New York – October 01, 2026 -- Kyndryl (NYSE: KD) found that 98% of organizations that delayed technology modernization experienced negative business impacts, according to the company's first global Modernization Report released today. The study, based on responses from 2,000 business and technology leaders across five continents and 12 industries, shows nearly half of organizations are behind schedule on modernization goals even as AI adoption becomes the dominant investment driver.
AI adoption now outranks cost-cutting as the top modernization driver
The report found that the need to adopt AI now outranks priorities to reduce spending, replace legacy systems, or address a shrinking pool of legacy-systems expertise. AI is the leading driver of increased mainframe and edge computing use, the second-biggest driver for SaaS and private cloud expansion, and the top reason organizations are upgrading networks and application portfolios. Every surveyed organization with a mainframe reported plans to deploy AI to that platform.
Agentic AI adopters report faster modernization progress
Ten percent of organizations have deployed agentic AI in production for modernization tasks, including dependency mapping, code conversion and documentation generation. Among these early adopters, 67% said they are ahead of or on track with modernization goals, compared with 51% of other organizations. Lack of visibility remains a bottleneck: just 9% of respondents said they fully understand their applications' dependencies, and one-quarter reported large numbers of undocumented applications.
Modernization decisions now require sign-off from nine stakeholder groups
Respondents identified nine distinct stakeholder groups with control over modernization decisions, spanning CIOs, CTOs, boards of directors, and finance and compliance teams. Kyndryl's findings indicate modernization has shifted from an IT-department function to a board-level business decision requiring coordination across multiple functions without slowing execution.
Sovereignty rules are reshaping network and cloud architecture choices
Sixty-five percent of organizations address data sovereignty selectively or primarily through a compliance lens, while 63% expect sovereign cloud usage to increase. Fifty-five percent anticipate sovereignty and regulatory requirements will place greater demands on their network architectures, indicating that geopolitical and governance considerations are increasingly dictating where technology workloads run alongside cost and performance factors.
Enterprise IT environments are growing more distributed, not less
Mission-critical applications are now distributed almost evenly across public cloud, private cloud, mainframe and on-premises environments. Kyndryl's data challenges the assumption that digital transformation would consolidate organizations onto a single preferred technology environment, finding instead that AI readiness is driving greater hybrid complexity across infrastructure.
"AI is creating new possibilities and raising expectations for the business outcomes technology should deliver," said Martin Schroeter, Chairman and CEO, Kyndryl. "Modernization is about preparing for what comes next, and the leaders making the most progress are investing across their technology environments."