New research shows that organizations modernizing apps are 3x more likely to see AI payoffs, while those clinging to legacy systems face rising security risks and developer talent shortages
India – Cloudflare, Inc. (NYSE: NET), the leading connectivity cloud company, today published its inaugural 2026 App Innovation Report. Findings from the report reveal a stark divide, with companies that prioritize application modernization—i.e.,updating tech stacks to move away from outdated systems—able to successfully use AI and stay secure, while those stuck with technical debt are falling behind and facing rising costs. The report ultimately underscores that application modernization is no longer just an IT goal, it’s the key to how organizations across every industry maintain a competitive edge.
The urgency for application modernization is clear: If an organization fails to modernize, they do not just stay in the same place, they move backward as the rest of the market accelerates. Organizations that continue to cling to legacy systems face a barrier that stifles AI innovation and leaves them more vulnerable to cyberattacks. While leaders invest in growth, lagging organizations are trapped in a cycle of high maintenance costs and talent drain—spending the majority of their IT budgets on keeping the lights on while competitors pull ahead.
“In order to succeed with AI, having a modern and secure foundation is non-negotiable. This report made clear that organizations who prioritize modernization are able to innovate at speed and scale, while those who don’t are likely to become a threat actor’s next target,” said Matthew Prince, CEO and co-founder of Cloudflare. “If you aren’t modernizing 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.”
Key highlights from Cloudflare’s 2026 App Innovation Report:
- Up-to-date infrastructure is the gatekeeper for AI success: Companies that modernize their apps are 3x more likely to see a clear ROI on AI. In fact, 93% of leaders say updating their software was the single most important factor in boosting their AI capabilities.
- Mindsets around AI have shifted from adoption to integration: The race has moved beyond simply using AI, to now focusing on deepening integrations. 91% of leading organizations have already integrated AI into their existing portfolios, with 74% planning to double down on integration in the coming year.
- Security is a growth multiplier: Security is not just a shield; it is a multiplier. Companies that align their security with their modernization efforts are 4x more likely to reach advanced AI maturity.
- There is a high cost of inaction: Delaying updates is a massive risk. Organizations lagging in modernization report 85% less confidence in their infrastructure and often only modernize “reactively” after a security breach occurs.
- Having too many tech tools is a universal concern: Simplicity is winning. While 96% of companies struggle with complex tech stacks, leaders are moving aggressively to consolidate—85% are actively cutting redundant tools and “shadow IT” to move faster.
Methodology In partnership with Qualtrics, Cloudflare interviewed organization leaders who live in target countries across NAMER, EMEA, and APAC regions. Cloudflare limited the scope of interviews to those who are currently a director, VP, C-suite executive, or owner of their organization; who work full-time in target roles within IT, security, product, or engineering; and who have at least some influence on IT infrastructure or vendor decisions. Those who work for organizations with fewer than 1,000 employees did not qualify for this research. Responses were completed by 2,351 organizational leaders, during the survey period, fielded from June 13 to July 21, 2025.
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