AI spending puts the squeeze on IT modernization, risking ROI
61% of organizations have paused or abandoned IT modernization to fund AI. The irony: AI could have accelerated those projects.
Why it matters
AI budget reallocation is forcing organizations to halt legacy modernization efforts, but the two are increasingly interdependent—misalignment between AI and modernization spending is creating strategic risk for enterprises trying to transform.
The key facts
11 to know61% of organizations paused, delayed, scaled back, or abandoned IT modernization in past 24 months (Ensono survey)
71% of modernization projects exceeded original budgets; 27% exceeded by 51% or more
Digital transformation budgets grew from $39.4M to $54.2M average in single year, mostly to AI projects (WalkMe report)
Only 17.5% of organizations have data infrastructure fully optimized for agentic AI readiness (SAS research)
CIOs redeploying spend from modernization toward AI due to competitive pressure and faster visible ROI promises
AI tools (code discovery, legacy cleanup) could cut modernization costs and timelines but remain underutilized
Modernization and AI capability are increasingly interdependent—data, integration, infrastructure, governance investments deferred for years now needed for AI outcomes
72% of modernization initiatives exceeded original budgets; 27% exceeded by 51% or more
Digital transformation budgets grew from $39.4M to $54.2M annually, with most new spend going to AI (WalkMe)
Budget reallocation to AI cited as major blocker for IT modernization by CIOs
AI tools can accelerate legacy code discovery and modernization, but most organizations haven't deployed them yet
Go to the source
CIOcio.com
Publisher excerpt: IT modernization remains a key pillar of CIOs’ strategic agendas, and even CEOs are coming around to the value that addressing legacy systems has in fueling transformation and innovation. Yet a solid majority of application and infrastructure modernization projects are failing to meet expectations,…