[Title slide 1. Blue CAI company logo with tagline “We power the possible” appears in middle of screen. Company website www.cai.io appears at the bottom center of the screen]?
[Title slide 2. White background with text centered in the middle of the screen that reads: “Webinar On-Demand. How to build a business case for legacy modernization”. The blue CAI company logo with tagline “We power the possible” appears underneath of this text towards the bottom of the screen]

[There are two speaker boxes on the screen, each containing a name and a speaking head. Jen Boyer appears on the left-hand side and Ken Spangler appears on the right-hand side. On the bottom right of the screen contains the CAI logo alongside the text “We power the possible.”]

00:00:08 - 00:01:12
Jen Boyer
Hi there. Welcome everyone. Welcome to our session today. We appreciate your time and look forward to sharing some information on how to build the business case for legacy modernization. My name is Jen Boyer, I'll be your host for today. A little bit about myself. I've spent my career in IT consulting, performing, managing, and partnering with large client executives to build people plus technology solutions that really drive business results and spending a lot of that time on the software side of the house. I've certainly become very familiar with the ever present priority of modernizing legacy applications. So today we're going to take a little bit of a deep dive around how to build the business case for modernization and legacy modernization in a way that aligns with company goals as well as wins over stakeholders, both those who are going to do it and the business who is being done for.

00:01:13 - 00:02:28
Jen
A couple housekeeping items. This session is scheduled to last for 30 minutes. If you do have a question, feel free to use the chat on your screen to submit that question. If we do not get a chance to get to it today, we will certainly follow up with you after with that information. Also, the event is being recorded. A replay of the event will be sent out to everybody after if you'd like to revisit the material or if you'd like to share it with your peers and contacts. So I'd like to introduce our speaker today. Welcome Ken Spangler. We look forward to having you here. Ken is the former EVP of information technology and CIO for FedEx's global OPCOs. He spent about 30 years in IT and leadership positions throughout FedEx. We are very lucky to have him today. FedEx, as you know, is a Fortune 500 company, also number 17 on Fortune World's Most Admired Companies. So you've had quite a career, a lot of success. We really look forward to your insights today.

00:02:29 - 00:02:40
Ken Spangler
Well thanks, Jen. Thanks for having me today. When you asked me to join, this is such an important topic and a key topic at every company today, not just FedEx. So I'm glad to join. Glad to be here.

00:02:41 - 00:03:06
Jen
Good, thanks. So you've had a very successful career in leadership positions in IT, and we all know, right? Technology goes through so many transformations. So before we get into specifically about modernization, what are some of the major transformations that you think have really shaped the world of technology to where we are today?

00:03:07 - 00:03:56
Ken
That's a great opening question and interestingly enough, I had just spoke at a conference not too long ago and we were talking about this very thing and how different things are today and what that means. And so to jump into your question, I would say there's at least 3 major buckets, the era of discrete independent applications in a company like FedEx, thousands of them. Earlier in my career, the individual applications and the integration of data across applications was one of the biggest focuses, but today it's truly the platform era. So the way we design, the way we architect, the way we build is very different. And it's not just building at a company like FedEx where we had to do so much of our own software engineering, but the platforms that are available to everybody today. So I would say first is the platform era makes a lot different.

00:03:57 - 00:04:39
Ken
Second is the cloud era, and I mean everybody understands what it is, but I like to think of it as well the world is flat now. It used to be because years ago, earlier parts of my career, mid-parts of my career when you had a lot of new things, you were standing up a lot of new compute, you were managing data centers, massive lots of servers. The administration of that alone took a lot of your costs and resourcing. But in the cloud era, whether you're a startup that started 2 months ago or whether you're a massive corporation like FedEx or anybody else, it's the ability to stand up compute, scale compute is so much easier. And then the third one I would say is the data, the scale of data and the availability of data.

00:04:40 - 00:05:11
Ken
And it's funny, a lot of people say we're definitely in the heart of the big data era. In my opinion, we've been in the big data era that's been going on. I think we're in the big compute era, the ability to turn data into real-time intelligence or AI, what AI can do. That's really the fundamental difference. So I think the three things of the platform era, the cloud era and really big data becoming to be compute era is enabling so much, it's transformed what's possible in technology for businesses.

