBM System z Mainframe Platforms .....................................................................8 Table 5: Legacy Modernization Strategies for IBM System i and AS/400 Platforms ...................................................................9 Table 6: Legacy Modernization Strategies for Unix Platforms ............................ 11 Table 7: Lessons Learned by Company Size and Challenged Industry.............. 15 Table 8: Comparison of Legacy Application Technology Approaches................. 15 All print and electronic rights are the property of Aberdeen Group © 2006. Aberdeen Group
  7. 7. The Legacy Application Modernization Benchmark Report Chapter One: Issue at Hand • Most respondents cite improving IT delivery of changes to the business and lowering Key Takeaways integration costs as the top drivers in embracing SOA. • Enterprises want to squeeze all the value they can get out of their legacy IT systems, especially those that are mission-critical. • The key reasons for moving to SOA vary depending on the hardware platforms enter- prises use. Thus, approaches will also vary depending on the platform. B usinesses are moving en masse toward the service-oriented architecture (SOA) as the technological underpinning of enterprise information technology. In fact, 90% of respondents to Aberdeen’s survey for its recent report, Enterprise Service Bus: An SOA Middleware Foundation, said they will end this year with experi- ence in SOA planning, design, or programming. While SOA is revolutionizing how dis- tributed computing is organized and delivered, it opens up both opportunities and chal- lenges in extending the life of legacy application investments. The global economy runs on legacy systems ─ both the software and hardware ─ that represent hundreds of billions of dollars in investments that enterprises have made over decades. This leads to two major pressures on technology executives: • They want to squeeze all the value they can out of this technology, especially those that are mission-critical, and • They need to integrate legacy applications to improve business process visibility. However, the first pressure complicates the second. And enterprises face additional pres- sures: extending business processes over the Internet to B2B customers, suppliers, and business partners, as well as pressures associated with competition, globalization, and regulatory compliance. The cure, at least from the vantage point of most global enterprises, is the SOA, which most survey respondents for this report see as a path to improving IT time to deliver changes to the business and lowering IT integration costs (Table 1). Table 1: Top Drivers for Embracing SOA % of Drivers Respondents Improving IT time to deliver changes to the business 66% Lowering IT integration costs 53% Lowering IT application maintenance costs 44% Consolidation of IT infrastructure 37% Source: Aberdeen Group, September 2006 All print and electronic rights are the property of Aberdeen Group © 2006. Aberdeen Group • 1
  8. 8. The Legacy Application Modernization Benchmark Report But priorities can change depending on the hardware and operating system platform in use. The survey that formed the basis of this report asked respondents which hardware platforms their organizations use. We found that among users of these three major plat- forms ─ IBM System z mainframe, IBM System i and AS/400, and Unix (Fu- jitsu/Siemens, HP, IBM, SGI, Sun, etc.) ─ there are different emphases among the key business drivers (Table 2). Table 2: Top Drivers by Hardware Platform (Multiple Choice) System i, Drivers Mainframe Unix AS/400 Improving IT time to deliver changes to the business 58% 61% 80% Lowering IT integration costs 65% 45% 55% Lowering IT application maintenance costs 45% 39% 50% Consolidation of IT infrastructure 35% 26% 55% Source: Aberdeen Group, September 2006 As a point of clarification for this report, legacy moderinzation has two different mean- ings: (1) modernizing a legacy application’s software so that it’s no longer considered a legacy, and (2) the SOA enablement of a legacy application. While the chief focus of this report is on the second definition, readers must be aware that some in both the user and vendor communities can treat these meanings as being mutually exclusive. Legacy Modernization Strategies For this report, Aberdeen took a different approach in examining enterprises’ strategies in incorporating legacy applications into their SOAs. We asked separate questions for re- spondents in each of the three major hardware platform groups. To respond to the drivers listed in Table 2 and extend the productive lives of their legacy applications, enterprises use one or more of four technology strategies: modernize, extend, surround, or replace legacy platforms into Services-Oriented Legacy Applications (SOLA). Technology Modernization Modernizing legacy applications to SOAs means opening them up to web services and SOA middleware such as an enterprise service bus (ESB) and services registration in an SOA repository. The implication is that the applications stay on their current platform and are refurbished as composites in application services, including web services, which may be distributed on or off the legacy platform. However, modernization is also used with replacement (see below) strategies to port an application to a new platform. The first step in modernizing to SOA is often the modernization of pre-relational data- bases and file structures such as IMS, VSAM, IDMS, Adabas and Datacom, along with their proprietary programming languages, to relational database processing and newer languages. This modernization is accomplished with automation to convert the existing program logic from one programming language to another, and to port data (and data- bases) to a new operating environment and database manager. Organizations benefit greatly when the conversion also includes the exposure of the new database layers and logic layers as services in their SOAs. All print and electronic rights are the property of Aberdeen Group © 2006. 2 • AberdeenGroup
