Treating application modernisation as mere housekeeping is a fast track to obsolescence. Infrastructure is now a living platform, and the gap between companies that realise this and those that do not is widening.
For engineering leads, success rarely hinges on shipping more code. The 2026 App Innovation Report from Cloudflare highlights that organisational discipline, deep AI integration, and the removal of security silos are the real differentiators. Failing to update tech stacks puts organisations in reverse gear while the market speeds ahead.
Agility over bureaucracy
Technical velocity often dies in the org chart. Companies successfully modernising their stacks share a specific operational trait: streamlined command structures. 73 percent of these leaders centralise decision-making among a few individuals, compared to 36 percent of lagging organisations.
Consolidating authority helps avoid paralysis. 54 percent of lagging organisations report fractured decision-making processes that delay initiatives. Leaders, however, remove the bureaucratic friction that kills momentum.
Agility breeds financial confidence. Leaders are betting big: 76 percent expect a large budget increase for application modernisation, versus 36 percent of laggards. Streamlined processes yield better returns, justifying the heavier spend.
AI pulls infrastructure forward
The market has shifted from simply adopting AI to weaving it into the application lifecycle. AI is now the main engine for new modernisation efforts.
Leaders are nearly three times more likely to prioritise AI development ahead of general application modernisation, letting AI requirements pull infrastructure projects forward. These leaders are three times more likely to see a definite ROI on AI. 91 percent of leaders have integrated AI into their existing portfolio, compared to 54 percent of laggards.
Infrastructure confidence is the linchpin. 96 percent of leaders believe their current tech stack is sufficient for AI development. Laggards often wait for modernisation to finish before starting AI work, a hesitation stemming from resource shortages and compliance pressure.
Matthew Prince, CEO and co-founder of Cloudflare, said: “In order to succeed with AI, having a modern and secure foundation is non-negotiable. This report made clear that organisations who prioritise modernisation are able to innovate at speed and scale, while those who don’t are likely to become a threat actor’s next target.
“If you aren’t modernising your business to embrace AI and prevent the next wave of cyberattacks, you aren’t just standing still, you’re rapidly falling behind. The winners of this era of the Internet will ultimately be defined by their infrastructure.”
Security accelerates innovation
Engineering teams often view speed as the enemy of security. The data proves otherwise. Security acts as an innovation accelerator when embedded by design.
71 percent of leaders report that aligning security and application modernisation is “very easy,” allowing them to build resilient systems without slowing development. Only 32 percent of laggards say the same. Misalignment is expensive; organisations treating security as an afterthought spend resources fixing incidents instead of building.
This alignment impacts maturity. Companies pairing security with modernisation are four times more likely to reach advanced AI capabilities.
The “velocity trap” has a price. 87 percent of leaders find it easy to remediate security events causing noncompliance. They also manage time spent on these issues more efficiently. Laggards report their top barrier is a lack of resources, leaving them in a cycle of firefighting. Many only modernise “reactively” after a breach.
Maintenance over new builds
A surprising trend emerges regarding developer time allocation. One might assume innovation leaders spend their cycles building new systems. The reality is different.
53 percent of leaders report their developers spend more time maintaining and modernising existing systems, while 75 percent of lagging organisations spend more time building entirely new ones.
This signals stability, not stagnation. Leaders have a solid core, with 100 percent feeling “very confident” in their current foundation. They focus on optimising systems that work. Laggards are forced to rebuild from scratch because their infrastructure cannot support demands like global expansion or AI.
Reactive initiatives drain laggard resources. They modernise to patch breaches or meet compliance. Leaders modernise proactively to launch products and expand markets.
Consolidation tactics
For engineering directors, joining the leaders requires shifting philosophy as much as technology.
First, prune the governance model. If approval steps slow modernisation, centralise authority to break the paralysis.
Second, consolidate security. 96 percent of companies struggle with complex stacks. 85 percent of leaders are cutting redundant tools and “shadow IT” to move faster. A simplified stack – preferably using infrastructure-as-code – allows for automated protection with every launch.
Finally, treat AI as a core infrastructure component, not as a sandbox experiment. Investing in cost-effective AI infrastructure enables experimentation without prohibitive expense.
The market divergence is real. Modernising the entire stack defines the winners. Those who hesitate risk being defined by their technical debt.
See also: Software development in 2026: Curing the AI party hangover
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