Cloudflare releases research linking application modernization to improved revenue for artificial intelligence projects across the Asia-Pacific region, while warning that many organizations are behind schedule with core system updates.
According to the company’s 2026 App Innovation Report, APAC organizations that modernize their applications are three times more likely to see tangible returns from their AI investments. It found that 92% of “leading organizations” believe application modernization is the most important factor in unlocking value from AI.
Cloudflare also reported that only 14% of organizations across APAC, including Australia and New Zealand, are ahead of schedule with application modernization.
what is important
The report defines applications broadly. This includes your IT stack, APIs, and internal workflows. Cloudflare said these systems are at the center of its continued innovation efforts.
Cloudflare claimed that the modernization and integration of these systems will occur in parallel with its AI program. The same effort will also impact how organizations securely deploy AI at scale, he said.
developer’s paradox
One of the report’s findings focused on how developers spend their time. Cloudflare described a “developer paradox” between organizations at different stages of modernization.
It found that 58% of leading organizations say their developers spend the majority of their time maintaining and improving existing systems. Cloudflare has combined this approach with innovation built on a stable foundation.
This is in contrast to laggard organizations in APAC. According to Cloudflare, up to 83% of laggards are rebuilding from scratch. That pattern was associated with addressing technical debt and security gaps rather than advancing AI initiatives.
Split governance
The report also points out governance as a differentiating factor. Cloudflare said culture plays a role, along with technology choices.
It found that 72% of leading organizations centralize application modernization decisions to a small group of people. Cloudflare said this structure correlates with faster execution and larger investment decisions.
Organizations that lag behind face constraints from fragmented governance, he said.
AI flywheel
Cloudflare said the introduction of AI could widen the gap between leaders and laggards. It explained about the “AI modernization flywheel.”
The report notes that modern infrastructure supports AI adoption. The company said a successful AI implementation will justify investments in deeper modernization. Cloudflare has tied that cycle together to help leaders prioritize AI development early and connect work to business outcomes.
integration focus
Cloudflare said its AI efforts are moving from initial deployment to integration into existing systems. APAC survey results show that 90% of leading organizations are integrating AI into existing applications.
Additionally, 80% said they plan to “double” their integration over the next year. Among the global highlights included in the study, Cloudflare says leaders have a 91% consolidation rate and 74% plan to double.
Application updates are also cited as a gating factor in this report. Cloudflare said its leaders believe software updates are central to advances in AI. Global Highlights found that 93% of leaders cite software updates as the most important factor in accelerating AI initiatives.
Security system
This report links security practices and modernization developments. Cloudflare said its APAC survey found that 76% of leaders say it is “very easy” to adjust security and application modernization. We coupled this with AI and the acceleration of new digital services.
Global highlights included stronger claims about results. Cloudflare said organizations that align security and modernization are four times more likely to reach “high AI maturity.”
Cloudflare also said that organizations that lag demonstrate low confidence in their infrastructure. It is said that there is a high possibility that it will be modernized after the incident. Among the global highlights, it said laggards report having 85% less confidence in their infrastructure and are more likely to modernize it reactively after a security breach.
Tool integration
The report says technology stack complexity remains a barrier. Cloudflare said that in APAC, 86% of leaders are consolidating their technology stacks to reduce complexity and speed delivery.
Global highlights also pointed to widespread concerns about tool sprawl. According to Cloudflare, 96% of businesses struggle with complex technology stacks. It found that 85% of leaders are cutting back on redundant tools and “shadow IT.”
Investment outlook
Cloudflare said it tracks budgets to ensure they are executed. In Asia Pacific, 72% of leaders reported expecting a significant increase in modernization investments. The report found that 53% of laggard organizations expect their budgets to increase only “slightly” next year.
Cloudflare said it surveyed senior leaders across IT, security, product and engineering. Respondents said they were part of an organization with 1,000 or more employees. The survey received 2,351 responses across North America, EMEA, and APAC.
Matthew Prince, CEO and co-founder of Cloudflare, connected the findings to AI and cybersecurity risks.
“To succeed with AI, building a modern and secure foundation is non-negotiable,” said Matthew Prince, CEO and co-founder of Cloudflare. “This report reveals that organizations that prioritize modernization are able to innovate quickly and at scale, while those that don’t are likely to become threat actors’ next targets.”
“If you don’t implement AI and modernize your business to protect against the next wave of cyberattacks, you won’t just stand still, you’ll quickly fall behind,” Prince said. “Winners in this internet age will ultimately be determined by their infrastructure.”