  9. 9. The Legacy Application Modernization Benchmark Report Modernization to open applications and data access to web services and SOA middleware can be achieved by programmers using tools or manually. Extend and Surround Applications that cannot be modernized for economic, technological, or risk reasons, can be “extended” or “surrounded” with new SOA middleware. They may be implemented on the legacy platform as extensions, or off the platform. For companies looking to extend on the current platform, the message is clearly an in- creased investment in the legacy platform. However, the alternative surround approach to extension largely leaves the existing application and platform intact by doing the leg- acy-to-SOA translation work off the legacy platform. In both the on- and off-platform approaches, the solution is a software “translation en- gine” that communicates with the legacy application using native and existing technol- ogy. These technology approaches include: • Messaging, such as IBM’s MQ, CTG, and IMS Connect or enterprise applica- tion integration (EAI) technology. • APIs: legacy application programming interfaces. • Files and databases: communication via files or transactions left in a database. • Data Adaptation: typically uses user interface “screens” of data instead of mes- sages to manipulate information to and from the legacy application. For many larger companies with legacy applications that literally define the business and the business process, extend or surround approaches present a powerful business case, primarily because they can leave the existing application and platform in place. Replace A common perception is that it’s patently impossible to replace the billions of lines of code that represent the business processes of the Global 5000 companies. If those pro- grams are to be rewritten by human programmers, even offshore, we would be leading a chorus of naysayers. The solution for some companies and their applications is auto- mated logic and data definition extraction from existing applications, or full automated conversion of the databases and programs to new technologies and languages. Replacements can be off the current hardware platform if a platform migration is in- cluded with the application modernization. Replacement can also include replacing obso- lescent custom applications with new third-party applications to perform the same busi- ness functions. Aberdeen’s Maturity Framework for Legacy Modernization In this survey, we asked targeted questions of respondents in each of the three hardware platform categories about the four strategies they were using, the reasons behind the strategies, the challenges in executing those strategies, and the responses to those chal- lenges. This will replace the PACE framework Aberdeen uses for most of its benchmark reports. Through these findings, we hope to offer not only broad insight on moving leg- acy applications into an SOA, but more specific insight readers can use to assist in their All print and electronic rights are the property of Aberdeen Group © 2006. Aberdeen Group • 3
  10. 10. The Legacy Application Modernization Benchmark Report strategic planning or compare their experiences with those of the companies represented in the survey. Learning from the Best in Class Aberdeen’s Competitive Framework for this report can help companies benchmark their business processes, organization, internal knowledge, and performance metrics against those of companies ─ called Best in Class ─ that exhibit best current practices and yield the best results in migrating legacy applications to their service-oriented architectures. Competitive Framework Key The Aberdeen Competitive Frame- From the results of this survey, Aberdeen came to work defines enterprises as falling the following conclusions about Best in Class enter- into one of the three following levels prises: of practices and performance: 1) They’re achieving moderately or very satis- Best in Class (20%) — practices factory results in their modernizations; that are the best currently being 2) Beyond resources, they see no major barriers employed and significantly superior to re-architecting applications under an to the Industry Average SOA; Industry Average (50%) — practices 3) Their key metric is lowering IT integration that represent the average or norm costs; and Laggards (30%) — practices that 4) They’re achieving at least 29% ROI on leg- are significantly behind the average acy application investments and averaging of the industry 42%. Readers of this report will also be able to gauge what kinds of tools enterprises are using or planning to use to assist in their migration strategies, as well as the deployment scope of those tools. All print and electronic rights are the property of Aberdeen Group © 2006. 4 • AberdeenGroup
  11. 11. The Legacy Application Modernization Benchmark Report Chapter Two: Key Business Value Findings • Two-thirds of Best in Class companies are working on modernizing legacy applications and data into their service-oriented architectures, compared with only 37% of all survey respondents. Key Takeaways • Best in Class companies are more likely to include multi-process applications as part of their migration strategies. • The Best in Class also exhibit a stronger commitment to SOA as an IT strategy, as well as a commitment to keep as much of the SOA enablement work in-house as possible. • The ROI for Best in Class companies is more than two-thirds higher than that of Industry Average performers. A s we noted in Chapter One, nearly every organization has discovered the SOA and just about all are moving rapidly toward adoption. In fact, 37% respondents to this survey said they plan to complete modernizing their legacy applications and data to their SOAs within a year (Figure 1), and another 50% will follow within five years, leaving 13% of respondents’ companies with no firm plans for a legacy migration strategy. Still, more than 80% of respondents’ companies plan to finish within three years. Figure 1: Timeframes for Finishing Legacy Application and Data Modernizations 50% 44% 45% 40% 35% 30% 25% 22% 20% 15% 13% 15% 10% 6% 5% 0% Within 6 Within 1 year Within 3 years Within 5 years No firm plans months Source: Aberdeen Group, September 2006 Best in Class organizations are a step ahead in their SOA plans. Half of Best in Class re- spondents plan to complete their SOA modernizations within six months; two-thirds within a year. And, they are more apt to modernize applications that cover a wide range of business processes rather than take a more granular approach (Figure 2). And, the Best All print and electronic rights are the property of Aberdeen Group © 2006. Aberdeen Group • 5
