IDC research reveals that organizations achieving the strongest AI and business outcomes invest nearly three times more of their IT budgets in modernization than their least mature peers.
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Every organisation wants AI outcomes. Faster decisions, sharper insights, leaner operations. Yet across the Australian enterprise landscape, a clear pattern is emerging, and it has little to do with who ran the flashiest pilot or stood up the most proofs of concept.
IDC's latest research points to a different differentiator. The organisations pulling ahead aren't the ones experimenting hardest with AI. They're the ones investing hardest in modernisation. That distinction matters, because it reframes AI success as a question of foundations rather than ambition.
The Most Important Number in AI Readiness
Here's the number worth remembering. IT Modernisation Experts allocate 53% of their IT budget to modernisation. Explorers, the least mature group, allocate just 19%.
That's nearly three times the commitment. And it turns out funding is one of the clearest indicators of modernisation maturity we have. It's easy to talk about transformation. It's harder to fund it consistently, year after year, rather than in the occasional burst tied to a single project.
The gap tells a story. Experts don't treat modernisation as a line item they trim when budgets tighten. They treat it as the engine that makes everything else, AI included, possible.
53% vs. 19%: The Modernisation Investment Gap
For mainframe organisations in banking, insurance, and government, this framing is especially useful. Your core systems run the business. The question isn't whether to modernise them, but whether your investment matches the outcomes you expect from them.
Where Modernisation Leaders Are Investing
So where does that 53% go? Leaders spread their investment across a coordinated set of priorities, rather than chasing one shiny capability at a time.
- Cybersecurity and resiliency. Improving reliability, uptime, and resilience is the top driver of modernization strategies. Security and risk remain the single largest barrier to progress, so leaders build protection into every layer from the start.
- IT governance and compliance. With DORA, PCI, and evolving local mandates raising the bar, mature organizations bake governance into modernization rather than bolting it on later.
- AI-capable infrastructure. Foundations that can handle modern workloads and scale with demand, so AI has somewhere solid to run.
- Data modernisation. Unlocking the value of data is a primary driver for nearly half of organizations, and it underpins every downstream AI ambition.
- Agentic AI-enabled DevOps. Applying AI to code analysis, translation, and transformation to accelerate delivery without disrupting operations.
- IT automation and AIOps. Automating maintenance and detection to free skilled teams for higher-value work.
The common thread is coordination. These aren't isolated bets. They reinforce one another, and that's precisely why the returns compound.
The Business Results
Investment is only worth discussing if it delivers. It does. Organisations making these modernization investments see measurable gains that speak directly to the metrics leadership cares about.
IT Modernisation Experts report:
- 25% improvement in employee productivity
- 24% improvement in business agility
- 24% improvement in operational efficiency
These aren't marginal upticks. For an enterprise measuring cost, throughput, and speed to market, improvements of this scale are the difference between keeping pace and setting it. This is the evidence that modernization isn't a cost centre. It's a return-generating strategy.
Data Is the New AI Bottleneck
If there's a single constraint that separates AI leaders from everyone else, it's data. AI depends on access to trusted, governed, accessible information. Without it, even the most capable model produces results you can't stand behind.
The maturity gap here is stark. Experts extract 59% of the potential business value from their data. Explorers manage just 22%. Same raw material, vastly different value.
The accessibility gap is just as telling. Experts achieved a 27% increase in the internal data available to AI models over the past year, compared with 14% among Explorers. More trusted data, flowing to the right models, producing outcomes you can act on with confidence.
For organisations running decades of business logic on IBM Z®, this is the opportunity. That data is a genuine asset. The task is making it accessible and governed, so AI can draw on it safely rather than working around it.
Preparing for the Agentic AI Era
The next wave is already reshaping requirements. Agentic AI changes what infrastructure needs to deliver, raises the bar on security, and shifts the skills your teams need.
None of this favours the unprepared. Organisations with mature foundations, coordinated investment, solid data, and embedded security, are positioned to absorb the next wave rather than scramble after it. Those still funding modernization at 19% will find the gap widening beneath them.
Skills matter here too. Talent shortages remain a stubborn challenge, particularly around specialised platforms. Leaders address this by investing in people and automation together, extending the reach of the experts they already have.
The Question Worth Asking
The AI readiness gap is quietly becoming a competitive gap. Organisations that modernise consistently are seeing stronger AI outcomes and stronger business outcomes, and the distance between them and everyone else keeps growing.
The question is no longer whether to modernise. It's how mature your modernisation strategy really is, and whether your investment reflects the outcomes you expect. On that measure, 53% and 19% tell you almost everything you need to know.
Take the Modernisation Index assessment—built by IDC, five questions, five minutes—to benchmark your organisation's readiness and identify opportunities for improvement. The assessment evaluates your organisation across the same core modernization dimensions highlighted in the IDC research, and when you're done, you'll get a personalised report showing your modernisation maturity. It's a clear, practical starting point for the journey ahead.
Assess Your Organization’s IT Modernisation Maturity | Rocket Software
