Kyndryl Report: AI Forces Shift in Corporate Modernization Strategies

The research highlights a significant departure from the assumption that digital transformation would naturally lead toward unified, singular technology environments. Instead, the push for AI is driving a surge in hybrid infrastructure, with mission-critical applications distributed across public and private clouds, mainframes, and on-premises systems. This increasing complexity leaves nearly half of all companies trailing their original modernization timelines.

Agentic AI is emerging as a critical tool for breaking this cycle. While only 10% of firms currently use agentic AI in production, those that do are significantly more likely to remain on schedule. By automating labor-intensive tasks like dependency mapping and code conversion, these early adopters are outpacing peers who remain mired in technical debt. The challenge remains acute: only 9% of organizations possess a complete understanding of their application dependencies, while one-quarter struggle with large inventories of undocumented software.

Modernization has effectively migrated from the IT department to the boardroom, involving at least nine distinct stakeholder groups in every major decision. This shift is further complicated by geopolitical factors, as 63% of organizations expect sovereign cloud usage to rise, forcing leaders to balance performance and cost against strict regulatory and governance requirements. As AI-driven threats grow, the focus has moved beyond mere hardware replacement toward building resilient, integrated operational frameworks.