  12. 12. The Legacy Application Modernization Benchmark Report in Class are more than twice as likely to modernize applications used in quality control work. However, the Best in Class place just as equal an emphasis as all other companies on customer service processes. This reflects a prevalent business trend of using informa- tion technology to improve customer retention and grow the customer base to boost reve- nue. The fact that nearly half of the Best in Class are targeting a wide swath of business processes is evidence that they place a slightly higher emphasis on managing and moni- toring business processes as a way to react quickly and more efficiently to changing mar- ket dynamics. (See Aberdeen’s recent Business Process Management Benchmark Report for more details.) Figure 2: Top Business Processes Targeted for Initial Legacy Modernizations 60% 53% 50% 43% 36% 40% 35% 29% 29% 29% 25% 25% 26% 30% 24% 20% 11% 10% 0% Many Customer Procurement Finance Supply chain Quality applications service control for many business All Respondents Best in Class processes Source: Aberdeen Group, September 2006 To further meet the legacy applica- tion migration drivers listed in Chap- Good development and migration soft- ter One, enterprises can utilize sev- eral strategic actions, the most com- ware tools for programmers are as im- mon among them the choosing of portant as radar to an air traffic control- SOA development and moderniza- ler. You won’t be very job-effective with- tion tools and creating a composite out them.” services architecture and roadmap. Best in Class organizations lean to- ~ Chemical company executive ward two other strategies: engaging an IT services partner and choosing strategic SOA technology vendors (Figure 3). But about one-third of Best in Class respondents to Aberdeen’s survey cite the creation of a separate SOA development environment while largely eschewing outsourcing the work. This indicates that these leading organizations would rather keep the work in- house as a strategic IT project. Recent Aberdeen studies that focused on IT outsourcing found that many companies ─ especially the Best in Class ─ tend to outsource tactical work (e.g., one-time application language or database migrations) and leave the strategic stuff in-house. All print and electronic rights are the property of Aberdeen Group © 2006. 6 • AberdeenGroup
  13. 13. The Legacy Application Modernization Benchmark Report Figure 3: Strategic Actions in Addressing and Implementing Legacy SOA 31% Increase training and staff skills 42% Create a composite services architecture 44% and roadmap 52% Create a separate SOA development 25% environment 18% 38% Engage an IT services partner to assist 32% Choose SOA development and migration 63% tools 55% 44% Choose strategic SOA technology vendors 39% All Respondents Best in Class 0% 10% 20% 30% 40% 50% 60% 70% Source: Aberdeen Group, September 2006 These findings, as well as those in Table 3, reflect a stronger commitment to SOA by Best in Class organizations and a preference to rely on internal skills to execute their leg- acy migration strategies. That has paid off in better financial performance over those of Industry Average and Laggard organizations. In this study, Best in Class organizations are achieving better than a 28% ROI and averaging 42%. Other recent Aberdeen IT stud- ies show the Best in Class achieving application maintenance cost reductions of 15% of the IT budget and dedicating 11% more of the IT budget to line-of-business innovations. Table 3: Competitive Framework for Legacy Application Modernization for SOA Best in Class Industry Average Laggards Barriers Some cite barriers, but 44% Close to half cite lack of Half cite lack of skills cite only a lack of resources skills and training in and training in SOA, as to execute on their commit- SOA well as resistance due ment to SOA to the cost of enabling services Performance ROI for legacy SOA applica- ROI for legacy SOA ROI for legacy SOA Metrics tion projects – 42% on aver- application projects – application projects – age 22% on average 12% on average IT software maintenance IT software mainte- IT software mainte- costs as % of IT budget – nance costs as % of IT nance costs as % of IT 24% on average budget – 22% on aver- budget – 22% on aver- age age Expense decrease from SOA – 15% on average Expense decrease from Expense decrease from SOA – 8% on average SOA – 5% on average All print and electronic rights are the property of Aberdeen Group © 2006. Aberdeen Group • 7
  14. 14. The Legacy Application Modernization Benchmark Report Best in Class Industry Average Laggards Technology Most will acquire new SOA Split between using Strongest approach is Approach development tools. There is internal programmers to to use software adapt- also a strong preference to make changes manually ers that come with SOA use internal programmers to and bringing in contrac- software middleware make changes manually tors or consultants to products to connect to help. Slightly less than legacy applications. half will acquire new They’re less likely to SOA development tools invest in SOA devel- opment tools or use automated migration tools. Source: Aberdeen Group, September 2006 Modernization Strategies by Platform For the rest of this chapter, we examine the legacy modernization strategies undertaken by companies with mainframe System z, mid-range System I (i.e., AS/400), and Unix platforms. In each section, we summarize: • Approaches: The technology strategies in each platform and the proportion of respondents that chose each approach; • Key Reasons: Why they chose the approaches; • Challenges: The key challenges survey respondents