Cloud Modernization: What It Is, Why You Need It & How to Get It Right

The numbers speak volumes: 90% of companies that prioritize cloud modernization report major improvements in operational efficiency. With the public cloud computing market also set to hit $723 billion this year, moving your legacy systems to modern cloud environments has become essential for staying competitive.

Your existing systems likely contain valuable business logic built over years of operation. Cloud modernization allows you to preserve this value while gaining access to:

• Greater scalability to meet changing demands
• Enhanced security features and compliance capabilities
• Cost optimization through pay-as-you-go models
• Faster innovation cycles and deployment.

This guide walks you through what cloud modernization really means for your organization, how it differs from simple migration, and practical steps to implement it successfully in your business context.

What is cloud modernization?

Cloud modernization is the process of updating your legacy IT systems and applications to leverage cloud technology and architecture. This goes beyond simply moving existing systems to the cloud. It involves rethinking, redesigning, and sometimes rebuilding applications to take full advantage of cloud capabilities.

At its core, cloud modernization transforms your traditional infrastructure and applications into cloud-native assets. This transformation typically includes:

• Adopting microservices architecture to replace monolithic applications
• Implementing containerization for greater flexibility and resource efficiency
• Integrating DevOps practices for faster development cycles
• Utilizing automation for improved reliability and reduced manual tasks.

For most businesses, modernization happens in phases rather than all at once. You might start by identifying which legacy systems most urgently need updating, then develop a roadmap for transforming them while minimizing disruption to daily operations.

The level of modernization varies based on your business needs. Some applications might require complete rebuilding as cloud-native solutions, while others might benefit from less intensive approaches like replatforming or refactoring.

Successful cloud modernization aligns your technology with your business goals. It enhances performance, reduces costs, improves security, and provides the agility needed to respond to market changes.

Cloud modernization vs migration: What’s the difference?

While often used interchangeably, cloud modernization and migration represent two distinct approaches to opening up your legacy systems to the cloud.

Cloud migration is when you migrate legacy applications and data to cloud infrastructure with minimal changes to the underlying architecture. Think of it as relocating your systems without renovating them.

Cloud modernization, on the other hand, involves transforming your applications to take full advantage of cloud capabilities through redesign, refactoring, or rebuilding.

Here's how they compare:

Many organizations benefit from a hybrid approach, like that possible with OpenLegacy Hub, which combines elements of both strategies:

• Wrap existing legacy assets with APIs for quick wins
• Modernize high-priority systems first while maintaining others
• Create integration points that work in both environments
• Gradually transform systems based on business priorities

This incremental approach lets you begin your cloud journey immediately while minimizing risk to regulatory compliance and business continuity. You can maintain critical legacy functions while progressively building your cloud-native capabilities.

Common legacy modernization approaches

Today, there are seven common legacy system modernization approaches, which are known as the “seven Rs.”

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Replace

This approach to legacy software modernization involves abandoning the legacy system entirely and replacing it with a modern solution. This could, for example, mean ditching your legacy in-house accounting software and switching to something like NetSuite ERP. This requires hefty tasks like data migration and system onboarding.

Replatform

A popular form of legacy app modernization, replatforming is when you port an application’s components to a new runtime platform. This involves a minimal amount of code alterations by way of an API integration platform. Developers can adapt applications to the new platform with relative ease. Replatforming lets businesses maintain their tech ecosystem with reduced infrastructure costs, greater scalability, and improved performance in all areas.

Rehost

Rehosting is when you deploy your legacy systems in a new and modern environment. This could be hosted privately, on a public or hybrid cloud, or physically hosted on-premises. This lift-and-shift approach to modernizing legacy applications allows for quicker migration to services like Google Cloud Platform (GCP).

Refactor

Refactoring involves adding new technologies to the various tiers of your business systems. It requires heavy backend work but keeps things straightforward for the end-user. It’s also less disruptive than legacy system modernization approaches like complete replacements or rewrites. Code changes and optimization allow components of your legacy systems to be connected to cloud-based environments.

Rebuild

Rebuild is—as the name suggests—starting from scratch and building a completely new and modern enterprise system. This involves a heavy upfront investment. Full application development also comes with a lot of disruption.

