Canadian firms lag on IT modernisation, Kyndryl says

Kyndryl has published a report showing that many Canadian organisations are behind on IT modernisation. The findings place Canada among the markets facing stronger operational and budget barriers than the global average.

In Canada, 47% of organisations said they are behind on their modernisation goals. Respondents cited integration of legacy systems, budget constraints or approval delays, reluctance to change established processes, and limited technical-team capacity and resources as the biggest obstacles.

The Canadian results form part of a global study of 2,000 business and technology leaders across five continents and 12 industries. Across the full sample, nearly half of organisations were behind schedule on modernisation, and 98% had delayed modernisation and then experienced negative business effects.

Canadian respondents reported pressures that were more acute than those seen globally. Some 58% identified integrating legacy systems as one of their biggest modernisation challenges, while 57% cited budget constraints or approval delays, compared with 48% globally.

Resistance to organisational change was also more pronounced in Canada. The report found that 51% of Canadian organisations cited business reluctance to change established processes, compared with 39% globally, while 50% pointed to technical-team capacity and resource availability, versus 42% overall.

Mainframe focus

Despite those constraints, Canadian organisations reported relatively strong activity in one area of legacy technology. Some 73% are engaged in mainframe modernisation efforts, ahead of the global figure of 68%.

The report suggests organisations are not simply replacing older systems with a single newer environment. Instead, many are expanding technology use across mainframe, edge computing, private cloud, software as a service and network infrastructure as artificial intelligence reshapes investment priorities.

The need to adopt AI now ranks ahead of efforts to reduce spending, replace legacy systems or respond to a shrinking pool of legacy-systems expertise. Every organisation in the global survey with a mainframe said it plans to deploy AI on that platform.

This shift is creating more complex technology estates rather than simpler ones. Mission-critical applications are now spread relatively evenly across public cloud, private cloud, mainframe and on-premises systems, leaving technology leaders to manage a more hybrid operating model.

AI and execution

The research also examined the use of agentic AI in modernisation work. Some 10% of organisations have already deployed agentic AI in production for tasks such as dependency mapping, code conversion and documentation generation.

Those early adopters were more likely to report delivery progress. According to the survey, 67% of organisations using agentic AI in production said they were ahead of or on track with modernisation goals, compared with 51% of other organisations.

The report also highlighted a lack of visibility into existing systems as a structural problem. Just 9% of respondents said they fully understand their applications' dependencies, and one-quarter said they have large numbers of undocumented applications.

That lack of documentation and system knowledge may help explain why modernisation has moved beyond the IT department. Respondents identified nine separate stakeholder groups with control over modernisation decisions, including Chief Information Officers, Chief Technology Officers, boards of directors, finance teams and compliance teams.

The findings suggest this wider spread of decision-makers is making modernisation as much a business-governance issue as a technical one. Technology leaders are being asked to pursue AI adoption, cyber resilience, regulatory compliance, operational efficiency and business growth at the same time.

Geography and regulation are also influencing infrastructure choices. Kyndryl found that 63% of organisations expect sovereign cloud usage to increase, while 55% expect sovereignty and regulatory requirements to place greater demands on network architecture.

Martin Schroeter, Chairman and Chief Executive Officer of Kyndryl, said: "AI is creating new possibilities and raising expectations for the business outcomes technology should deliver. Modernization is about preparing for what comes next, and the leaders making the most progress are investing across their technology environments - strengthening resilience and putting those investments to work where they deliver the greatest value."