cited in undertaking an approach; and • Responses: How they overcame the challenges. Mainframes Close to one-third of survey participants report very good results in achieving their main- frame modernizations; none report poor results. About 45% report very good results in the database/information management part of their migrations. About 20% had problems and report poor results with SOA development tools, compared with the 11% that had very good results (Table 4) What stands out was that none of the survey participants reported very good results in the overall service delivery improvement to the business as a result of modernization work, which contrasts with the better results reported by companies using System i and Unix platforms. In follow-up interviews, application and business process complexity was cited as the key reason it may be difficult to change IT delivery to line-of-business units in mainframe migrations that do not also include business process transformation. Table 4: Legacy Modernization Strategies for IBM System z Mainframe Platforms Approaches Key Reasons Challenges Responses All print and electronic rights are the property of Aberdeen Group © 2006. 8 • AberdeenGroup
  15. 15. The Legacy Application Modernization Benchmark Report Approaches Key Reasons Challenges Responses Extend/surround Management and control Unknown value for Systematic planning on mainframe facilities for existing applica- ROI/ROA approach and close (31% of tions are better on main- project management Too many different appli- respondents using frame cation systems to inte- Implement a small mainframes) Performance is better doing grate pilot service to show it this way success Extend/surround Economics are better Lack of staff skills, best Systematic planning off mainframe We keep loads off the main- practices, or lessons approach and close (19%) learned project management frame if we can avoid it Limited vision/support or understanding from ex- ecutive management Replace on or Mainframe replacement Lack of staff skills, best Contract for IT ser- off mainframe strategy practices, or lessons vices or project inte- (35%) learned gration services Modernize home-grown apps off the mainframe Too much technology re- Establish migration training anticipated oversight program Replace databases or old office languages during migration Choose strategic and IT services ven- dor to work with Modernize with Management and control Too much complexity to Increase technical automation or facilities for existing applica- manage or inadequacy of education manually tions are better on main- our development tools (15%) frame Too much technology re- Applications are key com- training anticipated posite piece of SOA strategy Source: Aberdeen Group, September 2006 Mid-Range System i and AS/400 Nearly one-quarter of survey participants report very good results in their midrange mod- ernizations, while 9% reported poor results. About 43% report very good results in the IT integration stages of their migrations (Table 5). Meanwhile, about 14% reported prob- lems and poor results with SOA development tools; 17% had poor results with applica- tion migration tools, compared with 13% that had very good results in each category. Importantly, 27% of the survey participants running mid-range System i and AS/400 re- ported very good results in overall IT service delivery to the business as a result of the migration. Users cite the integrated nature of the System I hardware and operating system facilities as an accelerator to business process changes. Table 5: Legacy Modernization Strategies for IBM System i and AS/400 Platforms Approaches Key Reasons Challenges Responses All print and electronic rights are the property of Aberdeen Group © 2006. Aberdeen Group • 9
  16. 16. The Legacy Application Modernization Benchmark Report Approaches Key Reasons Challenges Responses Extend/ System i economics are Too much complexity for Implement a small surround on better employees to cope with pilot service to show System i success System i is our platform of Too many different applica- (46% of respon- choice when possible tions systems to integrate Systematic planning dents using i Se- approach and close ries or AS/400) Too much complexity to project management manage or inadequacy of development tools Unknown value for ROI/ROA Modernize (18%) Applications are key com- Too many different applica- Implement a small posite of SOA strategy tions to integrate pilot service to show success System i economics are better Increased technical education System i is platform of choice when possible Surround off Economics are better Limited acceptance on im- Increased invest- System i (11%) plementation schedule or ment in IT infrastruc- budget ture Replace (25%) System i replacement Change management Implement a small strategy around people or existing pilot service to show processes success Modernize home-grown applications off the Sys- tem I and buy new apps Application consolidation: no longer needed by the business Source: Aberdeen Group, September 2006 Midrange Unix Slightly more than 40% of survey respondents whose companies use Unix platforms re- ported achieving very good results in overall modernizations at the IT level, with 17% achieving very good results in the service delivery to the business (Table 6). However, Unix migrations were marred by a high level of poor results: 15% were dissat- isfied with database and information management; one-quarter with IT integration; 17% with application migration tools; and 45% reported poor results with the IT services pro- viders they used. All print and electronic rights are the property of Aberdeen Group © 2006. 10 • AberdeenGroup
