In the era of digital transformation, modernization of outdated systems is critical. According to Gartner’s 2021 CIO Survey, 47% of midsize enterprises are maturing in their digital initiatives while 40% are still initiating various legacy system modernization approaches. But rather than completely overhaul their old business systems, most companies usually opt for a process of legacy system modernization to update their existing systems to retain their business relevance.
What is a legacy system?
A legacy system is an obsolete program that is still critical to daily business operations. These systems are characterized by outdated architectures, programming languages, and technology that may no longer be supported by current technology. They are found in a tightly coupled environment and feature monolithic architecture that creates compatibility limitations with current IT systems. Even though they may remain functional, they are a burden to companies as they are costly, unreliable, inefficient, and pose serious security threats.
10 reasons to consider legacy system modernization
As businesses grow and technology advances, companies may struggle to meet their goals and customers’ expectations by relying on legacy systems. Modern-day business operations require organizations to upgrade their obsolete systems in order to streamline processes, improve productivity, enhance customer experience, and gain a competitive advantage. This article explores 10 important reasons why businesses should consider legacy system modernization, with highlights of the relevant use cases.
#1 Improved efficiency
Modernizing your legacy system can lead to greater efficiency due to significant improvements in performance. Reducing the time it takes to process tasks increases overall productivity. Outdated architectures are generally slow, inflexible, unreliable, and become difficult to support over time. Meanwhile, legacy system modernization takes advantage of the latest technological advancements such as micro-services architecture, automated processes, and cloud-based infrastructure to improve performance.
Case study: Walmart upgraded its supply chain management system to a modernized cloud-based platform. The cloud-based platform allowed for real-time inventory tracking and better coordination across its vast distribution network. It also improved scalability and reduced operational costs, leading to significant improvements in business operations and customer service.
#2 Enhanced security
Aged legacy systems are likely more vulnerable to security threats. They are often no longer supported and the lack of latest security patches from developers means that they are prone to data breaches. Application modernization leads to better system functionality and better security features. Modern applications are often built with high-level security patches that can help prevent and identify cybercrime.
Case study: Target made significant investments to modernize its cybersecurity infrastructure in the aftermath of 2013’s massive data breach that affected millions of its customers. To strengthen its digital system and prevent the likelihood of future occurrences, the US retailer upgraded its payment systems to use chip-and-pin technology, implemented multi-factor authentication, and regularly conducts cybersecurity assessments to better protect its customer data.
#3 Easier integration
Integrations are complex, challenging, and costly to implement for outdated technologies. As new functionalities are added to legacy systems, supporting and managing them becomes even more complex and in some cases third-party integrations are impossible. Modernizing outdated software involves updating the underlying platform and adopting new data protocols, making it easier to exchange data and integrate the system with other systems. This makes it easier to collaborate across different platforms with customers, business partners, and suppliers.
Case study: Salesforce, a leading customer relationship management (CRM) platform, allows business users to integrate the software with other third-party apps. This functionality lets businesses streamline sales information and centralize customer data, leading to enhanced customer engagement. By using Salesforce, Coca Cola was able to unify its customer data and integrate the CRM with its marketing automation system, thereby improving the effectiveness of its marketing efforts, saving time and money.
#4 Greater scalability
Legacy apps are known to limit business growth and scalability. Customer and business needs change over time and using an outdated technology inhibits a business’s capacity to effectively adopt new technology. Newer systems, however, enable businesses to leverage the latest IT architecture that can cater to fast-evolving customer requirements and growing business needs. By accommodating growth and expansion, modern systems allow companies to scale up or down without significant investment in resources.
Case study: In a bid to scale up rapidly and efficiently to meet its growing business needs, Netflix transitioned to a cloud-based architecture from its legacy data center-based infrastructure. The latter was inflexible, limiting the company’s scalability. Meanwhile, a cloud infrastructure built on Amazon Web Services not only offered scalability to support growing business needs but was also cost-effective.
#5 Lower maintenance costs
Outdated legacy systems require more resources to maintain and troubleshoot. It’s expected that by 2025, legacy system maintenance operations will account for more than 40% of IT budgets. But even with the significant management costs, dealing with cumbersome obsolete apps that fail to meet ever-changing business needs is invaluable. It should be noted that lack of proper maintenance, on the other head, often leads to frequent outages, which lead to even greater business losses.
However, proper legacy system modernization strategies can lead to lower maintenance costs over time, thanks to standardizing technologies and programming languages, reduced downtime, and automated business processes.
Case study: To reduce the company’s maintenance costs and dependency on on-site hardware, General Electric (GE) modernized its IT infrastructure. The company’s initiative, “Digital Thread,” aimed to transform its core business processes and create an efficient digital thread to manage its manufacturing processes. By doing so, GE was able to increase its engineering productivity, reduce the cost of solution execution, and improve its product design quality and robustness.
#6 Better user experience
One of the main factors that differentiates two businesses offering similar products/services is user experience. A business using an old system will likely fail to offer better user experience due to the limited capabilities of legacy systems that cannot effectively support fast-changing customer demands. Tech-savvy customers expect a seamless user experience with the kind of intuitive and user-friendly interface that can only be found in new IT systems. Besides that, the adoption and use of new technologies help enhance employee productivity, leading to increased job satisfaction and productivity.