00:05:12 - 00:06:06
Jen
Yeah, yeah. For sure cloud era, I think I read a statistic from Gartner about somewhere in the 70% of companies by 2027 will have adopted and implemented cloud strategy. So certainly that's an area of big change and something that is contributing to modernization. Now Forrester and Gartner both predict increases in IT spending significantly higher than IT spend in 2023. And a lot of that, at least in our experience and things that we've heard from clients is around modernization. So what would you are some of the critical drivers that are really propelling this whole move and modernization theme?

00:06:07 - 00:06:59
Ken
Well, I think first and foremost, and this is significant, maybe not talked about even as much as it should be in our industry is companies today have to move to the future more aggressively. The speed of change is unlike anything before. But again, that's one of those things I don't think is revolutionary. Change is beginning faster as long as man's been here. And so the change is accelerating, but the scale of the changes and what that scale enables is significant, so companies must move more rapidly and change with scale, be more adaptable. And certainly AI is a perfect example of it. Thinking of statistics, I heard an interesting stat just recently, I have no way to verify it and I don't know how accurate it is, but it really caught me. It talked about of publicly held companies, 97% are talking about their AI activity.

00:07:00 - 00:07:50
Ken
In other words, we are investing in, implementing or moving forward in any way of description with AI, but only 7% thus far have determined and found true value in it. Now, whether that's true or not, I would say there's definitely a gap between them. But one of the real, I don't want to say hidden secrets in there, but one of the things that's true is moving to the future is an imperative, but so many companies are tethered to the past so they're trying to run forward and it's like they're cabled to some parachute or something because of the legacy they have. And so in this era there's always been a need to modernize when you're running technology and especially a complex technology stack, but the ability to move faster and the limits of what your legacy you're doing are a really making this more important than it's ever been.

00:07:51 - 00:08:24
Jen
I like the analogy of the parachute because it's definitely multiple strings. I spoke to a client last night who has a cyber problem and in order to address a cyber problem, they need to get out of their data center and move to the cloud, but in order to do that they have to go back to some legacy applications and some deprecated code. And so there's so many tethers there but can't take care of the one problem without going all the way back. So very relevant.

00:08:25 - 00:09:09
Ken
And the tech stack has continued to change for all good reasons. It's all great problem to have, but if you haven't really managed your complexity down, you're in an era now that from your legacy, what's truly considered your legacy, what's considered... Or after that, the evolving tech stack all the way to the new things that are possible today. When you put it all together, it's massive complexity. And one thing I've always called the laws of physics of IT, and that is as you manage your complexity, your cost and speed will go exactly that direction. If you don't manage your complexity down, in other words, if your complexity increases, then your cost increases and your speed is negatively impacted. And so you have to manage complexity in the world today.

00:09:10 - 00:09:50
Jen
Yeah. Well, speaking of complexity, you have been instrumental in designing and leading some major modernization initiatives at FedEx. Can you talk to us a little bit about those and really how did you build the business case? Sometimes modernization, it's like painting the Golden Gate Bridge as soon. As we're done painting it, we got to get budget and start over. So sometimes putting together that business case for the board, for the executives can be challenging. So tell us about some of those things that you did and how did you build that case?

00:09:51 - 00:10:37
Ken
Yeah, absolutely. Before I jump into this, I'll say the why. One of the things that's true is FedEx, a company like FedEx, we were always modernizing. It wasn't like we were sitting here ignoring it. We were always modernized, we're always driving more and more modern tech stack. We had a very aggressive strategy of how we were capitalizing on cloud and colo data centers and streamlining around the world. It was always true. But what really became evident to us is the core legacy environments, they just don't go away easily. You have to be willing to have a fight. And what I mean by that, mainframe technology is still amazing technology this day. I'm certainly don't want to sit here and say it had to go because it wasn't good. It wasn't that, it was just the complexity it had in FedEx and a lot of how our genealogy of acquisitions that came with a lot of mainframe was just problematic for us.