  17. 17. The Legacy Application Modernization Benchmark Report Table 6: Legacy Modernization Strategies for Unix Platforms Approaches Key Reasons Challenges Responses Extend/surround Performance is better do- Lack of staff skills, best Implement small pilot on Unix platform ing it this way practices, or lessons service to show suc- (58% of respon- learned cess Unix is platform of choice dents using Unix) when possible Unknown value for Choose strategic and ROI/ROA IT vendors to work with Modernize (16%) Applications are key com- Conflicts with other busi- Systematic planning posite of SOA strategy ness technology/process approach and close initiatives project management Performance is better do- ing it this way Change management Implement small pilot around people or existing service to show suc- processes cess Standardized or will standardize on one ERP package across the company Surround off Performance is better do- Change management Systematic planning Unix platform ing it this way around people or existing approach and close (16%) processes project management Economics are better Increased investment in IT infrastructure Replace (11%) Unix platform replacement Unix platform replace- Systematic planning strategy ment strategy approach and close project management Modernize home-grown Modernize home-grown applications off the Unix applications off Unix plat- platform form Source: Aberdeen Group, September 2006 All print and electronic rights are the property of Aberdeen Group © 2006. Aberdeen Group • 11
  18. 18. The Legacy Application Modernization Benchmark Report Chapter Three: Implications & Analysis • Most enterprises, especially in the mid-market, opt for an “extend/surround” approach to Key Takeaways modernizing their legacy applications for SOA. • Measure success through the metrics that correspond closest to the chief drivers behind your company’s migration strategies. • Migration challenges and lessons learned relate to company size and industry segment. G iven a choice of legacy modernization approaches, most companies opt for the more economical, less complicated “extend/surround” option (Figure 4). In fact, close to 90% of mid-size companies in our survey said they chose that option over replacing and modernizing, not a surprise given the pressures on the mid- market to keep an eye on costs while eyeing growth. However, replace and modernize are not far behind. Figure 4: Respondents’ Choices of Legacy Modernization Approaches 16% Replace 26% Extend/Surround 58% Technology Modernization Source: Aberdeen Group, September 2006 What’s the Defining IT Metric for SOA Modernization? Given a choice of improving IT time to delivery, lowering IT integration costs or applica- tion maintenance costs, or consolidating IT infrastructure as the key IT drivers to focus on during a legacy modernization, the majority chose IT time to delivery (Figure 5). But note that Best in Class companies concentrate on lowering IT integration costs, which has a collateral positive effect in speeding time to deployment and lowering application maintenance costs. All print and electronic rights are the property of Aberdeen Group © 2006. 12 • AberdeenGroup
  19. 19. The Legacy Application Modernization Benchmark Report Figure 5: Key Legacy Modernization Drivers, by Industry Group 90% 85% 80% 69% 68%67% 70% 62% 60% 52% 48% 49% 50% 43% 40% 45% 41% 38% 38% 40% 33% 27% 30% 20% 10% 0% Consolidation of IT Lower IT application Lower IT integration Improve IT time to infrastructure maintenance costs costs deliver changes to the business Discrete/Process CPG Services Public Sector Source: Aberdeen Group, September 2006 Whatever the primary driver behind a modernization strategy, it should match the pri- mary metric to determine the success of the strategy. However, most respondents re- ported only moderate success when asked about overall application service improvement outside the IT department and overall SOA application service results, with the best results coming from companies running IBM System i and AS/400 platforms (Figure 6). Figure 6: Success Ratings in Service Improvements application "service" improvement outside Overall application Mainframe 89% 11% IT department "service" Series I, 27% 59% 14% AS/400 Unix 17% 67% 17% Mainframe 29% 65% 6% Overall IT SOA results Series I, 23% 68% 9% AS/400 Unix 42% 50% 8% 0% 20% 40% 60% 80% 100% Very good Moderate Poor Source: Aberdeen Group, September 2006 All print and electronic rights are the property of Aberdeen Group © 2006. Aberdeen Group • 13
  20. 20. The Legacy Application Modernization Benchmark Report Modernization Project Challenges by Company Size and Industry When asked what factors impeded their migration efforts, survey participants cited an unknown value for ROI and ROA; too many different application systems to integrate easily; lack of staff skills, best practices, and lessons learned; and people-process change management (Figure 7). ROI/ROA challenges are most prevalent at large companies and in the public sector (64%). Application integration issues are most commonly found in discrete/process manufacturing. Human capital change management challenges are espe- cially prevalent (63%) in CPG manufacturing. Figure 7: Modernization Project Challenges by Company Size 60% Small Mid-Size Enterprise 57% 50% 45% 40% 40% 39% 40% 40% 36% 32% 29% 30% 24% 25% 20% 13% 10% 0% 29% 31% 36% 45% Change management Lack of staff skills, Too many different Unknow n value for around people or best practices, applications systems ROI/ROA existing processes lessons learned to integrate Source: Aberdeen Group, September 2006 Modernization Lessons Learned The most common miscalculation in an initial legacy application modernization project is having too aggressive a project schedule (Table 8). This problem is especially prevalent (53%) in the services industry and in large companies (53%). Technical problems with development tools impeded 40% of survey respondents overall, and half of dis- crete/process manufacturing companies. Training issues most affected public sector or- ganizations. Mid-size companies (48%) were most impeded by unanticipated develop- ment and testing problems, especially among manufacturers. All print and electronic rights are the property of Aberdeen Group © 2006. 14 • AberdeenGroup
