Global study of 2,000 business and technology leaders finds that 98% of organisations experienced modernization delays with negative business impacts, while agentic AI adopters report faster progress.
Enterprise modernization is entering a new phase as artificial intelligence reshapes technology investment priorities and forces organisations to rethink how they manage complex IT environments. According to Kyndryl’s first global Modernization Report, modernisation is increasingly about orchestrating technology, people and business priorities rather than consolidating systems or replacing legacy infrastructure.
Based on insights from 2,000 business and technology leaders across five continents and 12 industries, the report finds that adopting AI has overtaken cost reduction, legacy replacement and concerns about shrinking pools of legacy technology expertise as a leading modernization priority.
The shift is expanding the scope of enterprise transformation. Organisations are investing across legacy platforms and newer environments to support AI adoption, resilience and business growth, creating more complex operating models that require coordination beyond the IT department.
“AI is creating new possibilities and raising expectations for the business outcomes technology should deliver,” said Martin Schroeter, Chairman and CEO of Kyndryl. He said organisations making the most progress are strengthening resilience while directing investments towards areas that deliver business value.
AI accelerates modernization priorities
AI is influencing decisions across enterprise infrastructure and applications. Kyndryl’s research identifies it as the leading driver of increased mainframe and edge computing use, and the second-biggest driver of SaaS and private cloud expansion. It is also the leading reason organisations are upgrading their networks and application portfolios.
Significantly, every organisation with a mainframe reported plans to deploy AI on the platform, challenging the assumption that legacy systems are primarily candidates for replacement.
“Modernization is about preparing for what comes next, and the leaders making the most progress are investing across their technology environments — strengthening resilience and putting those investments to work where they deliver the greatest value.”
— Martin Schroeter, Chairman and CEO, Kyndryl
However, modernisation programmes continue to face execution difficulties. Nearly half of respondents said they were behind schedule, while 98% reported modernization delays accompanied by negative business impacts.
Limited visibility into existing IT environments is a major obstacle. Only 9% of respondents said they fully understood their applications’ dependencies, while one-quarter reported having large numbers of undocumented applications. These gaps complicate transformation planning and increase the difficulty of assessing how changes to one system may affect others.
Agentic AI offers a potential way forward
Organisations are beginning to use agentic AI to address some of the time-consuming and skills-intensive work involved in modernisation. These systems can autonomously plan and execute tasks, including dependency mapping, code conversion and documentation generation.
According to Kyndryl, 10% of organisations have deployed agentic AI in production for modernization. Early adopters reported stronger progress: 67% said they were ahead of or on track to meet their goals, compared with 51% of other organisations.
While these findings indicate potential benefits, wider adoption will depend on how effectively organisations integrate AI into their operating models and manage the risks associated with increasingly automated processes.
Modernization becomes a board-level responsibility
The report also highlights a shift in governance. CIOs and CTOs must balance AI adoption with cybersecurity, regulatory compliance, operational efficiency and business growth. Respondents identified nine stakeholder groups with influence over modernisation, including boards, finance teams and compliance functions.
This broader involvement makes coordination essential. Technology decisions must align with business strategy, financial priorities and regulatory obligations, without slowing implementation.
Sovereignty is adding another layer of complexity. Although 65% of organisations address sovereignty selectively or mainly through compliance, 63% expect sovereign cloud usage to increase. Another 55% anticipate that sovereignty and regulatory requirements will place greater demands on network architectures.
Hybrid environments remain central
Rather than converging on a single preferred platform, enterprise technology environments are becoming more distributed as organisations prepare for AI. Mission-critical applications are spread almost evenly across public cloud, private cloud, mainframe and on-premises environments.
This growing complexity reinforces the need for integrated governance, operational coordination and cyber resilience, particularly as AI-driven threats evolve.
Kyndryl’s findings suggest that successful modernization will depend less on eliminating legacy systems and more on connecting diverse technology environments to measurable business outcomes. Organisations must understand their existing dependencies, establish clear decision-making structures and deploy AI where it can accelerate progress without compromising security or operational stability.