However, the end result is ultimately rewarding. You’ll gain access to modern DevOps technologies like containers, microservices, and declarative APIs. These are the tools that will reap the most significant benefits for your organization.

Rearchitect

The penultimate of the common legacy modernization techniques, rearchitecting means making the shift to new application architecture. You can alter the application code to access the greater capabilities of a new platform. For example, access real-time data streams for more accurate predictive analytics. This involves migrating your legacy system from internal infrastructure to a modern alternative.

(W)Rap or encapsulate

You may also choose to wrap your existing legacy component in access layers with APIs. This means minimal code changes and the rapid deployment of legacy modernization services. Encapsulation allows you to leverage the solutions you already have and extend their features and value.

Why is cloud modernization important? Potential cloud modernization benefits

Greater agility

Nothing helps an organization keep or increase its market share like superior business agility. Modernizing your legacy applications ensures you can achieve rapid time to market (most likely faster than the competition). Switching to a cloud-based architecture lets DevOps and QA teams rapidly test and deploy applications as and when needed.

Increased productivity

Most legacy apps are a product of their time. This means slow and clunky user interfaces and a poor user experience compared to the modern solutions available today.

The right cloud modernization solutions can improve the overall user experience. Your teams will be empowered with more efficient workflows, which are boosted by intuitive interfaces and application dashboards.

Better data streaming also allows you to more effectively implement things like machine learning and AI for analytics and reporting, and modernized apps play better with automation tools and their associated programming languages.

Remember, every time you eliminate redundant, manual tasks, you save your team members time, so they can focus on more important and skilled jobs where their talents are not wasted.

Reduced costs

Modern and updated business tools may require an upfront investment of time and money; when used properly, though, they will always help your organization reduce costs. Many cloud-native platforms (i.e., Kubernetes) allow you to use containers or microservices on demand to minimize your resource spending.

Instances are created only when needed and returned as quickly as they were allocated. This means you don’t need to worry about a resource pool of reserves. App customization can also help eliminate license fees and/or subscription fees for legacy software.

Another major saving made possible by the right cloud modernization solution comes in the area of your IT infrastructure. As you modernize the code of your legacy systems, you’ll be able to wean them off expensive in-house solutions. This means you can reduce your IT footprint by becoming serverless. You also won’t need to rely as much on highly specialized (and costly) team members.

Improved customer experience

When you implement a modernization strategy, it’s not only your organization that benefits; your customers also reap the rewards of upgrades and cloud adoption for legacy applications.

When it comes to software development, things like low-code mobile apps and flexible APIs will give them more robust products with faster response times.

Cloud modernization challenges

Even with clear benefits, cloud modernization comes with substantial challenges. Being aware of these potential roadblocks helps you develop a more effective strategy:

• Legacy system complexity: Older systems often lack documentation and may contain interdependencies that aren't immediately apparent, making modernization more complex than anticipated.
• Data migration and integrity: Moving data between environments while maintaining accuracy, completeness, and security presents significant technical hurdles.
• Skills gap: Your IT team may lack experience with cloud-native technologies, containerization, microservices, and DevOps practices necessary for successful modernization.
• Business continuity: Maintaining operations during transition requires careful planning to avoid service disruptions that could impact customers and revenue.
• Security and compliance: Cloud environments introduce new security considerations and may affect how you maintain compliance with industry regulations.
• Cost management: Without proper governance, cloud costs can quickly exceed expectations, especially if applications aren't optimized for cloud efficiency.
• Organizational resistance: Teams accustomed to legacy systems may resist changes to workflows, tools, and processes they've used for years.
• Vendor lock-in: Some modernization approaches may tie you to specific cloud providers, making future transitions difficult or expensive.
• Technical debt accumulation: Quick fixes during modernization can create new technical debt if not carefully managed.
• Integration complexity: Ensuring modernized systems work seamlessly with remaining legacy applications requires robust integration planning.

Addressing these challenges requires a comprehensive approach that combines technical expertise, business process analysis, and change management strategies.