  21. 21. The Legacy Application Modernization Benchmark Report Table 7: Lessons Learned by Company Size and Challenged Industry Mid- Challenged Lesson Overall Small Large Size Industry Schedule was too tight 39% 46% 35% 56% Services Problems with development/migration 39% 23% 50% 32% Mfg tools Training issues 36% 15% 38% 40% Public Sector Unanticipated development or testing 32% 23% 46% 20% CPG problems Source: Aberdeen Group, September 2006 How Application Modernization Experiences Differ We analyzed survey responses by two different technology approaches, combining re- placement and modernization into one and surround and extend into the other. The ex- tend/surround approach essentially says the existing application logic and data are to be preserved and “extended” by reengineering with SOA technology. In contrast, modern- ize/replace is about technology replacement of the application logic and data. Table 8 summarizes the contrasts between the two approaches. Importantly, companies are mak- ing equal investments in each technology approach and seeing about equal — and sig- nificant — returns on their investments. Table 8: Comparison of Legacy Application Technology Approaches Extend/ Modernize/ Comparison Key Reasons Surround Replace Key Drivers Improve IT time to deliver changes to the business 74% 71% Lower IT integration costs 67% 40% Consolidation of IT infrastructure 26% 46% Our applications are antiquated 21% 26% We have no plans for SOA 0% 3% Top Migration Limited vision/support or understanding from execu- 33% 23% Challenges tive management Limited agreement on how to measure mainframe 2% 11% migration success Conflicts with other technology/business process 14% 37% initiatives Lessons Schedule was too tight 26% 41% Learned Problems with SOA development/migration tools 42% 28% Training issues 42% 34% All print and electronic rights are the property of Aberdeen Group © 2006. Aberdeen Group • 15
  22. 22. The Legacy Application Modernization Benchmark Report Extend/ Modernize/ Comparison Key Reasons Surround Replace Runtime performance, capacity, or stability problems 34% 21% Barriers to Only barrier is resources; we are committed to SOA 45% 28% SOA Resistance due to cost of enabling services 35% 16% Adoption Unproven business case and/or no executive buy-in 15% 31% Technology Use our own programmers to make the changes 54% 44% Strategy largely by hand Acquire new SOA development tools 46% 53% Use an automated migration tool(s) 13% 16% Use software adapters from SOA software middle- 46% 19% ware products to connect to legacy applications Source: Aberdeen Group, September 2006 All print and electronic rights are the property of Aberdeen Group © 2006. 16 • AberdeenGroup
  23. 23. The Legacy Application Modernization Benchmark Report Chapter Four: Recommendations for Action • Tailor your legacy application modernization projects based on the application’s com- puter platform and your company’s maturity level within Aberdeen’s Competitive Frame- Key Takeaways work. There is no “one size fits all” modernization strategy. • Best in Class companies focus on lowering long-term IT integration costs that represent 40% of the IT budget. • Automated software tools may allow a broader choice of migration targets, faster imple- mentation, and higher quality than a manual application project. T he cost of IT integration activities is enormous — about 40% of the entire IT budget. SOA is attractive because it can lower IT integration costs, freeing funds for greater innovation and transformation at the line-of-business level. SOA is also allowing IT departments to deliver applications and changes more quickly, so time-to- value is lowered. That’s why progressive IT organizations are triaging their existing ap- plication portfolios to find those legacy applications that should be incorporated into an SOA strategy. Technology Considerations by Approach About one-third of survey respondents plan to engage service providers to assist with the legacy application modernizations for SOA. Here are top-level considerations for each of the four approaches discussed in Chapter Two: Modernize: (1) Look to automated software products and services that can abstract and extract the application’s logic and data definitions, combining these with SOA technology to create a modernized application that can run on the same or a different platform (e.g., re-hosting). (2) Programmer labor is a critical resource, so wholesale modernization by hand is cumbersome and expensive. (3) Consider opportunities for incorporating modern technology beyond SOA: Business process management (BPM), business activity monitoring (BAM), and rich user interfaces are three popu- lar choices while creating composite applications. Replace: First, ask whether the application be replaced with a third-party software package? Custom application replacement projects should consider (1) software tools and approaches that incorporate BPM technology so that future process changes are close to the line-of-business and (2) high-power software generators that provide ex- cellent programmer productivity while generating the target platform’s native Java or .NET low-level code. Extend: (1) Choose the Message, API, File and Database, or Data Adaptation ap- proach discussed in Chapter Two. (2) Look for SOA middleware and application de- velopment tools that can be integrated quickly and effectively with the existing code base. Our research shows a majority looking at SOA middleware suites consisting of an Enterprise Service Bus (ESB), registry/metadata repository, security, management, All print and electronic rights are the property of Aberdeen Group © 2006. Aberdeen Group • 17