00:10:38 - 00:11:30
Ken
So we set a strategy that says we're going to have zero mainframe, we're going to have take rid of it. The early belief was as we modernize application at a time, all the old applications that are on there and got to something new that it eventually would fall over on its own. And that is the farthest thing from the truth in IT. It just doesn't fall over. You have to fight it away. And so first is we knew that. Second is well then you have to really understand well what's it really worth. Because if it's going to be that large of a fight both in energy resource and commitment and cost, what's it worth. And so the way we really build a business case is there was a need in our business for three things, in no particular order because security will always be number one, but I'm just going to name them the way we were... The problem we had, we needed to lower costs, we needed to have better speed and obviously we needed to ensure we were getting more secure all the time.

00:11:31 - 00:12:28
Ken
And so cost, speed and security. So that was a driver we knew we'd have to fight it away and then we had to figure out what it was worth. And so in the analysis, the thing that really started to show up... When you look at tech stacks, it's not just the direct tech take the mainframe. It's not just what the mainframe costs you in capital and expense and running it every day. It's all the connected points that really when we started to analyze it, it was much more costly than we ever realized and our company had tremendous detail of our financials. So anyhow, make a long story short, about nine months of really building a plan... In fact the great Charlie Fehl, the famous IT CIO from years, for many years now, he has a framework says a story of the deal on a plan. We've used it for years.

00:12:19 - 00:13:05
Ken
FedEx has used it. The story is here's the current state, here's the future state, what's the gap in the middle? We analyze that. The deal is what's it going to cost you and what you going to get out of it. And then the plan is how are you going to execute it and how long is it going to take. That's really how we built it. The reality of it is, we realized that this was much more costly than we realized to run these environments. While the investment was significant to get rid of them, it had very fast return. That was something at FedEx. The state of FedEx where we're at right now is we were looking for quick returns on large savings and that's really what generated this business case and how we went to the board and got it approved. But at the heart of all that was we spoke a lot of truth. So one of the truths was this isn't going to be easy, it's going to be a fight.

00:13:06 - 00:13:46
Jen
With saying it that way, you had to really... It was a fight that implies a lot of change and transformation in your organization. I mean I assume you can't just go do that with the group or I don't want to say group, I don't want to make it about people, but with the way you were structured before and trying to take care of it a little bit at a time wasn't necessarily getting you where you needed to be. So now you had to do something to be able to go at it differently. How did you change the organization, how you were structured, how you went about the work to make it happen?

00:13:47 - 00:14:29
Ken
Well, first thing, I'm going to repeat one thing really quickly because it's foundational to this question as well, and that is the business case was compelling. And in business generally if you have a compelling business case you'll move forward. But the truths we had to set were really two things. And the exact wording by the way I used, Rob Carter and I both used was, this is going to be a vicious fight, but it's a fight worth fighting. So that's the first truth we had to tell. The second truth we had to tell is this is not the kind of thing that you get halfway in. Now you know business is business, you have to adapt all the time. You might slow things down a little bit, but this is something you got to fight it to the end. So in other words, the analogy we use or metaphor we use just to get everybody around them and said, "We're sending the kid to four years of college here. We're not just changing our mind a semester at a time."

00:14:30 - 00:15:11
Ken
And so those two truths were an imperative to moving forward. Once we had a compelling business case, we knew it was going to be hard and we were willing to fight the whole way through it and we weren't going to stop. Even though as business situations mandate, we may have to slow down, we may have to adjust whatever, we'll be flexible, but we're not going to just drop it in the middle because it'll increase complexity. And as I said earlier, nothing good comes from that. So that was first. Now, more to your question is there was a couple of things we were driving ahead... In this initiative, we really had three shapings. Environment shaping is we're retiring mainframes, we're modernizing our tech stack holistically, and ultimately we're retiring some of our legacy data centers out of it.

