CloudflareApp InnovationReport Rearchitecting applicationsfor AI, trust, and speed Contents Enabling developers The AI catalyst The modernization advantage The widening AI gapThe AI-modernization flywheelEnd the AI sandboxBuilding the future with AI16181920 Fuel the innovation engineThe universal bottleneckTo build or to innovate?The consolidation divide33353637 How to use this reportThe anatomy of a leading organization56 Secure by design Agility at scale Build for what’s next The agility thesisAvoiding decision paralysisStop tinkering, start transformingThe hidden tax of scalability9111213 Security as an innovation acceleratorThe velocity trapSetting the foundation with security firstWhy silos sink AIReliability is the new speed limitWinning the battle against timeThe widening impact of security events23252627282930 A framework for modernization leadersAdditional resources4042 Appendix Methodology44 The modernization advantageEXECUTIVE SUMMARY In an era marked by persistenteconomic disruption, applicationmodernization is a survival imperative. First,the rise of agentic artificial intelligence (AI) magnifies the potential ROIof modernization initiatives.AI-powered systems demand agile infrastructure,real-time data access, and applications that can integrate and adapt on the fly.By driving modernization initiatives to support these goals, organizations arebetter-positioned to expand their AI use cases and see bigger results. While some organizations are still debating strategy, leadersare laying the groundwork that makes rapid innovationnot only possible, but inevitable. For them, the process ofmodernizing their application infrastructure and internalworkflows represents a systemic shift, one that reshapeshow their organizations operate and deliver value. This transformation sits at a true inflection point, driven bythree powerful forces. And third,users have raised the bar.They have come to expect instant, personalized,and seamless digital experiences as the default, rather than the exception. By failingto meet the threshold for secure, high-performing applications, organizations risk losingrelevance, revenue, and user trust. The modernization advantageEXECUTIVE SUMMARY The real divide — between those who are leading the conversationand those who are left behind — is both a technical and cultural one.Leaders make strategic moves from a culture of discipline, focus,trust, boldness, and confidence. They take time to perfect theirinternal processes, view security as a growth multiplier, and takecalculated risks to maximize on innovative technologies like AI. Those who lag behind, by contrast, are forced to manage anever-expanding technical debt. Without a solid core, internalalignment, and resource optimization, they lose out on keyopportunities for expansion, waste resources patching securitygaps, and struggle to support AI initiatives with the sameefficiency and speed as their peers. The urgency here is clear: Agentic AI, accelerating cyber threats,and surging user expectations are rewriting the rules of competition.Organizations that understand how to modernize effectively are theones who shape markets, define experiences, and set the standardfor what comes next. For the rest, the call to action is simple. Modernize the entire stack — applicationsand infrastructure together, built on a unifiedplatform — or risk being defined by thosewho already have. Chief Cyber Solutions Officer,CloudflareRamy Houssaini How to use this report With growing initiatives and investments in AI, this reportlooks to explore the role application modernization playsin maximizing an organization’s ability to innovate at scale.We surveyed over 2,350 leaders in large-scale companiesacross the globe to better understand leadership strategies,application roadmaps, security alignment, and how thesetools are being developed — looking for what truly sets themapart from their competitors. Within this report, “leading organizations” or “leaders” refersto organizations that report they are ahead of schedulewith their application modernization efforts, have muchmore developed AI capabilities, and are very confident intheir infrastructure. Opposite these leaders are “laggingorganizations” or “laggards” — those who are behind scheduleon their application modernization timelines. Comparing these two sets of organizations reveals differencesthat go beyond technology and reflect distinct operationalpatterns in their approaches to modernization. Leadingorganizations report more consistent application performance,greater progress with AI, greater organizational agility, andmore resilient application security. This isn’t just better performance; it’s a fundamental shiftwhere technology becomes a force multiplier.Their consistentmethods provide better user experiences and a significantcompetitive edge, offering a guide for others to follow. The anatomy of aleading organization Leaders gain advantage by buildinga str