Risk-Adjusted ROI Model for Modernization Projects

vFunction has identified app modernization as a critical challenge in the third wave of cloud adoption, focusing on transforming legacy IT systems into microservices to enhance scalability and engineering efficiency. Despite the urgency, over 70% of these projects reportedly fail, often taking longer and costing more than anticipated, leaving executives in a predicament: modernize and risk failure or refrain and risk obsolescence. However, vFunction argues that integrating AI and automation can significantly mitigate these issues, reducing costs by 50%-66% and accelerating project completion by 10x-15x, while also lowering the risk of failure. They present a model indicating that a medium-sized project, typically costing $1.8 million with a 30% success rate, could be completed for $850,000 with a 90% success rate using AI, offering a 700% return on investment. This approach not only transforms the financial and temporal dynamics of modernization but also provides a strategic pathway for executives to undertake necessary updates with greater confidence and reduced risk.