Kyndryl VP: Canadian firms face barriers to modernising for AI

Almost all Canadian organisations have delayed a modernisation project, and nearly half are behind on their goals, according to Kyndryl, whose Canadian modernisation lead said ambition is not what is holding them back. Budget constraints, resistance to change and technical capacity are the barriers, with Canadian respondents reporting higher levels of each than the global average.

Kyndryl's first State of Modernization Report, published on 1 October, draws on a survey of 2,000 business and technology leaders worldwide. The company supplied a Canadian cut of the data, which shows that 98 per cent of Canadian organisations have delayed a modernisation project and virtually all experienced negative consequences. Comparatively, some 47 per cent are behind on their modernisation goals.

Umair Dinarwala, Kyndryl's Vice President, Modernisation and AI, who leads the AI service line for Canada, said his conversations with Canadian clients closely match the global findings.

His team works with clients on hybrid cloud, covering private and public cloud, application modernisation, data and AI, and connects them rather than treating each separately.

Dinarwala said modernisation is not new, but the scaling of AI in the enterprise and changing economic demands have made it more urgent. The report supports this, finding that the need to adopt AI now outranks priorities like cutting spending or replacing legacy systems.

Kyndryl's Canadian data names AI as the leading driver for application modernisation, network modernisation, edge computing growth and increased mainframe usage. Some 75 per cent of Canadian respondents said AI is increasing their network architecture requirements.

The most common consequences of delay among Canadian organisations were an inability to adopt new capabilities quickly, cited by 48 per cent, and higher long-term costs, cited by 43 per cent. Talent retention and attraction challenges were cited by 31 per cent and new security or compliance vulnerabilities by 29 per cent.

Canadian organisations are actively modernising, Dinarwala said. Mainframe activity is ahead of the global average, with 73 per cent of relevant Canadian respondents undertaking modernisation compared with 68 per cent on the global stage. Looking ahead, 34 per cent plan cloud modernisation and 41 per cent plan application modernisation over the next year.

Canadian leaders report heavier barriers than their global peers. 57 per cent of Canadian respondents cited budget constraints or approval delays, compared with 48 per cent overall. 

Sovereignty is a growing factor in modernisation strategies. In the report's section on the issue, 61 per cent of Canadian respondents said they address it mainly through a compliance lens, compared with 74 per cent in the United States.

"Sovereignty is not just about, 'Hey, my data needs to reside in the country.' It's more about how do I control the data and how can I protect my data. That's the most important part of it," said Dinarwala. "Organisations in Canada understand the fact that sovereignty is an important driver, and they're looking at that aspect of it. But they're also looking at how does that balance between your business outcomes as well... You don't want to have sovereignty or data residency slowing you down."

Dinarwala said ambition has to align with budget, and that Canadian organisations reported more funding constraints than the global figure. When modernisation changes technology and ways of working, resistance to change follows, and organisations feel they lack the capacity and technical scale to execute. He said modernisation goes beyond technology and platform upgrades to a cultural shift and organisational change management.

Visibility is another gap. Dinarwala said only 9 per cent of organisations globally fully understand their application dependencies, a figure he called surprising because modernising is difficult without knowing what you have. In Canada, the figure is 18 per cent, according to Kyndryl's data.

Dinarwala said organisations should treat modernisation as an evolution driven by business outcomes, not a single project.

"There's no limitation or any concerns around ambition in Canada. There's a lot of ambition for modernisation in Canada. There's a lot of talent out there in Canada as well. It's more about how organisations can prioritise and build a culture around continuous modernisation."