By Saibal Chakraborty, Managing Director & Partner, India Leader, Tech & Digital Advantage Practice, BCG; Sujith Vijayan, Director (Partner), BCG and Anshita Rajoria, Principal – Enterprise Architecture, BCG
India’s public sector represents a powerful lever for inclusive growth and national development, with significant opportunities to unlock value through technology-led transformation. However, many Indian PSUs still operate on time-tested systems such as COBOL, mainframes and decades old core systems.
Take COBOL, a 60-year-old programming language still powering critical government systems. With a shrinking pool of experts, maintaining these legacy platforms is increasingly costly and risky, slow time to market for new digital products and features with limited integration capabilities. While COBOL has served reliably, modern paradigms like microservices and cloud-native architectures offer far greater scalability, agility, and innovation potential. This highlights how legacy systems can hinder the delivery of key digital services to citizens.
At the same time, PSUs are losing market share to agile, digital-native startups that offer superior customer experiences such as frictionless onboarding and real-time engagement, particularly in sectors like banking, capital markets, and insurance.
While no PSU has yet cracked full-scale modernization, several private institutions offer a blueprint for what’s possible:
* In October 2023, Axis Bank launched ‘open by Axis Bank’, a digital banking platform aimed at providing a personalized and intuitive banking experience. This platform offers over 250 banking services, including instant account opening and real-time transaction capabilities
* A large private insurer in India built a cloud-native data lake to unify its customer data and power AI-driven underwriting, fraud detection, and hyper-personalized recommendations. The insurer now processes over 90% of claims digitally, with sub-minute decisions on select product lines
For PSUs, the urgency to embrace tech transformation is undeniable. The real challenge, however, lies in orchestrating large-scale change that balances operational continuity with the creation of new digital capabilities.
The challenge in tech transformation at PSUs
Embracing tech transformation might sound straightforward, yet these efforts are often far more complex for PSUs, which face unique constraints compared to private enterprises.
Several underlying issues exist, including a tech-only approach, insufficient governance, and an unclear strategy.
Monolith, siloed and fragmented systems lead to excessive bespoke development, data duplication, accumulating legacy technology debt and limiting cross-department collaboration, ultimately hindering efficiency
Current state architecture is outdated and lacks a modular, API-first, cloud ready, agile and platform-led architecture required to power new aged digital solutions
* Lack of key foundational enterprise capabilities such as an API Management Platform restrict ecosystem integration
* Data & AI Challenges – Lacks modern data platforms (e.g. Data Lake, Lakehouse) and a unified data strategy making AI/ML adoption difficult
* Lack of a cloud adoption policy restricts usage of cloud services
* Lack of best-in-class security practices, such as embedding security by design into transformation programs to ensure compliance and trust, while protecting critical infrastructure and citizen data
* Legacy infrastructure that lacks new age capabilities such as containerization and auto-scaling
* Legacy ways of working, such as the waterfall development methodology, severely limit the organization’s ability to deploy solutions quickly and adapt to evolving needs
* Vendor lock-in risks with no strategy for open-source tech adoption
Addressing these challenges can strategically enable PSUs to accelerate progress and deliver on their growing digital mandates with greater agility and resilience.
Priorities for PSUs on the path to modernisation
While transformation requires thoughtful investment and careful execution, a phased and strategic approach can ensure sustained outcomes with measurable impact.
A strategic, step-by-step transformation journey—grounded in enterprise priorities—can deliver sustainable value and measurable impact over time.
In our experience, the following 7 approaches will help PSUs incrementally prioritise modernisation while they build new capabilities in parallel leading to continuous delivery of value.
1. Define a clear tech transformation strategy by aligning technology goals with organisation strategy, identify key business drivers, assess current IT maturity and create a roadmap to meet transformation objectives
2. Assess core systems and modernize them using the right strategy i.e. adopt modular, API-first, cloud-ready solutions based on a modern tech stack e.g. move from COBOL to Java microservices or modularize insurance policy admin systems
3. Create shared platforms for re-use, architectural consistency and faster roll-out of services within the enterprise e.g. authentication, identity verification such as CKYC/e-KYC/Digilocker, payments etc.
4. Create a strong integration layer using API gateways, ESB’s and event brokers to enable integration between internal and external systems, seamless third-party integrations such as UIDAI, NSDL PAN, CERSAI and decouple front-end from the back-end
5. Modernize existing data platforms by creating a centralized Data Lake or a Lakehouse and expose aggregated datasets as data products within the organization for re-use e.g. for AI/ML and data-warehouse. Implement MDM capabilities and build reporting and advanced analytics capabilities. Consider introducing a GenAI orchestration layer to enhance operations such as customer support, but prioritize building foundational capabilities first to ensure scalability, governance, and long-term value
6. Strengthen cybersecurity and compliance by adopting a zero-trust security architecture, implementing security tools and platforms such as IAM, SIEM, DLP, endpoint protection, HSM, tokenization solutions and secure coding practices. Ensure compliance with UIDAI, SEBI, IRDAI, RBI, DPDP and MeitY guidelines through regular audits.
7. Implement a best-in-class Cloud-Native Infrastructure and DevSecOps by automating build, test and deploy pipelines and embedding security scans in these pipelines, using cloud-native tools such as containers to deploy digital applications orchestrated using Kubernetes clusters, to ensure scalability, resilience, and agility
The experiences of early adopters show that while the challenge is considerable, the tools and methodologies to overcome these issues are now well-developed-–from cloud native architecture and migration frameworks to API-based integration patterns.
The rewards for successful transformation are considerable: faster, more reliable, and secure systems, the ability to launch new digital services in weeks rather than years, and rich data insights driving policy and decision-making.
The road ahead
Tech transformation in PSUs can shape a paradigm shift in governance. The public sector can drive innovation by deploying a structured, strategic approach to transformation. As India advances toward a $30 trillion economic vision, the technological readiness of these critical assets will determine national competitiveness on the global stage.
The journey may be challenging, but the goal—a self-reliant, technologically empowered nation—is well within reach.