98% of organisations delayed modernisation and felt the impact, Kyndryl Report finds as AI raises the stakes

Kyndryl released its first global Modernisation Report, drawing on 2,000 business and technology leaders across five continents and 12 industries. Its central finding is that as companies invest across both legacy and modern platforms, modernization increasingly demands business orchestration rather than technology consolidation.

“AI is creating new possibilities and raising expectations for the business outcomes technology should deliver,” said Martin Schroeter, Chairman and CEO of Kyndryl. “Modernization is about preparing for what comes next.”

AI now outranks cost-cutting and legacy replacement

According to the report, the need to adopt AI now ranks above reducing spending, replacing legacy systems or addressing a shrinking pool of legacy-skills expertise. The report finds AI is:

The top driver of increased mainframe and edge computing use.
The second-biggest driver of SaaS and private cloud expansion.
The leading reason organizations are upgrading their networks and application portfolios.

Every organisation with a mainframe now plans to deploy AI on the platform, the report says.

Agentic AI offers a faster route

Agentic AI, which can autonomously plan and execute tasks, is emerging as a way to speed things up. Ten percent of organisations have deployed it in production for modernization, applying it to time- and skills-intensive work such as dependency mapping, code conversion and documentation.

Early adopters are doing better: 67% said they are ahead of or on track with modernization goals, compared with 51% of other organizations.

What is slowing leaders down

Visibility is a major obstacle. Just 9% of respondents said they fully understand their applications’ dependencies, and one-quarter reported large numbers of undocumented applications.

Modernisation is now a boardroom decision

The findings add to the pressure on CIOs, who must advance AI adoption, cyber resilience, regulatory compliance, operational efficiency and business growth at once. Respondents named nine distinct stakeholder groups with control over modernization, from CIOs and CTOs to boards of directors and finance and compliance teams.

Modernisation has outgrown the IT department, the report concludes, and organizations must coordinate decisions across more stakeholders without losing speed.

Geopolitics joins cost and performance

Sovereignty is becoming a bigger factor in strategy. While 65% of organizations address it selectively or mainly as a compliance matter, 63% expect their use of sovereign cloud to rise, and 55% expect sovereignty and regulatory requirements to place greater demands on their network architectures. Where technology runs is increasingly shaped by governance and geopolitics alongside performance, cost and innovation, the findings suggest.

The single-platform future is not arriving

The research challenges the long-held assumption that digital transformation would steer organizations toward one preferred technology environment. Instead, environments are growing more distributed as companies prepare for AI. Mission-critical applications are spread almost evenly across public cloud, private cloud, mainframe and on-premises systems, creating an increasingly hybrid enterprise.

That complexity calls for strategic, governance and operational coordination, the report says, including a more integrated approach to cyber resilience as AI-driven threats accelerate and broaden.