00:15:12 - 00:15:59
Ken
So that was, we called it environment shaping. Then we had demand shaping and that is really the way we worked and the way we managed demand. And that was we were going to become more of a lean agile enterprise, more of a safe, but it was safe for FedEx and we drove that transformation around the world. That was demand shaping. And then talent shaping, reason we started as resource shaping we're like this resourcing just isn't respectful enough of what we really have and has tremendous talent over the world. And talent shaping was what are FedEx employees, FTEs doing, and what are we relying and partnering with third parties to do? And that was a big part of the success of this as well. In other words, in this case, we knew there was a lot of surge that had tremendous value to go through the surge and the payback was almost immediate, but nonetheless, you have to surge.

00:16:00 - 00:16:38
Ken
So we built what we called a factory model and that was a repeatable factory that as we were retiring mainframe applications or we were modernizing our tech stack to streamline our data center environment, that it was a repeatable factory and that was a big part of it. So in summary, we had a case, we spoke to truth, we drove the way, the process, the way we worked, how we worked and how we governed to change. And then in a talent, we had to have surge capacity that we used, again, we call it a talent shaping model, but we used a factory model and all three of those proved to be absolutely critical to the success.

00:16:39 - 00:16:55
Jen
Yeah, definitely. I was reading something about modernization, big transformations, one of the number one things is pick the right team, right? And that can be hard to do when you're mixing employees and partners at the same time and for such a large initiative.

00:16:56 - 00:17:53
Ken
I didn't mean to interrupt, I'm going to throw one thing out that I've always believed in and this was a case where you really got to see it. I believe when you work with third parties, there's tons of great companies. I mean FedEx has worked with CAI for years and had great success in all the things we've partnered on, but there's three kinds of engagements you generally see in this industry. Those who do it to you, those who do it for you or those who do it with you. We were absolutely and always have leaned towards a with you model, but in this case we absolutely needed it to be those who do it with you. And so the factory we built and as well as the PMO and how we govern this were directly related on alignment of key FedEx subject matter experts and world-class engineering as well as third parties who could bring the specialties and skills we needed. And that proved to be super effective. So it was a do it with you model and that was an imperative. We didn't stray from that and we didn't.

00:17:54 - 00:18:26
Jen
Yeah, I mean thinking about people, right? Change transformation, it's uncomfortable, it's scary. So you talked about speak the truth to describe what you wanted to do and support the business case, but how did you work with your teams to just kind of keep the motivation and the morale up? It's like eating an elephant. It is a big deal and it's going to take time, right? So what did you do from a communications perspective to keep everybody engaged and focused on the goal?

00:18:27 - 00:18:58
Ken
Well, I guess one of my principles, golden rules I've always believed in my career, you've heard me say it probably multiple times so far, speak the truth. So when we were talking to the executive committee or the board, we were speaking truth, right? That is equally true or even more true. Would you talk to your own teams? And we talked about why this was an imperative for FedEx, what it did. We talked about it, we were very open about the value it generated and we were very open, even more open that says this is going to be super hard, it's going to be a vicious fight, but it's a fight worth fighting.

00:18:59 - 00:19:27
Ken
And we need the teams to be empowered, to speak up, look at better ways. We will all along the way, principles of agile, we'll adapt the horizon, overcome... Expect, and adapt is really the agile principles that we use. And that was so true. So number one is engaging our team, speaking to everybody. To me it was not just when we kicked this off, it was I had frequent town halls. Rob Carter had frequent town halls. We talked about this constantly.

00:19:28 - 00:20:12
Ken
Secondly that really it became so valuable early on, I call it the whole first year plus was teams that just found better ways. And we had these sessions, we would have them every month. We had weekly, we had all kinds of different level. But at this monthly session we looked for highlighting teams that had other ideas and to find out if it really works, if we can cross pollinate other teams, etc. And there was a lot of that. I mean we had one of our senior vice president groups who really was leading the way. They were just ahead of everybody. And the reason they were ahead of everybody is they were being super creative. And so that was another really key to keeping the teams energized is if they hit a roadblock or this was just too hard, we would find a better way. And I think that empowered teams. Now, this was hard.

