AI is accelerating enterprise IT modernization, but rising costs and continued reliance on legacy systems are complicating those efforts, according to new Ensono research, which found that 71% of organizations have exceeded their original modernization budgets.
The State of IT Modernization Report 2026: Enterprise Reality Check found 54% of decision-makers say AI has accelerated modernization efforts, up from 39% in 2025. At the same time, 78% say legacy systems play a more important role in their organizations today than they did two years ago.
Budget overruns complicate IT modernization
Budget overruns, delayed initiatives, talent shortages, and hybrid complexity are slowing down execution and limiting the value of modernization investments.
Among other key findings are:
- 38% of IT teams spend more of their time innovating or adding new capabilities – up from 25% in 2025.
- 61% of organizations have had to pause, delay, scale back, or fully abandon IT modernization initiatives in the past 24 months.
- 54% of decision-makers say AI has accelerated IT modernization efforts – up from 39% in 2025.
- 78% of decision-makers say legacy systems play a more important role in their organizations today than they did two years ago.
- 31% of organizations now consider themselves modernization leaders – up from 21% in 2025.
Technical debt leaves less room for innovation
According to the report, the share of IT teams that spend most of their time innovating or adding new capabilities increased from 25% to 38% over the past year, but 47% said they remain focused primarily on day-to-day operations, leaving limited room for modernization.
A vast majority of IT leaders surveyed (93%) said that innovation is frequently delayed because reducing technical debt, outsourcing routine work, or improving operational efficiency consume too much budget.
U.S. decision-makers are more likely than their U.K. counterparts to agree with this sentiment, too (51% vs. 37%). Staying on budget is a challenge for 71% of organizations in the U.K. and 66% in the U.S.
Keeping modernization initiatives on track is just as challenging as keeping them on budget, with organizations pausing or delaying (38%), scaling back (36%), or fully abandoning (16%) IT modernization initiatives in the past 24 months.
AI accelerates modernization efforts
With AI adoption expanding, its impact has been significant on reshaping priorities behind IT modernization.
AI investment is noticeable, with 45% of organizations actively scaling AI across the business and 44% investing in targeted, high-impact use cases.
AI is the top driver of modernization and the leading outcome organizations expect from it.
More than half (54%) of organizations say AI is helping advance modernization through greater automation and improved efficiency, up from 39% in 2025.
Legacy systems remain critical to enterprise AI
However, organizations are also facing barriers to AI success: 33% have difficulty integrating AI into existing workflows and business processes, and infrastructure limitations (28%) are among the top barriers to achieving expected AI ROI.
Governance, risk, or compliance concerns are among the other top barriers to achieving expected AI ROI.
What this signals to partners
For MSPs and other solution providers, the findings suggest the AI opportunity increasingly overlaps with the less glamorous work of infrastructure and legacy modernization.
Organizations aren’t simply ripping out older systems to make way for AI. Ensono’s research found 78% of decision-makers believe legacy systems are more important than they were two years ago, while AI integration and infrastructure limitations remain barriers to realizing expected AI returns.
That creates an opening for partners that can help customers determine what actually needs to be replaced, what should be modernized, and what needs to be integrated with newer AI environments.
Modernization assessments, application and data integration, infrastructure readiness, technical debt reduction, and ongoing managed services can therefore become part of the AI conversation rather than separate projects.
The budget findings also raise the stakes. With 61% of organizations having paused, delayed, scaled back, or abandoned modernization initiatives in the past two years, partners will increasingly need to connect modernization investments to measurable operational or AI outcomes rather than positioning modernization as an end in itself.
“As AI reshapes modernization priorities, don’t assume your most valuable systems are the newest ones,” the report states. “Evaluate where legacy systems provide the data, business logic, and operational stability AI depends on, then modernize to preserve and extend those strengths.”