  24. 24. The Legacy Application Modernization Benchmark Report and governance components. (3) Consider an automated or semi-automated conver- sion of common tasks such as API, user screens, or message replacements. (4) Model the performance and capacity changes brought about by the new middleware soft- ware. Surround: The same considerations as Extend, with additional considerations for be- ing on a different computer in a loosely-coupled SOA messaging configuration. Model failure scenarios for either the host or the surround server. Note that develop- ment tools are an important choice. New development technology delivering a rich Internet experience is one such example. Recommended Actions by Organizational Maturity Whether a company is trying to gradually move its legacy application SOA moderniza- tion efforts from “Laggard” to “Industry Average,” or from “Industry Average” to “Best in Class,” the following actions will help spur the necessary performance improvements over time: Best in Class Next Steps 1. Focus on radical modernization as the preferred strategy for mission-critical applications. Application programs are basically logic and data. To support the lines of busi- ness, lower IT integration costs, and speed time to change, look to extract the logic from mission-critical applications and re-implement it as part of a business process management system. The data belongs as part of an information man- agement strategy that delivers information as a service in an SOA. If the current software languages are proprietary or outdated, or if the current database man- agement system is pre-relational, consider automated conversion of the applica- tions or databases to newer technology and to SOA in a single migration project. 2. Weed out the old, tired, and unneeded applications. One CIO told us, “I’m tempted to turn off one of our (many) mainframes just to see if anyone complains.” He’s getting at a root problem: not knowing what all your applications do and who is using them. Look to deactivate as many applica- tions or programs as possible from your application portfolio. Consider enlisting the help of highly automated tool vendors that can provide details quickly on what your applications do and how they are integrated. 3. Require broad participation by IT technicians to foster SOA training and experi- ence. All of your IT staff must become technically proficient in SOA technologies. In- stead of creating a dedicated legacy modernization team, consider broad partici- pation in concert with SOA training. This shares the “pain”, prevents morale is- sues with a dedicated migration team, and moves modernization along in parallel with standard application maintenance. All print and electronic rights are the property of Aberdeen Group © 2006. 18 • AberdeenGroup
  25. 25. The Legacy Application Modernization Benchmark Report 4. Focus on IT integration costs as a key performance metric. Using IT integration costs as a key performance metric in an SOA environment will also lower application maintenance costs and speed time to change imple- mentation. Best in Class companies are freeing up about 15% of the IT budget with this strategy and using most of the savings to drive innovation with the lines of business. Industry Average Steps to Success 1. Prioritize application migration by service value. The shortest path from cost to value is to know what “services” in your SOA will deliver the greatest and earliest value to your organization. The prioritized list should have a major influence in the order of application migration. 2. Industrialize the modernization process. A total modernization will take years at most large and upper mid-size organiza- tions (at least $500 million in annual revenue). Therefore, manual, labor- intensive migrations will cost more over the migration period than choosing modernization tools (including automated migration) and best-in-class SOA de- velopment software tools. Training investments will pay back several times over during the modernization period through higher productivity and faster completion. 3. Consider outsourcing the legacy application modernization. The services arm or services partners of application modernization technology companies are experts in modernization projects. An outsourcing strategy is worth a cost-benefit analysis, considering the skills diversion, training, and re- lated IT management issues for a migration that is a one-time ─ but major ─ oc- currence. 4. Merge legacy application modernization planning with IT consolidation strate- gies. The combination of a new services-oriented re-architecture and application mod- ernization has created a once-a-decade opportunity to consolidate IT hardware and operating system platforms with new storage and networking technologies. Service-oriented software architecture planning should be coordinated with a service-oriented hardware infrastructure architecture. Laggard Steps to Success 1. Realize that resistance to spending on IT results in higher IT costs. Aberdeen research consistently shows Laggard companies as being resistant to spend money on IT to make money with IT. This is an organizational and mana- gerial issue. Avoiding necessary spending on automation, SOA modernization tools, SOA development tools, training, and IT services results in a less efficient operation with lower quality and longer time to delivery. All print and electronic rights are the property of Aberdeen Group © 2006. Aberdeen Group • 19
  26. 26. The Legacy Application Modernization Benchmark Report More than 45% of our survey respondents will spend at least $500,000 on legacy application modernization. Well-spent funds on IT, such as those earmarked for legacy modernization, show a demonstrably strong return. 2. Determine the highest long-term paybacks. Two-thirds of our Laggard company respondents report that their companies have not analyzed their platform (i.e., hardware and operating system) operating costs versus those of alternate platforms. Meanwhile, 24% report antiquated ap- plications, and 36% have applications that are not well mapped to business proc- esses. Modernizing an application that does not meet the business needs will not add value, but simultaneously modernizing “business fit” applications to new technology and SOA can add much value. Consider using an automated solutions vendor to make this transition versus a manual migration. Consider modernization, including the acquisition of new third-party SOA- enabled application software, where practical. Look to high-productivity devel- opment tools as replacements for third-generation languages, which have a high life-cycle labor cost component, for custom application development going for- ward. 3. Carefully select modernization and SOA development tools, and IT services pro- viders. Laggard companies are likely to report poor results with migration and develop- ment tools and with migration services providers because of inadequate funding (see the first recommendation) and inadequate training. 4. Consider automation versus a manual legacy application modernization strat- egy. Automated application language and database projects can modernize an applica- tion, extend its life, and make the application ready for an SOA. Consider using an automated solution vendor to complete this process quickly, and with less risk and less cost than a manual conversion. All print and electronic rights are the property of Aberdeen Group © 2006. 20 • AberdeenGroup
