Digital transformation: scope, governance, funding, sequencing and how to measure it

What a digital transformation program covers

The NAO's 2023 report on UK government found that earlier attempts often put the citizen-facing parts of a service ahead of the harder problems of legacy systems and poor data quality. It said the existing systems and their business processes have to be modernized to make significant and lasting cuts in running costs.^5,6

The same report counted 11 digital strategies in 25 years, each aimed at usability, efficiency and legacy systems.⁸

The European Central Bank lists what a bank's digital strategy should identify: the key digital initiatives and how they align with the long-term business strategy, the technologies under each, and quantitative profitability targets. The ECB takes no position on format. The strategy can sit inside the business strategy or the IT strategy, or stand alone.^9,10

Some banks the ECB observed organized the analysis behind their digital strategy around pillars that include these:

• Operating model and support capabilities, so the organization and its processes support the strategy.¹¹
• Data and AI capabilities, to find internal processes to automate and customer services to improve.¹²
• Technology infrastructure, aligned with business objectives, resilience and long-term agility.¹³
• Digital talent, hired and developed to keep a sustainable pace of transformation.¹⁴

The ECB also expects a digital readiness assessment covering financial resources, skills, the complexity of legacy systems and current use of new technology. Banks must consider digital trends even if they decide against a digital strategy.^15,16

Digital transformation governance: who owns the program

For EU banks, governance of digitalization is a supervisory matter. The ECB ties its review to Articles 73 and 74(1) of the Capital Requirements Directive and the EBA Guidelines on internal governance. Its 2026-28 supervisory priorities tell banks to prioritize digitalization to stay competitive and manage the risks of new technology.^17,18

• Name owners in the management body. The ECB expects a clear allocation of responsibility for digital topics in the management body, either to named executives or to a central steering body.¹⁹
• Give non-executives a job. The ECB expects the supervisory side of the board to challenge executives and oversee the digital strategy and its risks.²⁰
• Sponsor each workstream at the top. The UK roadmap the NAO reviewed gave each of its six missions a sponsor at permanent secretary level.²¹
• Own services end to end. The NAO found that different people were often responsible for the online front end and the back-office legacy processes, and called this a major barrier to redesigning services.²²
• Bring in middle management. In a 2020 BCG survey, three in four executives felt leadership engagement was good, but only one in three had committed middle-management engagement.²³

Our pages on digital transformation

• AI Legacy Code ModernizationBuyer Guide
• Enterprise Architecture ToolsBuyer Guide
• Project & Portfolio Management (PPM / SPM)Buyer Guide
• Process Mining & Process Intelligence PlatformsBuyer Guide
• Enterprise iPaaS SoftwareBuyer Guide
• Digital Adoption Platforms (DAP)Buyer Guide
• RFP questions: Project & Portfolio Management (PPM / SPM)RFP questions
• RFP questions: integrationRFP questions
• State of Play: Process Mining & Process Intelligence PlatformsState of Play
• State of Play: Enterprise iPaaS SoftwareState of Play
• Digital transformationArticle
• Digital transformation roadmapArticle
• Digital transformation governance frameworkArticle
• CIO leadership in digital transformationArticle
• Digital transformation readiness assessmentFree tool
• Digital transformation readiness checklistFree tool
• Legacy modernization checklistFree tool
• Transformation execution risk assessmentFree tool
• Modernize the estateJob

Funding a digital transformation: budgets, milestones and business cases

The ECB expects a multi-year budget aligned with the digital strategy and sized to its ambition. The budget should state why money goes where it does, for example through cost-benefit analysis, and how it is recalibrated.^24,25

Among the practices the ECB recorded, one bank funded its most strategic initiatives from budget pools so allocations could change. Another reviewed its strategic project portfolio every quarter to reprioritize, monitor and challenge initiatives.^26,27

The US Technology Modernization Fund releases money to federal agencies in stages. Agencies receive further transfers only as they complete project milestones, and repayment typically begins within one year of the first transfer. Agencies are expected to aim for full repayment.^28,29,30

The fund reports more than $1.1 billion invested in 74 projects across 34 agencies. Competitive projects are typically under $25 million, with a five-year repayment timeline.^31,32

In the UK, the central digital office worked with HM Treasury to secure £8 billion for digital change from 2022-23 to 2024-25, according to the NAO. £2.7 billion of it was for departments to invest in cyber and legacy IT.^33,34

The NAO warned that digital change carries complexity, uncertainty and risk particular to each program, from legacy systems, existing ways of working and integration. It said business cases, funding and approval processes and technology procurement must reflect that.^35,36

Sequencing legacy modernization in a transformation roadmap

The US federal government spends more than $100 billion a year on IT, and agencies have typically reported about 80% of it going to operating and maintaining existing IT, GAO said in July 2025.³⁷

Of the 11 federal legacy systems GAO ranked most in need of modernization in 2025, eight use outdated languages, four run on unsupported hardware or software, and seven have known cybersecurity vulnerabilities.³⁸

GAO says a modernization plan should contain at least three things: milestones, a description of the work, and what happens to the legacy system. Nine of the 11 systems had plans, and only three of those had all three elements. Without full plans, GAO expects a higher chance of cost overruns, delays and failure.^39,40,41

The NAO found that keeping legacy services running is risky and commits an organization to higher costs later. Many of those costs are hidden, in the people and processes needed to keep older services working. They include manual processes that make up for missing functions and extra interfaces with other systems.^42,43,44,45

The Strangler Fig pattern, as Microsoft's Azure Architecture Center documents it, is one way to sequence the work. A facade sits in front of the legacy system and routes each request to either the old system or a new service. Functions move across in stages, which lets a team replace high-return pieces before low-return ones.^46,47,48

Microsoft notes two limits. The facade must not become a single point of failure or a bottleneck. The pattern may not suit a small system that is simple to replace whole.^49,50

How to measure digital transformation success

The ECB expects financial and non-financial KPIs that track execution of the digital strategy and trigger a reassessment when targets are missed. Each KPI should have a clear owner and be reviewed regularly.^51,52

DORA's research finds that speed and stability in software delivery are not tradeoffs.⁶¹

In BCG's 2020 survey, two in five organizations monitored progress adequately. Among organizations with winning programs, the share was 90%.⁶²

Digital transformation failure rate and outcomes: the evidence

BCG's six factors, as the 2020 study names them:

• An integrated strategy, with goals tied to specific, quantified business outcomes.⁷²
• Leadership commitment from the CEO through middle management, including middle-management ownership and accountability.⁷³
• High-caliber talent, with the most capable people freed up to run the program.⁷⁴
• An agile governance mindset, where leaders clear roadblocks quickly and adapt to changing context.⁷⁵
• Monitoring of progress toward defined outcomes, with clear metrics and enough good data.⁷⁶
• A business-led, modular technology and data platform. More than half of the companies BCG studied struggled with inflexible technology platforms.^77,78

Cloud and AI adoption by company size: small, medium and large enterprises

Eurostat's 2025 survey of EU enterprises shows how far adoption rises with size. It sorts companies into small (10 to 49 people), medium (50 to 249) and large (250 or more).^79,80,81