Examples of real-life applications of cloud modernization services

Let's explore some hypothetical examples to show how the concepts we've discussed translate into practical implementations that deliver tangible benefits:

A financial services company

A regional bank with core banking systems built in the 1990s faces increasing maintenance costs and difficulty meeting regulatory requirements. Their cloud modernization journey may involve:

• Creating APIs to access core banking functions without disturbing the underlying system
• Gradually refactoring customer-facing applications to cloud-native microservices
• Building a new data layer that connects legacy databases with cloud data warehouses

The process allows them to develop new features more efficiently while maintaining the stability of their critical banking operations.

A healthcare provider network

A healthcare organization struggles with patient record systems that can't easily share information between facilities. Their modernization approach may include:

• Replatforming their patient management system to a cloud environment
• Implementing a secure API gateway to enable safe data sharing
• Developing cloud-native applications for patient engagement

This phased approach allows them to maintain critical healthcare services while gradually improving their technological capabilities and patient experience.

A manufacturing company

A mid-sized manufacturer relies on legacy ERP systems that can't scale to meet growing demands. Their cloud modernization strategy might involve:

• Breaking their monolithic ERP into microservices for inventory, ordering, and production
• Creating a modern cloud-based interface while maintaining core business logic
• Implementing IoT integration for production monitoring

The company can maintain operations throughout the transition while gaining the ability to adapt more quickly to supply chain challenges.

A retail chain

A retail business with outdated point-of-sale and inventory systems may modernize to meet changing consumer expectations by:

• Rearchitecting their inventory system to enable store-wide stock visibility
• Developing cloud-based mobile applications for associates
• Creating APIs to enable omnichannel shopping experiences

This approach can help them transform customer experiences while preserving the reliability of their core business systems.

How to make a success of your cloud modernization strategy: A cloud modernization framework

Success in cloud modernization doesn't happen by accident. Follow these four key steps to transform your legacy systems while minimizing risk and maximizing business value:

1. Evaluate and plan

Start by taking stock of your current IT capabilities. This means identifying all your applications, their interdependencies, and how critical each one is to your business operations.

Ask these key questions during your assessment:

• Which applications could deliver the most value if modernized?
• What technical debt exists in your current systems?
• Which legacy applications face end-of-life or support issues?
• What security vulnerabilities need addressing?

Create an application portfolio that categorizes each system based on business value and modernization complexity. This helps you prioritize which applications to tackle first.

Next, define clear business objectives for your modernization efforts. Are you aiming to reduce costs, improve customer experience, accelerate time-to-market, or enhance security? Your goals will shape your modernization approach.

Develop a realistic timeline that accounts for your business cycles and available resources. Most successful modernization initiatives follow a phased approach rather than attempting a complete overhaul all at once.

Finally, establish measurable KPIs to track your progress. These might include deployment frequency, lead time for changes, mean time to recovery, and change failure rate.

2. Implement incrementally

Start small and build momentum. Choose a non-critical application with high modernization potential for your first project. This lets you test your approach while limiting business risk.

Break your modernization journey into digestible phases:

• Phase 1: Quick wins that demonstrate value (API creation, simple replatforming)
• Phase 2: Moderate complexity projects (refactoring, partial rebuilds)
• Phase 3: Complex transformations (complete rebuilds, major rearchitecting)

Adopt an agile approach with short sprints that deliver functional improvements. This creates visible progress and allows for course correction based on what you learn.

Consider the "strangler fig" pattern for modernizing complex applications. This involves gradually replacing specific functions of a legacy system while keeping the overall system running. With each function you modernize, the legacy system's footprint shrinks until it can be fully decommissioned.

Maintain parallel environments during transition periods. This gives you a fallback option if issues arise and helps minimize disruption to your business operations.

Document everything you learn during early implementations. These insights will prove invaluable as you tackle more complex modernization efforts in later phases.

3. Use the right cloud modernization software or solutions

Your choice of cloud modernization tools can make or break your modernization efforts. The right solutions simplify complex processes and help you avoid common pitfalls.