  27. 27. The Legacy Application Modernization Benchmark Report Appendix A: Research Methodology I n August and September 2006, Aberdeen Group examined the approaches, chal- lenges, strategies, benefits, and performance improvements companies and their IT organizations are experiencing in enabling their legacy applications for service- oriented architectures (SOAs). The research effort began with an online survey that was filled out by respondents from about 120 companies in various enterprises from dif- ferent industries around the world. In the survey, respondents answered questions designed to determine the following: • The factors causing their companies to embrace SOA; • The technological options companies considered and eventually chose – based on their respective hardware platforms – to enable their legacy applications; • Company spending plans for legacy SOA enablement through 2007; • The challenges companies face in legacy migration projects and how they re- spond to those challenges; • The technology vendors and service providers they use to assist them in their SOA enablement efforts; and • Performance improvements linked to their legacy SOA enablement projects. Aberdeen supplemented this online survey effort with telephone interviews with select survey respondents, gathering additional information on legacy SOA enablement strate- gies, experiences, and results. The study aimed to identify emerging best practices for SOA enablement and provide a framework by which readers could assess their own capabilities. Responding enterprises included the following: • Job title/function: The research sample included respondents with the following job titles: manager (23%), director (20%), internal consultant (14%), CIO/IT leader (11%), senior management, such as CEO, CFO, or COO (10%), and vice president or senior vice president (5%). Thirteen percent identified themselves as “staff” while 4% came from other positions within their organizations. • Industry: The research sample included respondents from several industries. High technology/software companies represented 19% of the survey field, fol- lowed by finance/banking/accounting (11%), health/medical/dental services (9%), public sector (9%), retail (6%), automotive (6%), industrial equipment manufacturing (4), and insurance/real estate/legal services (4). Other respondents came from the following industries: aerospace/defense, apparel, chemicals, com- puter equipment and peripherals, construction/architecture/engineering, con- sumer durable goods, consumer electronics, consumer packaged goods, distribu- tion, education, food/beverage, health and beauty aides, metals and metal prod- All print and electronic rights are the property of Aberdeen Group © 2006. Aberdeen Group • 21
  28. 28. The Legacy Application Modernization Benchmark Report ucts, paper/lumber/timber, telecommunications services, transportation/logistics, and utilities. • Geography: Most study respondents – 52% – were from North America; 28% were from Europe, 8% from Asia/Pacific, 7% from the Middle East and Africa, and 6% from Central and South America. • Company size: About 43% of respondents were from large enterprises (annual revenues above US$1 billion); 42% were from mid-size enterprises (annual reve- nues between $50 million and $1 billion); and 15% from small businesses (an- nual revenues of $50 million or less). Solution providers recognized as featured underwriters of this report were solicited after the fact and had no substantive influence on the direction of The Legacy Application Mi- gration Benchmark Report. Their underwriting has made it possible for Aberdeen Group to make these findings available to readers at no charge. All print and electronic rights are the property of Aberdeen Group © 2006. 22 • AberdeenGroup
  29. 29. The Legacy Application Modernization Benchmark Report Appendix B: Related Aberdeen Research & Tools Related Aberdeen research that forms a companion or reference to this report includes: • The Business Process Management Benchmark Report (August 2006) • The Business Value of IT Outsourcing Benchmark Report (July 2006) • Enterprise Service Bus and SOA Middleware (June 2006) • Achieving More Value from Enterprise Applications Benchmark Report (May 2006) • The SOA in IT Benchmark Report (December 2005) • Enterprise Applications: Build or Buy? (June 2006) Information on these and any other Aberdeen publications can be found at www.Aberdeen.com. Aberdeen Group, Inc. Founded in 1988, Aberdeen Group is the technology- 260 Franklin Street driven research destination of choice for the global Boston, Massachusetts business executive. Aberdeen Group has over 100,000 02110-3112 research members in over 36 countries around the world USA that both participate in and direct the most comprehen- sive technology-driven value chain research in the Telephone: 617 723 7890 market. Through its continued fact-based research, Fax: 617 723 7897 benchmarking, and actionable analysis, Aberdeen Group www.aberdeen.com offers global business and technology executives a unique mix of actionable research, KPIs, tools, © 2006 Aberdeen Group, Inc. and services. All rights reserved September 2006 The information contained in this publication has been obtained from sources Aberdeen believes to be reliable, but is not guaranteed by Aberdeen. Aberdeen publications reflect the analyst’s judgment at the time and are subject to change without notice. The trademarks and registered trademarks of the corporations mentioned in this publication are the property of their respective holders.

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