00:20:13 - 00:21:06
Ken
I mean it was tiring. There's no doubt about it. These teams were... We said it was going to be a vicious fight. It was hard. But you know what I always have learned, and this is so true, I would imagine it's true everywhere, but I'm biased 'cause I spent nearly 34 years at FedEx. We have a positive spirit. And the positive spirit was when you speak to truth and everybody knows there's value, everybody wants to come to work and do the right thing, people get committed and they love the fact that they are adding value. And that's really what it came to be. I mean there was almost, I'll call it a friendly competition across senior vice president level groups and everybody was trying to meet the ultimate goal, but everybody was trying to be the most creative to find a better way. And that again, so speak the truth, engage the teams and empower and ask for their help to make this better all the time and then keep that positive spirit, keep the energy high. That was a big difference for us.

00:21:07 - 00:21:29
Jen
Yeah, it sounds like you had to be quite a cheerleader during that and FedEx continues to go through significant change. So I really like that encouraging the spirit of creativity. I mean that's ultimately what drives innovation, right? Is giving people the freedom and flexibility to find new ways to do things.

00:21:30 - 00:22:04
Ken
Maybe one other thing, when I say teams, I should have been really more direct and say, all right, T-teams are incredible in the positive spirit because when they know they're delivering value, they'll keep going. But our business partners work equally and just as much and more so committed. So they knew their role in it and they were committed. In our operating company, have a different strategy of one FedEx now, but even at the operating company level, the presidents of each of the operating companies were super committed, championing it and ensured that their teams understood why the value of this was so important. And that was big.

00:22:05 - 00:22:20
Jen
You did a whole scaled agile framework for a FedEx way of doing it, safe for FedEx. I mean the business had to join you in that. Were they all on board? How did they get on board with that kind of a model?

00:22:21 - 00:23:07
Ken
The answer is yes, but that wasn't easy. I mean, that was a multi-year journey as well. And I would say really the big thing there is we had to keep it simple in the lean agile journey, the safe journey. We got it down to two really big things we were after. Lean portfolio management or what we ended up calling common lean portfolio management. One thing I've engaged with a lot of different companies, both benchmarking and some consulting I'm doing these days about lean agile transformations. And one of the things I see that's so true in industry, everybody kind of makes it up as they go. In a company the scale of FedEx, there's certain things that have to be, you just can't make it up and one of them is in common lean portfolio management. To us it was three things, processes, taxonomy and tooling.

00:23:08 - 00:23:48
Ken
We had to align around common processes, taxonomy and tooling. If everybody was working differently, the how of work, it was going to be very difficult. And then after that was enterprise portfolio management. We were a federated structure, so we had to have enablement of some demand management at the operating company structure, but the enterprise of FedEx corporation is most important. And we had to have an enterprise portfolio. And ultimately that moved on and transformed to what's called the drive initiative at FedEx now, which is generating a lot of value, but one way or the other, whatever it is, and however you do it has to be commonized for the enterprise. And that was really the key to success there is. So the transformation was tough. Everybody had to be aligned.

00:23:49 - 00:24:09
Ken
People love to see things that work and at the heart of it, I mean if you want to simplify agile down to the basics, it's eliminate waste and reduce contact switching. And so everybody, when you eliminate waste and reduce contact switching, it's easy to get everybody's hearts and minds because those are the things that hurt productivity. So people love to see that improvement.

00:24:10 - 00:24:29
Jen
Yeah. Okay, good. Let me ask, any big project like this of course, or big transformation effort has a lot of key risks. So what were some of the big risks that you had to first of all identify and then figure out how to mitigate as you went forward?

00:24:30 - 00:25:24
Ken
One of the things I learned in my career, and it's so true today, is in fact you see all the stats of whether it's McKinsey, [inaudible 00:24:39], anybody name the company, they all have say that 70 to 85 for all their data... I've looked at everything for the last year that they've produced. Everybody says between 70 and 85% of transformations and modernizations at scale fail. And so I tend to want to focus on, well, what about the 15 to 30% [inaudible 00:24:57] to succeed? And what you see there is the most adaptive. This is the adaptive era. At FedEx, and in fact, my post FedEx career, I'm partnering as a longtime collaborator, Steve Davis on a company about adaptability that we're doing. So for us, the key risk was ensuring we were adaptive. Okay? And that's everything from managing scope and progress. And it includes just the mindset of not just what your plan is... But everybody has a plan.

