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.
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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.
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.
Organizations are exposed to an array of technological and competitive threats from legacy systems. The top risks include:
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.
With such large risks, why do smart executives put up with outdated systems and tools? There are several key reasons:
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.
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:
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.
The next step is rationalizing and simplifying the existing environment rather than just replicating it. Set up an initial modernization program that:
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.
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:
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.
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.
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:
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.
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.
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.
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.
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.
Requires executive sponsorship plus strong program managers. Business and IT stakeholders should collaborate closely from assessment through execution.
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.
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.