How AI is Slashing IT Modernization Costs by Nearly Half

Legacy IT systems are no longer just an "IT problem"—they're becoming the biggest roadblock to business transformation. With 70% of Fortune 500 software built over 20 years ago, companies are discovering that generative AI agents can dramatically reduce both the cost and timeline of modernizing these aging systems.

The Business Case for AI-Powered Modernization

Traditional IT modernization has been prohibitively expensive, often requiring hundreds of millions of dollars and 5-7 years to complete. But McKinsey's research shows that AI is changing this equation. A transaction processing system that would have cost over $100 million to modernize three years ago now costs less than half that amount using generative AI.

The impact goes beyond cost savings. Companies using AI agents for modernization are seeing:

• 40-50% faster completion timelines
• 40% reduction in technology debt costs
• Improved output quality compared to traditional approaches

The Multi-Agent Revolution

The breakthrough isn't coming from simply translating old code into modern languages—that just moves technical debt into a new system. Instead, companies are deploying hundreds of specialized AI agents that work together on end-to-end modernization processes.

These AI agents can:

• Translate legacy documentation into plain English process descriptions in minutes
• Perform data analysis, security design, and quality assurance autonomously
• Collaborate with human experts to determine what processes actually create business value

One banking company used orchestrated AI agents to modernize 20,000 lines of mainframe code, cutting the estimated 700-800 hour timeline by 40%. The relationship-mapping step alone went from 30-40 hours to just 5 hours.

Building Your AI Modernization Capability

Success requires moving beyond individual AI tools to create what McKinsey calls a "factory" approach—standardized capabilities that can tackle multiple modernization challenges simultaneously. Companies should focus on their biggest, most expensive IT problems rather than small-scale initiatives.

The key is connecting modernization efforts directly to measurable business value, not just converting code. As one CIO noted: "I don't want one tool to solve one problem; I need a capability to solve hundreds of problems."