Look for platforms that offer these key capabilities:

• API management to connect legacy systems with modern applications
• Containerization tools to package applications for cloud deployment
• Automated testing to ensure functionality remains intact
• Monitoring systems to track performance across environments

Consider your team's technical expertise when selecting tools. Some platforms require specialized knowledge, while others offer low-code options that reduce the learning curve.

Evaluate vendor lock-in risks carefully. Solutions that support multiple cloud providers give you more flexibility as your needs evolve. This becomes especially important if you operate in a multi-cloud environment.

For complex legacy systems, specialized modernization platforms can help bridge the gap between old and new technologies. These tools often provide connectors for legacy databases and automated code conversion capabilities.

Security should be built into your modernization toolset from the start. Look for solutions with strong access controls, encryption, and compliance features relevant to your industry.

4. Continually optimize and improve

Your cloud modernization journey doesn't end with deployment. Cloud environments offer unprecedented flexibility to refine and enhance your applications over time.

Implement robust monitoring across your modernized infrastructure. Track performance metrics, resource usage, and user experience data to identify opportunities for improvement.

Set up a regular review cycle for your cloud applications:

• Monthly: Review performance data and user feedback
• Quarterly: Evaluate cost optimization opportunities
• Annually: Reassess your modernization roadmap

Take advantage of cloud-native scaling features. Configure your applications to automatically adjust resources based on demand patterns, helping to control costs while maintaining performance.

Stay current with cloud platform updates. Cloud providers continuously improve their offerings, and keeping pace with these changes ensures you benefit from new capabilities and security enhancements.

Create a culture of continuous improvement within your teams. Encourage regular knowledge sharing about cloud best practices and celebrate successful optimizations.

Finally, consider establishing a Cloud Center of Excellence (CCoE) within your organization. This cross-functional team can develop standards, share knowledge, and drive ongoing optimization efforts across all your cloud initiatives.

Cloud modernization helps accelerate your digital transformation

Cloud modernization sits at the heart of successful digital transformation. When you modernize your legacy systems, you remove the technical barriers that often slow innovation and limit your ability to respond to market changes.

The benefits extend far beyond IT efficiency. Modern cloud-native applications provide the foundation you need to implement advanced capabilities like:

• AI and machine learning for data-driven insights
• IoT connectivity for real-time monitoring and response
• Advanced analytics for better business decisions
• Omnichannel experiences for customers and employees.

Your modernized applications become enablers rather than constraints. They allow you to quickly test new ideas, gather feedback, and iterate—essential capabilities in today's fast-moving business environment.

The incremental approach outlined in this framework helps you balance immediate business needs with long-term transformation goals. You can maintain stability in critical systems while progressively building your digital capabilities.

Keep in mind that cloud modernization is both a technical and organizational journey. Success requires alignment between your technology investments and business objectives, supported by teams empowered to work in new ways.

By systematically addressing your legacy constraints through thoughtful modernization, you position your organization to thrive in an increasingly digital future.

Cloud modernization FAQs

Why modernize applications?

Modernizing legacy applications allows you to take a step toward your end goal. Rather than having to completely replace every business tool at once, you can prioritize and triage which areas of the business to modernize. For many organizations, the overarching aim is to completely migrate every business process to cloud-native applications and platforms.

Modernizing applications improves their effectiveness. At the very least, you know they won’t become obstacles to improved performance and adoption. Of course, whether in-house or outsourced, you can only persist in using legacy software for so long. The future replacement of existing business applications is a one-hundred-percent certainty.

Why are enterprises moving to cloud technologies?

Enterprises are moving to reap the benefits of a cloud environment. Shifting legacy systems to cloud services and artificial intelligence gives businesses improved agility that helps them rise above the competition. A digital transformation to cloud computing also improves the UX and reduces IT and operational costs.

What are the main benefits of cloud modernization?

Cloud modernization delivers enhanced agility that helps you deploy new features faster and respond quickly to market changes. You'll typically see significant cost optimization by switching from fixed capital investments to pay-as-you-go models that align with your actual usage. 

The improved security comes from access to advanced protection features and automated updates, while better scalability lets your resources expand or contract automatically based on demand. Many organizations also report increased reliability through built-in redundancy and improved customer experiences thanks to faster, more responsive applications.