00:25:25 - 00:26:01
Ken
But where these transformations go bad is when the real world comes into play and things happen, [inaudible 00:25:31] don't adapt. And so we had a saying, there are certain things that need to be days, not weeks, and things that need to be no more than weeks, not months. And certainly months can't turn into the years. So what ultimately, when you say days, weeks, months and years, that means you have to be adaptable by the day. And that was the key to risk management for us. We had daily risk management and weekly was the max scale that we would wait for anything to be addressed, not wait, I mean if it wasn't addressed in a week, we were all over it. So that was a key part of being lean and agile.

00:26:02 - 00:26:27
Ken
And most important, it was about adapting and being adaptive. And so I think when you talk about leadership today, we've always talked about IQ and EQ today, it's IQ, EQ and AQ, the most adaptive or those with the adaptability quotient are the most successful. And that was key to success for this. That's how we managed risk, it's how we managed the progress, and that's how we ultimately got the value in success.

00:26:28 - 00:26:36
Jen
Yeah, I really liked that, driving it down to a week. I mean, that's a short amount of time in the world that we live in. So making sure we-

00:26:37 - 00:26:38
Ken
When we're strongly successful, if you manage the events every day. You know, absolutely.

00:26:39 - 00:26:39
Jen
Yeah.

00:26:39 - 00:26:39
Ken
[Unintelligible]

00:26:40 - 00:26:40
Jen
That's true.

00:26:40 - 00:26:43
Ken
Right?

00:26:44 - 00:27:09
Jen
Yeah. I know we only have a few minutes left, but what would you say are again, some key lessons learned? We talked about adaptability, but what are some of the things that you would share with your peers or others who are about to embark in this or maybe they're embroiled in it right now. What would be some key lessons learned that you could share?

00:27:10 - 00:28:00
Ken
I would summarize it down to three big things. Number one is I would say absolutely, positively speak the truth. There's so much selling in business that's required. It's important. All of us, especially executives, when you make decisions on what should be done in some form of selling, why it should be done. But sometimes the truth gets lost in that. Too much promotion and not enough truth. Speak the truth, know the details, definitely that's big. Number two, engage the teams. This gets done by powerful aligned teams. Teams that work together and say words like we and us, that's success. When you hear a lot of them and they, that's not going to be success. So at that level, it's absolutely an imperative. We get things done with teams, make sure the teams will win together and say words like we and us. And then last is that thing I was just talking about.

00:28:01 - 00:28:37
Ken
Absolutely, I've learned, and this is why it's my post-FedEx career is all about adaptability. And this company we've started is about adaptability. That's the key to success today. Absolutely. And I'm talking to and seeing so many companies now that you can absolutely see the difference between lack of adaptability or significant adaptability and what that means. You have to define what it means. Like anything else in business, you have to define what it means. But we are not talking about adaptability for leadership development. We're talking about adaptability for execution. So a framework of adaptability to execute. And that is the greatest learning and key to success.

00:28:38 - 00:29:49
Jen
Okay, great. Well, unfortunately we are out of time, but I definitely want to thank you, Ken, and thank all of our attendees who are listening today. We hope you'll leave with some key takeaways around untethering from the past and doing it purposely, speaking the truth and engaging your teams. Remember the why and your north star, why you're doing it. And of course, adaptability, all critical lessons there. And we appreciate your insights, Ken. Very helpful. So for anybody who is listening, we will be sending out a follow-up email that'll have a link for replay. If you have questions, we'll make sure that those get addressed. Feel free to reach out to any of us or even Ken on LinkedIn. And we will look forward to seeing you hopefully at one of our future events. We do have other upcoming events, different topics, so stay in touch, follow us on LinkedIn, and we hope to see you soon. Thanks, Ken.

00:29:50 - 00:29:54
Ken
Thank you. Jen, great to be here with you. And thanks to everybody that joined. Have a great day.

00:29:55 - 00:30:03
Jen
Thanks, you too.

[Closing slide 1. Blue CAI company logo with tagline “We power the possible” appears in middle of screen. Company website www.cai.io appears at the bottom center of the screen]