Kyndryl | 2026 State of Modernization Report

Modernization is becoming a continuous business imperative

As enterprise technology and IT environments become more distributed and complex, organizations are modernizing to improve agility, accelerate innovation and build technology estates that can adapt to changing business needs.

Kyndryl’s 2026 State of Modernization Report examines how 2,000 business and technology leaders from around the world are approaching enterprise modernization, and what is helping — or hindering — their progress.

The research reveals a new modernization agenda shaped by AI, technology complexity, sovereignty and the need to continuously align applications, infrastructure and skills with business strategy.

Why enterprise modernization is changing

Modernization once meant moving from old technology to new. Today, the destination is less straightforward.

Enterprise technology environments have become more complex than ever before, with mission-critical applications distributed across mainframes, public and private clouds and on-premises infrastructure. Organizations need connected, secure and governed IT environments that can evolve as quickly as business demands. Yet nearly half of organizations report being behind on their modernization goals, and only 9% of organizations have fully mapped their business-critical applications and dependencies, underscoring the challenge of transforming increasingly distributed IT estates.

Modernization can’t wait for complexity to slow down. Success depends on making the entire technology estate work as one — securely, efficiently and with the flexibility to respond to change.

48%

of organizations report being behind on their modernization goals

Only 9%

of organizations have fully mapped their business-critical applications and dependencies

18%

are unclear on what value past modernization has delivered to their firms

5 modernization trends shaping the enterprise

1. Modernization is becoming a business capability

When it comes to modernizing, business leaders are placing emphasis on agility, innovation, scalability and control — but the real challenge is turning modernization investments into measurable business outcomes.

Only about half of organizations undergoing modernization report improved IT operations and nearly one in five (18%) say their modernization efforts have delivered limited or unclear value.

Realizing greater value requires a modernization strategy that extends beyond individual technologies and connects technology decisions across architecture, operations, finance, security and the workforce.

2. AI is reshaping IT modernization

AI is changing what organizations need from their infrastructure — and where modernization needs to happen.

AI ambitions are putting enterprise infrastructure to the test. With 82% of leaders reporting that AI is increasing demands on their network architecture, modernization is becoming critical to supporting what comes next.

As organizations scale AI, modernization strategies must account for the increasing demands on the systems that power the business.

3. Continuous modernization is gaining ground

Modernization has become an ongoing business priority, not a one-time technology project.

Today, 44% of organizations are making continuous modernization part of their operating model, compared with just 16% taking a “big-bang” approach.

Enterprises that have embraced a continuous modernization approach are gaining greater visibility across their IT estate and more confidence in their understanding of application dependencies.

4. Delaying modernization has measurable consequences

Postponing efforts to modernize your business's technology estate can create challenges that extend well beyond IT.

Nearly every organization surveyed has postponed a modernization project, with 44% reporting an inability to adopt new capabilities quickly, 43% citing higher long-term costs and 40% experiencing new security or compliance vulnerabilities.

Falling behind on technology can quickly result in falling behind on business priorities — and the longer business leaders wait to modernize, the harder it becomes to keep pace with change.

5. Agentic AI is emerging as a modernization tool

Agentic AI is starting to change how modernization gets done.

Organizations are beginning to use agentic AI to tackle time-consuming work that can slow modernization, including legacy estate discovery, documentation and code refactoring. Automated testing is emerging as a leading use case, with 43% turning to agentic AI to streamline testing.

Adoption remains early, but organizations leveraging agentic AI in modernization are one-third less likely to report being behind on their modernization goals than non-users.

Modernization requires visibility into the technology estate

Enterprises can’t modernize effectively without knowing what’s happening across the technology estate.

The average enterprise surveyed runs 383 business-critical applications, creating layers of dependencies and technical debt that can be difficult to uncover before modernization begins. These blind spots can slow progress and increase risk as undocumented dependencies and complex legacy integrations surface after work is already underway.

Greater understanding of the technology estate can help leaders make more informed modernization decisions and address risks before they become issues.

Modernization strategies must account for sovereignty

Data and operational sovereignty are reshaping where and how organizations run their most critical workloads.

Nearly two-thirds (63%) of organizations expect their use of sovereign cloud to increase, yet only 6% consider sovereignty principles from the outset of their broader transformation strategy.

As regulatory and operational requirements change, building sovereignty into modernization strategies early can give organizations greater flexibility over where their data and workloads reside.

37%

of organizations moved workloads back to mainframe

63%

of organizations expect their use of sovereign cloud to increase

Only 6%

consider sovereignty principles from the outset of their broader transformation strategy

From one-time projects to continuous modernization

Kyndryl’s 2026 State of Modernization Report points to a broader shift in how enterprises are approaching technology transformation.

Modernization is becoming a continuous business capability — one that brings technology decisions together to help organizations adapt faster and turn investments into real business value.