Today, many businesses depend on legacy systems that have not been updated. As a result, they can’t create new solutions and cannot compete efficiently.
Legacy systems are the old hardware and software a company uses to perform an integral part of its business. They are systems that are many decades old, using obsolete programming languages and not optimized to meet current business needs.
Article Shortcuts:
- The Hidden Costs of Legacy Systems
- Top Business Risks of Relying on Legacy Systems
- Why Companies Struggle to Modernize
- Four Keys to Successful Legacy Modernization
- Quick-Win Strategies for Getting Started
- Frequently Asked Questions (FAQs) About Legacy System Modernization
Legacy systems are a reliance that companies are quickly passing on.
Those who rely on legacy systems are effectively stuck with inflexible and inefficient processes that slow down growth. Upgrading these old systems is notoriously difficult, as they are complex, poorly documented, and expensive.
Thus, companies sometimes defer upgrades and work around limitations instead of solving the true problem through application modernization services or other means.
This article will discuss the reasons why legacy systems hold companies back, the costs associated with non-modernization, and the best ways of modernizing old infrastructure.
This information is important for technology decision-makers and business leaders who are trying to innovate in today’s digital economy.
The Hidden Costs of Legacy Systems
Fully depreciated assets can be expensive to operate, referred to as the total cost of ownership. This is because with every performance and agility comes a price; maintenance and integration costs escalate while performance and agility wane.
Research shows that around 80% of legacy-dependent companies' IT budgets focus on operationalizing existing systems rather than funding innovation.
As a result, legacy organizations spend more on maintenance than typical companies. Operational failures, cybersecurity breaches, and operational losses also cost companies revenue through lost bookings and revenue leakage.
Outages of legacy technology cost organizations an average of $300,000 per hour. Older infrastructures take almost twice as long to detect threats when breaches occur than when they are updated.
Legacy systems also prevent companies from interacting with customers on modern digital channels. Likewise, they cannot match the speed of innovations in mobility, internet-of-things, cloud computing, and advanced analytics.
Legacy dependency also motivates teams to take up wasted time on a tedious, manual workaround.
With rising maintenance bills and innovation handicaps, legacy systems drain IT budgets and organizational bandwidth. However, many leaders underestimate the actual costs until they become dangerous vulnerabilities requiring urgent upgrades at tremendous expense.
Top Business Risks of Relying on Legacy Systems
Organizations are exposed to an array of technological and competitive threats from legacy systems. The top risks include:
- Cybersecurity Vulnerabilities. The older software didn’t have modern security controls and is not patched anymore to keep it protected from attackers. These breaches result in the loss of sensitive data, regulatory fines, lawsuits, and damage to the reputation.
- System Outages and Failures. Also, aging hardware has more downtime and can result in catastrophic operational disruptions when it finally stops working properly. And Parts and Technicians may not be available anymore.
- Non-Compliance. Legacy systems tend to lag behind even the constantly changing regulatory and compliance standards, forcing organizations into manual compliance processes.
- Inability to Support Business Needs. Rigid, legacy applications cannot adapt in an agile way to changing customer expectations, market dynamics, and innovations. This impacts competitiveness.
- Talent Shortages. Younger workers have little experience maintaining old programming languages, and knowledge transfer becomes challenging as technicians retire.
- Vendor Dependence. Companies that rely on suppliers who no longer support legacy products lose bargaining power and flexibility. They cannot easily switch vendors.
Taken together, these risks form an awkward ticking time bomb that will ultimately defeat productivity, profitability, and continuity. The problems go up and up, and solutions are harder and harder, and there are fewer and fewer of them over time.
Why Companies Struggle to Modernize
With such large risks, why do smart executives put up with outdated systems and tools? There are several key reasons:
- Legacy Upgrade Costs. Due to their complexity, massive upgrade projects often fail and go over budget. In the short term, maintaining existing systems seems cheaper.
- Disruption Fears. Leaders worry about disrupting critical business operations during complex upgrades. So, they delay large-scale changes.
- Unproven Benefits. Since legacy systems currently handle baseline operations, their constraints stay invisible. Leaders are unsure upgrades can deliver a positive ROI.
- Resource Constraints. Forward-looking IT teams get stuck managing outdated systems rather than innovating. There’s no bandwidth to learn and deploy modern solutions.
- Piecemeal Approach. Many IT groups try to work around legacy systems rather than replace them. But integration costs, data silos, and tech debt eventually hinder these efforts.
In reality, legacy modernization done correctly leads to improved resilience, innovation, customer experiences, and operating margins. However, organizations need an incremental, de-risked approach rather than traditional “big bang” upgrades.
Research shows that companies modernizing systems and processes through incremental changes and creativity grow revenues at rates twice as high as peers. Modernized technology also boosts employee productivity by between 10-30% across industries.
The trick is to pick an agile operating method with few upfront costs and a quick payoff. This way, you will never get trapped in gradually building complex integrations around legacy systems and calling it modernization.
Four Keys to Successful Legacy Modernization
A modern strategy that allows companies to get control of their legacy environments in a controlled, step-by-step manner that removes the constraint of innovation. Leaders should focus on four key areas:
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Assessing and Benchmarking Existing Systems
Modernize only those legacy systems that are cataloged and ranked based on factors such as security, scalability, extensibility, data structure, and integration flexibility.
