Cloudflare: outdated apps stifle APAC AI investment gains

Cloudflare has published research that links application modernisation with higher returns on artificial intelligence projects across the Asia-Pacific region, while warning that many organisations remain behind schedule in updating their core systems.

The company's 2026 App Innovation Report said organisations in APAC that modernise applications are three times more likely to see a clear return on AI investments. It revealed that 92% of "leading organisations" view application modernisation as the most important factor in unlocking value from AI.

Cloudflare also reported that only 14% of organisations across APAC, including Australia and New Zealand, are ahead of schedule with application modernisation.

What counts

The report defines applications broadly. It includes IT stacks, APIs, and internal workflows. Cloudflare said these systems sit at the centre of continuous innovation efforts.

Cloudflare argued that modernising and unifying these systems sits alongside AI programmes. It said the same work also affects how organisations deploy AI safely at scale.

Developer paradox

One of the report's findings focused on how developers spend their time. Cloudflare described a "developer paradox" among organisations at different stages of modernisation.

It said 58% of leading organisations spend more developer time maintaining and refining existing systems. Cloudflare linked this approach to innovation that builds on stable foundations.

It contrasted that with lagging organisations in APAC. Cloudflare said up to 83% of laggards are rebuilding from scratch. It linked that pattern to responses to technical debt or security gaps, rather than forward movement on AI initiatives.

Governance split

The report also indicated governance as a differentiator. Cloudflare said culture plays a role alongside technology choices.

It reported that 72% of leading organisations centralise application modernisation decision-making with a small number of people. Cloudflare said this structure correlates with faster execution and larger investment decisions.

It said lagging organisations face constraints from fragmented governance.

AI flywheel

Cloudflare said AI adoption can widen the gap between leaders and laggards. It described an "AI-modernisation flywheel".

The report noted modern infrastructure supports AI deployment. It said successful AI deployments, then justified deeper modernisation investment. Cloudflare linked that cycle to leaders prioritising AI development earlier and translating work into business outcomes.

Integration focus

Cloudflare said AI activity has shifted from initial adoption to integration into existing systems. In the APAC findings, it said 90% of leading organisations have integrated AI into existing applications.

It also said 80% plan to "double down" on integration over the next year. In the global highlights included with the research, Cloudflare put the integration figure at 91% for leaders, with 74% planning to double down.

The report also framed application updates as a gating factor. Cloudflare said leaders see software updates as central to AI progress. In the global highlights, it said 93% of leaders cited updating software as the most important factor in boosting AI efforts.

Security posture

The report linked security practices with modernisation progress. In the APAC findings, Cloudflare said 76% of leaders described aligning security with application modernisation as "very easy". It connected this with faster movement on AI and new digital services.

The global highlights included a stronger claim about outcomes. Cloudflare said organisations that align security with modernisation are four times more likely to reach "advanced AI maturity".

Cloudflare also said lagging organisations show lower confidence in their infrastructure. It said they are more likely to modernise after incidents occur. In the global highlights, it said laggards report 85% less confidence in their infrastructure and often modernise reactively after a security breach.

Tool consolidation

The report said technology stack complexity remains a barrier. In APAC, Cloudflare mentioned 86% of leaders are consolidating their technology stacks to reduce complexity and speed up delivery.

The global highlights also pointed to widespread concern about tool sprawl. Cloudflare said 96% of companies struggle with complex tech stacks. It said 85% of leaders are cutting redundant tools and "shadow IT".

Investment outlook

Cloudflare said budgets track with confidence in execution. In APAC, it reported that 72% of leaders expect a significant increase in modernisation investment. It said 53% of lagging organisations expect budgets to rise only "a little bit" in the next year.

Cloudflare stated it surveyed senior leaders involved in IT, security, product, and engineering. It said respondents came from organisations with at least 1,000 employees. It said it collected 2,351 responses across North America, EMEA, and APAC.

Cloudflare Chief Executive Officer and Co-Founder Matthew Prince linked the findings to AI and cybersecurity risk.

"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 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 winners of this era of the Internet will ultimately be defined by their infrastructure," said Prince.