Case study: Adobe, an iconic software brand, transformed its legacy software products, like Photoshop and Illustrator, into a modernized, cloud-based subscription service called Adobe Creative Cloud. The legacy system migration from traditional desktop software packages to a cloud-based subscription model has enhanced user experience by offering a consistent user interface across different devices. Customers also have faster access to updates and new product features and can collaborate in real time, regardless of device or location.
#7 Access to new features and capabilities
Modern technology provides better access to new innovative features and enhanced functionality. Legacy software is not scalable and as your business grows, it requires new and better capabilities to handle vital business processes and meet customer expectations.
By upgrading the underlying infrastructure, businesses can incorporate the latest tools and software, including featuring advanced technologies such as artificial intelligence, mobile capabilities, advanced analytics, and cloud infrastructure. The new system with new capabilities and features can, therefore, help businesses increase their efficiency and adapt to the changing market.
Case study: To improve its business performance, which was declining due to an outdated Enterprise Resource Planning (ERP) system, Toyota upgraded to a modern platform. The new system allowed the company to collect and analyze large amounts of data from production, the supply chain, and sales. The real-time data and improved predictive capabilities of the system provided the company with valuable insights for production and inventory management, allowing the company to optimize its supply chain, sales, and operational costs.
#8 Improved compliance
The absence of developer support for optimizing an existing code base can make it impossible for an entire system to meet current regulatory compliance requirements. Most business models require meeting international compliance standards, such as the Health Insurance Portability and Accountability Act (HIPAA), Payment Card Industry (PIC), and Sarbanes-Oxley Act (SOX). Obsolete technologies that don’t comply with compliance requirements can leave your business facing huge penalties, as in the case of data breaches or security holes. However, new technologies found in modern systems are more likely to comply with the current industry requirements, ensuring all your business processes comply with industry standards and regulations.
Case study: During the 2008 financial crisis, regulatory and compliance agencies set strict rules for financial companies to mitigate similar crises in future. As a result, JPMorgan Chase modernized its risk management system to better adhere to regulatory standards. The updated system allowed the company to efficiently identify and address possible risks by enabling data monitoring and analysis in real time. Furthermore, the system’s ability to integrate with multiple data sources and provide comprehensive insights has enabled the company to make better risk management decisions. Consequently, the improved financial compliance adherence significantly reduced its risk of fines and penalties.
#9 Increased agility
Successful legacy system modernization can help promote agility, leading to more business flexibility. Outdated software in legacy systems makes it difficult to adapt them to changes quickly, whereas application modernization helps organizations to be flexible and quickly adapt to changing business and customer needs, leading to more agility.
Modern systems also offer improved data analytics, allowing organizations to collect and analyze data, which is important for decision-making and gaining deeper market insights. Overall, an agile business environment is likely to stay afloat in changing times and gain a competitive market share.
Case study: Airbnb migrated from a monolithic architecture to a microservice-based infrastructure. Initially, as the company grew and project deployments got more complex, it became impossible to rely on legacy technology that delayed code deployment and overall productivity. Migrating from the old system to micro-services became a necessity that helped to improve developer productivity and enhance efficiency.
The company was able to rapidly develop and deploy new product features, effectively catering to market changes and customer needs. This was because the new platform with a distributed architecture allowed for the breakdown of the application into smaller independent components with their own codebases and functionalities.
Future-proofing a legacy system is a process of modernizing the old existing system to ensure an organization meets possible technological advancements in the future while still remaining competitive in the highly dynamic digital landscape. Besides that, it helps to eliminate technical debts related to legacy systems that may restrict future development and lead to serious security breaches. The whole process may involve strategies such as adopting cloud technologies, upgrading hardware and software apps, and streamlining processes.
Case study: The New York Times, just like other similar media outlets, experienced declining revenues due to lower readership in traditional print media. To adapt and gain a competitive advantage in the changing market, the company had to embrace modernization, including implementing various future-proofing strategies for its outdated legacy printing system.
- Digital transformation: the media house shifted toward a digital-first strategy and heavily invested in modernizing its online platforms, content delivery systems, and automated systems, which helped to reduce human error, streamline operations, and improve efficiency.
- Cloud computing: to improve scalability and reduce hardware storage costs, NYT moved its publishing system to the cloud. The company’s modernization efforts allowed content to be easily accessible anytime and anywhere. This addition to continuous improvement ensures that the company stays ahead and prepares for future technological advancements.
Even though legacy systems are still critical to day-to-day operations, they are outdated and less efficient in handling core business processes in the current digital era. Therefore, any organization that wants to gain a competitive advantage and meet its customers’ needs should consider modernizing legacy software.
The modernization process helps to improve efficiency, leads to greater scalability, and facilitates easier integration with third-party applications. In addition, organizations can future-proof their systems, allowing them to quickly adapt to new market trends.
Overall, legacy software modernization is essential for any organization that wants to enhance its productivity, reduce operational costs, and meet consumer needs.