The highest risk and cost areas should be identified as top priorities.
Research typical maintenance costs for each legacy system’s underlying platform right-to-size budgets. Also, the project needs new features and functionality based on business goals for digital maturity.
This benchmarking spotlights the biggest constraints and modernization opportunities. It also informs business cases and measures progress.
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Rationalizing Systems and Information
The next step is rationalizing and simplifying the existing environment rather than just replicating it. Set up an initial modernization program that:
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- Decommission redundant apps, tools, and databases.
- Consolidates data stores and access points through master data management.
- Re-platforms legacy systems incrementally onto modern languages and frameworks.
- Re-architects workflows by orienting them around APIs.
These changes eliminate needless complexity and interdependencies. They also make integrations easier in the future. Rationalization prevents a proliferation of new systems and information silos as modernization advances.
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Adopting Agile Integration Patterns
Consider an agile integration approach rather than pursuing long, sequential modernization projects. This methodology focuses on delivering specific new capabilities in 12-16-week sprints.
Each sprint retires legacy systems, pays back investments, and unlocks value rapidly in a controlled fashion. Examples of sprint goals include:
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- Launching a customer portal for self-service transactions
- Automating manual processes with robotic process automation
- Developing a data lake and analytics dashboard
- Moving a legacy system into a cloud-native containerized architecture
- Exposing core legacy functions through modern APIs
Agile integration also means using flexible, low-code platforms rather than extensive custom coding. Low-code tools speed deliveries with drag-and-drop interfaces, templates, and automation and abstract away unnecessary complexity.
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Scaling Modernization Systematically
The final key is scaling modernization systematically across the organization after agile methods demonstrate success. This requires governance to sequence the retirement of legacy systems while ramping up new capabilities.
IT groups need strong program management skills for this sustained, strategic transition. The goal is to embed skills in areas like cloud-native development, APIs, and customer experience design for the long term.
Training and organizational change management also help smooth such a pervasive transition. With consistent governance and communications, companies can migrate fully to modern platforms over several years without downtime or disruption.
Quick-Win Strategies for Getting Started
Legacy modernization might seem intimidating. But getting started is often the hardest part. Leaders should focus first on a few quick wins. Good options include:
- Launching a customer portal, self-service app, or digitized process to demonstrate modernization value.
- Exposing legacy system functionality through APIs to enable integration.
- Developing a cloud data lake to offload reporting from transactional systems.
- Containerizing a legacy application to improve portability and resilience.
- Automating manual processes for rapid productivity gains.
These modest efforts create momentum while delivering positive ROI through hard-dollar savings or increased revenue. Quick wins make the case for further modernization investment.
Over two or three budget cycles, the initial successes compound as legacy systems are systematically phased out. Companies build internal skills, platforms, and integration architectures that support constant improvement.
With an agile integration approach, modernization activities continue indefinitely rather than ending after a single “big bang” project. This drives continuous innovation and sustains competitive advantage.
However, it requires an executive commitment to change existing budget models and upgrade methodologies.
Frequently Asked Questions (FAQs) About Legacy System Modernization
1. How long does legacy modernization take?
With an agile, incremental approach focused on delivering value in 12-16 week sprints, companies can fully modernize over 2-3 years. This prevents business disruption while allowing for continuous innovation.
2. What are examples of quick-win legacy modernization projects?
Good quick starts include launching customer portals, exposing APIs, building a cloud data lake, containerizing applications, and automating manual processes. These create momentum for further modernization.
3. How much does it cost to modernize legacy systems?
Costs are manageable if tackled incrementally in phases based on priority. Savings from increased efficiency and innovation offset much of the modernization investment over time.
4. What skills are needed to maintain modernized systems?
Modern platforms utilize simpler coding languages, low-code tools, cloud services, and newer architectures focused on APIs. This eases the talent shortage faced when managing complex legacy systems.
5. Who should lead a legacy modernization initiative?
Requires executive sponsorship plus strong program managers. Business and IT stakeholders should collaborate closely from assessment through execution.
Final Considerations
Clinging to legacy systems virtually guarantees declining market share, technical debt, and disruption risks. However, most companies rely on antiquated technologies because traditional modernization approaches are not suitable.
Instead of giant projects, companies should pursue incremental modernization sprints focused on tangible benefits. This requires assessing the current environment, rationalizing systems proactively, leveraging user-friendly integration tools, and scaling through strong governance.
Embracing constant, non-disruptive upgrades also prepares organizations for a cloud-centric digital economy. Companies that modernize continually will outperform peers stuck reacting to technical debt crises and compliance failures.
By treating modernization as an ongoing business priority rather than a temporary IT project, leaders can break legacy dependency. This unlocks resources to fund the latest innovations and experiences that underpin sustainable growth.
The time for piecemeal workarounds has passed. However, by learning from legacy modernization best practices, companies can transform today’s constraints into tomorrow’s competitive differentiators.
Author Bio
John Smith has over 5 years of experience as an IT consultant specializing in legacy modernization. He helps global companies incrementally upgrade legacy systems to enable digital transformation and cloud adoption. John focuses on pragmatic approaches that balance business benefits with technical progress.
