What are legacy systems?
A legacy system is an outdated or near outdated piece of hardware or software that an organization continues to use. Legacy systems are usually guarded with proprietary software that restricts their interaction with modern systems. Further, they are difficult to customize to a growing organization’s needs, unless it is built from scratch. Legacy systems are often used as the collective term to describe old methods, processes, etc. that the organization could be relying regularly upon.
The downside of legacy systems
In today’s cloud-driven environment, relying on legacy systems has obvious downsides to it. These downsides individually and collectively could hinder the growth of an organization and also put it at risk when it comes to meeting global data and security standards.
1. Doesn’t help deliver a positive customer experience
Legacy systems make data accessibility and sharing complicated. Most legacy systems have been developed when mobile devices and cloud computing were in the nascent stages. As a result, they lack the intuitiveness and user-friendliness of modern applications.
Legacy applications that make it difficult for employees to find or share data hinder the pace at which customer service can be provided. Further, it also restricts the level of personalization that can be provided during customer service. All said legacy systems do not help deliver a positive customer experience. This is a serious downside considering Gartner’s finding that CX drives over two-thirds of customer loyalty, which represents more than brand and price combined (Source).
2. Results in exorbitant maintenance costs
Most legacy systems are hardware-driven and require a lot of capital investment in acquiring commodity hardware. Think storage systems, on-prem servers, etc. Even basic utilities like telephony were based on on-premise PBX hardware that is bulky and occupies a large amount of space.
This hardware is difficult to maintain and almost always requires authorized technicians from the vendor for installation, maintenance, and repair. Each maintenance attempt costs in terms of maintenance personnel and also for replacing broken hardware. Calculated on an annual basis, this could amount to a significant amount that every organization would prefer to save.
3. Data privacy and security are at stake
Legacy systems did not always boast of the best security and privacy protection. They were easy to infiltrate and had several security flaws that were not thought of when they were built. Data security threats like eavesdropping, snooping, man in the middle attacks are easy to deploy on legacy systems due to their loosely planned security measures. As a result, the use of legacy systems puts the organization’s data security and privacy at stake. Although this situation can be remedied with additional investments in data security, the results may not match the benefits provided.
4. The threat of becoming digital laggards
Digital laggards are those organizations that are slow to invest in digital transformation initiatives. They follow what other organizations have done and hence miss the first-mover advantage. Most often, they are also late in providing experiences that digitally savvy customers have come to accept as default.
Remaining a digital laggard for too long can even threaten the existence of an organization. Blockbuster getting ousted by Netflix is a good example of how legacy systems or even processes in a digital era can threaten business existence.
In the IT domain, legacy systems can make an organization habitual to specific processes which could be obsolete or even redundant in the digital era. Hence, the need to invest and ramp up modernization efforts.
Don’t be a prisoner of your past investments in legacy systems. Organizations must move ahead with time and keep their IT infrastructure primed with the latest developments.
Why are organizations hesitant to replace legacy systems?
Old habits die hard. Legacy systems are harder to replace. Primarily because the organization has invested a significant amount of money and time into building it up. They would not have anticipated technological advancements to happen at the current pace, turning these legacy systems obsolete.
Further, several other concerns make organizations hesitate to replace their legacy systems.
1. It is a complex process
Switching from legacy systems to cloud-based or similar modern systems requires a significant amount of organizational planning and resources. A proper migration strategy has to be chalked out, plans for data backup and transfer have to be created, and new workflows have to be sketched. Above all, awareness has to be created among employees and stakeholders so that they can adapt and continue without any hassle. This is a complex process and organizations may hesitate to switch from the comfort of legacy systems.
2. It poses operational risks
Revamping even the smallest internal process can have a cascading effect on organizational productivity. It takes employees, both old and new, time and effort to get used to the new regime. A big exercise like replacing or upgrading legacy systems can take a significantly longer time to settle down. Employees could get frustrated while switching to the new system and decide to switch jobs creating a void in their positions.
At the same time, there could be a slowdown in operations due to the time taken for the whole organization to get adapted to the new system. All of these pose serious operational risks that makes an organization think again.
3. It incurs significant costs
The cost incurred to replace, upgrade, or even attune legacy systems to modern requirements is an expensive endeavor. The costs incurred are twofold since the investment in legacy systems would have to be written off and fresh investments made for new hardware or software purchase and their investment. If an organization cannot see positive RoI in the switch, they are more likely to remain with legacy systems until they reach the point of complete obsolescence.
4. It requires multiple stakeholder buy-in
Any major organizational change requires buy-in from all stakeholders involved. In usual business scenarios, the number of stakeholders is minimal since the changes are usually in corporate governance, finance, IT operations, sales & marketing, etc.
However, in the case of modernizing legacy systems, every functional team and its pod of stakeholders have to be involved in the decision-making. Buy-in has to be obtained from all of them since all functions are impacted when the new system is implemented. Securing buy-in from multiple stakeholders in a dynamic environment is another factor that makes legacy systems modernization extremely difficult.
Due to these reasons, many other organizations continue relying on their legacy systems even when they prove to be obsolete. They invest in new infrastructure on a piecemeal basis letting their legacy systems live alongside the new breed of IT systems. This hurts productivity while also suppressing the real results that modern IT infrastructure can provide if they are used optimally.
The three routes to legacy system modernization
Switching from legacy systems to cloud-based systems can be done through three routes.
Replace is the route where the legacy systems are decommissioned and replaced with modern systems that do a better job. Parts of the legacy systems may continue to exist and be used along with the legacy systems. This is particularly possible if modern systems are not available or are not economical compared to legacy systems.
