Outdated Apps Hinder APAC AI Returns, Cloudflare Warns

The 2026 App Innovation Report, based on a survey of 2,351 senior leaders from organizations with at least 1,000 employees across North America, EMEA, and APAC, broadly defines applications as IT stacks, APIs, and internal workflows. Cloudflare found that APAC organizations modernizing these systems are three times more likely to see clear returns on AI investments; however, only 14% of APAC organizations, including those in Australia and New Zealand, are ahead of schedule with modernization. This finding underscores a critical challenge in application modernization efforts across the region.

The 2026 App Innovation Report found that 92% of leading organizations deem application modernization critical for unlocking AI value. It highlighted a developer paradox: 58% of leading organizations refine existing systems, fostering innovation, while up to 83% of lagging APAC organizations rebuild from scratch due to technical debt or security gaps. Governance also differentiates, with 72% of leaders centralizing modernization decisions for faster execution. Cloudflare reported that 76% of APAC leaders found aligning security with modernization very easy, linking it to faster AI and digital service movement; globally, this alignment makes organizations four times more likely to reach advanced AI maturity. The report also noted 90% of leading APAC organizations have integrated AI into existing applications, with 80% planning to double down on integration, while 86% of APAC leaders are consolidating tech stacks to reduce complexity.

Cloudflare asserts that modernizing and unifying core systems is critical for successful and secure AI deployment at scale. Cloudflare CEO and Co-founder Matthew Prince emphasized the link between modernization and cybersecurity:

In order to succeed with AI, having a modern and secure foundation is non-negotiable… 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. He added, 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 company described an AI-modernisation flywheel, where modern infrastructure supports AI, and successful AI deployments justify deeper modernization investments.

The report does not provide specific figures for the average financial returns on AI investments or the precise monetary value of the identified application modernization investments. Detailed benchmarks for what constitutes ahead of schedule for modernization were also not specified.

Cloudflare suggests AI adoption will widen the gap between modernizing and non-modernizing organizations. Leaders are expected to translate AI work into business outcomes, while laggards may face increasing technical debt and security vulnerabilities. Investment outlooks reflect this, with 72% of APAC leaders expecting a significant increase in modernization investment, versus 53% of lagging organizations expecting only a little bit of budget rise.

Organizations should assess their modernization status, prioritizing AI integration into existing, modernized applications. Centralize decision-making for faster execution. Align security strategies with modernization to enhance digital service delivery and reduce cyber risk. Consolidate technology stacks to reduce complexity.