Singapore, 19 October 2026 — Nearly half of organisations in Asia-Pacific are falling behind on modernisation goals as artificial intelligence (AI) reshapes technology investment priorities, according to a report by Kyndryl. The findings from Kyndryl’s first global Modernization Report show that modernisation is becoming a broader business challenge, requiring organisations to coordinate investments across legacy infrastructure and newer platforms rather than focus solely on consolidating technology.
Based on insights from 2,000 business and technology leaders across five continents and 12 industries, with 30% of respondents based in Asia-Pacific, the report examines how AI is influencing infrastructure and application strategies while placing new demands on organisations’ operating models.
“Across Asia-Pacific, modernization is no longer a choice between investing in AI and strengthening the technology underneath it,” said Megawaty Khie, Vice President and Managing Director for ASEAN and Korea at Kyndryl. “Organizations need both. As technology environments become more distributed, the challenge is deciding where to invest, what to modernize and how to keep those environments secure, resilient and future ready.”
In Asia-Pacific, three modernisation priorities are equally ranked at 36%: enhancing performance, security and integration; improving business agility, innovation and scalability; and increasing control, predictability and governance. Enabling advanced AI capabilities follows closely at 34%.
AI is also influencing infrastructure decisions across the region. The report identifies it as the leading driver of increased mainframe and edge computing use, the second-largest driver of SaaS and private cloud expansion, and the primary reason organisations are upgrading their networks and application portfolios. All organisations with a mainframe reported plans to deploy AI on the platform, highlighting how established technology environments remain part of companies’ AI strategies.
Delayed Modernisation Brings Higher Costs
Despite these investment priorities, 49% of organisations in Asia-Pacific are behind schedule on their modernisation goals. The delays carry financial and operational consequences. Among organisations that postponed modernisation projects, 44% reported higher long-term costs, while 43% cited an inability to adopt new capabilities quickly. A further 38% reported new security or compliance vulnerabilities.
Agentic AI, which can autonomously plan and execute tasks, is emerging as a potential way to accelerate modernisation. However, adoption remains at an early stage, with 10% of organisations in Asia-Pacific using agentic AI in production for modernisation, in line with the global average. Current applications include dependency mapping, code conversion and documentation generation, tasks that typically require significant time and specialised skills.
Modernisation Moves Beyond IT
The report also highlights the growing number of stakeholders involved in modernisation decisions. Respondents identified nine distinct stakeholder groups with influence over these initiatives, ranging from chief information officers and chief technology officers to boards of directors, finance teams and compliance functions. This reflects the expanding responsibilities of technology leaders, who must balance AI adoption with cyber resilience, regulatory compliance, operational efficiency and business growth.
As modernisation becomes a board-level business decision, organisations face the challenge of coordinating a wider range of interests without slowing down implementation. The findings suggest that modernisation can no longer be managed solely as an IT programme. It requires coordination across business strategy, governance and operations, particularly as AI introduces additional considerations for security and resilience.
Sovereignty Shapes Infrastructure Decisions
Geopolitical developments and data sovereignty requirements are also influencing technology strategies across Asia-Pacific. According to the report, 37% of organisations in the region address sovereignty selectively when external requirements apply, while 26% consider it primarily through a compliance lens. Only 7% build sovereignty principles into enterprise transformation from the outset.
Nevertheless, 65% expect to increase their use of sovereign cloud regions or dedicated zones over the next year. The findings indicate that decisions about where technology operates are increasingly influenced by governance and geopolitical considerations alongside cost, performance and innovation.
Complexity Remains a Challenge
The report challenges the assumption that digital transformation will eventually lead organisations towards a single preferred technology environment. Instead, businesses are continuing to operate across distributed legacy and modern platforms, increasing the need for strategic, governance and operational coordination.
An integrated approach to cyber resilience is also becoming more important as AI-driven threats accelerate and expand. Together, the findings point to a modernisation agenda in which organisations must balance technology investment with business priorities, security requirements and the complexity of managing increasingly distributed environments.