This second approach to modernizing legacy systems attempts to build things from scratch to meet business requirements. This helps in taking a customized approach to business requirements and ensures that the migration from legacy systems to modern systems is seamless and smooth. Given the resources required for building systems from scratch, this is the most expensive and time-consuming modernization route of all.
As the name suggests, upgrading a legacy system is the most economical and easiest thing to do, provided the systems are compatible for upgrading. An upgrade is usually possible in the case of applications that can be ported to a new version along with all its previous settings and controls.
What to consider while upgrading, replacing, or rebuilding legacy systems
Modernization of legacy systems is not a simple activity like purchasing commodity hardware. It has long-term effects that can potentially make or break the organization’s growth prospects. Decision-makers must take into consideration vital aspects before upgrading, replacing, or rebuilding legacy systems.
1. Average workload
On an average working day, what is the workload that the entire organization processes? The proposed modern system should be capable of handling it and also have some buffer space for expansion to accommodate the organization’s needs as and when it grows.
The workload can be computed based on the data computing power required, the number of transactions per day, applications used or hosted on the servers, or similar parameters. To keep calculations accurate and to the point, always add some buffer value to the average workload. This would also help in calculating costs prudently without causing last-minute surprises.
2. Choice of architecture
The architecture upon which the modern system will be hosted plays a crucial role in its reliability. It is akin to the foundation of a building, which if not laid strongly will result in an untimely collapse of the whole structure.
Modern IT systems are primarily hosted on cloud servers — be it public, private, or hybrid. Cloud gives countless benefits including quick scalability, seamless connectivity, and improved data control. Even within cloud computing, there are several choices including selecting vendors who provide cloud services. AWS, Microsoft Azure, and Google Cloud Platform are some of the popular names that organizations both big and small rely on.
3. Capital outlay
The world’s most ambitious projects have been abandoned due to lack of funding. Capital investment plays a huge role in determining how legacy systems will be modernized. Organizations can decide to go all-in and upgrade their systems with high-end hardware and groundbreaking SaaS applications. Alternatively, they can also go for a budget-friendly option that can still serve the organization efficiently.
Any decision that is taken without considering its financial aspects is sure to misfire in the future. Hence, before committing to a modernization strategy, it is necessary to chalk out the entire capital outlay requirement and compare it to the organization’s current and future financial prospects.
4. Operational risks
Modernizing a legacy system is a great way to prepare the organization for a robust future. However, a thorough analysis of the plausible short-term operational risks it will create should be conducted. These short-term risks, if left unattended, could balloon to become permanent fixtures that can reverse all the benefits of modernization.
A decade ago, GDPR did not exist. So did several of the data protection and privacy control statutes that we have today. Data security, both at the organizational level and the end-user level, has been crucial. It is necessary to consider these security compliances and requirements before investing time, money, and resources into modernizing legacy systems.
Tangible benefits of legacy systems modernization
Despite its challenges and concerns, organizations must modernize their legacy systems. It provides the following tangible benefits –
1. Removes organizational silos
Data silos, functional silos, resource silos — are all common challenges that every organization around the world faces regularly. On-premise systems worsen the situation by restricting utility and access only to a handful of users.
Modern IT systems, on the other hand, open up access to all possible stakeholders. It removes organizational silos that could hamper productivity and limit the organization from serving its customers in the best manner possible. As mentioned earlier, modern IT systems are largely cloud-based and can be accessed from anywhere and through any device.
The access controls and privileges can be set by the IT admin to ensure that only authorized employees/personnel can access/use applications. Such centralized management further removes any remaining silos and provides equitable access to applications to all.
2. Gives data-driven insights
One of the key highlights of modern IT systems is that they are data-driven. They come with built-in dashboards that quantify data and present them in a quick and easy-to-digest manner, usually in the form of dashboards. There are default dashboards that provide basic information as well as custom dashboards that can be embellished with additional data layers.
The purpose of these dashboards is to help the organization and its leaders look at data objectively. It gives them insights into data points that were earlier hidden due to disparate systems. These insights can aid in data-driven decision-making, which is the ideal way of running a business compared to guesswork based on instincts and gut feeling.
3. Seamless integration of applications
The average number of software as a service (SaaS) applications used by an organization worldwide during 2021 was 110 (Statista). Imagine each of these applications working as a standalone tool that does not communicate or interchange data with other applications? It would be an operational nightmare. Incidentally, this is how most legacy systems work. Modern systems on the other hand pitch seamless integration with an ecosystem of apps to enable enterprises for better productivity.
4. Better control over regular operations
Modern systems are easier to control and easier to customize. They do not require extensive backend development or coding. Fundamental changes that will go a long way in enabling stakeholders to perform their duties better can be done without technical support.
A simple example would be that of modern CMS systems that have drag-and-drop facilities compared to legacy systems that have code-based interfaces. Modern CMS systems enable businesses to work faster and have total control over how their output should be.
The most obvious benefit of modernizing legacy systems is that it results in cost savings. In fact, by continuing with legacy systems, organizations incur an additional 15% budget increase every year (Modlogix). This can be easily prevented by replacing, rebuilding, or upgrading to modern IT systems the cost of which is predictable and is based on the actual usage. Further, cloud-based applications do not incur hefty technical maintenance or hardware costs which again contributes to cost savings.
Bringing it all together
Legacy systems are outdated and come with a lot of restrictions that are not ideal for an organization functioning in the digital era. Modernizing legacy systems has to be diligently planned and executed. There are three specific routes through which modernization can be attempted – replace, rebuild, and upgrade. Each of the three routes has its own pros and cons and can be best suited based on the organization’s resource availability. Irrespective of the route taken, modernization brings countless benefits that can put an organization on the fast lane to growth.