Legacy Modernization - A different perspective

I have been reading about Legacy issues and plans of organizations towards modernizing their legacy applications/portfolio. For sure, most of these modernization plans and business cases come with promises that yield result in 2-3 years with investments of the order of 10-20 million depending on your portfolio. Key point to note is, the 2-3 years payback time is post implementation, which itself takes close to 2 years.
Given this context, it is apt to understand such programs as big investment plans with change effort and naturally, a long evaluation cycle, good amount of resistance and approvals very well linked to how well industry and organization is performing in market (you need to have money to spend when planning for it). In current economic environment, if IT organization gets a go ahead for such big plan, then I will have to say their case was very well presented. Ground reality is - such plans are not finding their way to implementation in current economic scenario. Hence, there is a need to take a step back and relook the legacy problem
In the last one year I have worked with 3 clients facing similar issues, and have suggested them to approach the modernization solution a little differently than they did done in past. I call this approach Step-by-Step modernization. And in this approach, key levers of improvement are Business Processes, Organization Policy, Applications (technology), Operating environment (includes ways of working). While Application (technology) modernization comes with a good price tag, other levers can yield result with a short lag time. Though, it is not appropriate for me to suggest as to what comes first process/policy/apps, it is essential to understand that this approach does provide you with options with varied payback time and different risks and investment. In two of the three organizations that I worked last year, this has been the fallback options (after getting the big buck plan rejected), though the third organization has found its way towards a 20 million investment in complete change in IT.
I will detail the Step-by-Step modernization approach in my subsequent posts. In the meantime, if you have experiences to share from your organization or clients then it would be a real value. I invite your comments/suggestion/opinions