Well, this title is not clickbait. The problem with the legacy systems is real, and unfortunately, it’s not unusual for decision-makers not to see the whole picture. Using old, no longer supported technologies and frameworks and outdated infrastructure is a common problem that affects plenty of organizations all over the world, slowing down their growth and making them less competitive. Why does this happen? Making a long story short, the costs of transformation to modern solutions seem huge, compared to monthly spending related to legacy system maintenance. But, in most cases, the truth is completely opposite. In this text, we want to show you why almost no one can afford to maintain a legacy system, and that investment into digital transformation would solve more problems than one might expect.
What is a legacy system?
Before we move to the cost of legacy system maintenance, let’s quickly recap what legacy systems are. According to Gartner legacy app is “an information system that may be based on outdated technologies but is critical to day-to-day operations”. What you should keep in mind is that while Gartner includes only systems that use already outdated technologies, many companies utilize systems written in technologies that while still being supported are rapidly developing – in such case if the system is not regularly updated, the risk of it becoming incompatible with more modern solutions is getting higher and higher. Thus, it might not be a long period before the software could be described as a legacy. So, if you’re building your product from scratch remember to analyze what technologies have the potential to last the longest, and remember that time spend on improvements and refactoring should be treated as an investment rather than cost, so you won’t end with a legacy app. But protection before falling into the world of legacy apps is not the matter of this text, so let’s go back on the right track.
Over the last years, the importance of legacy system modernization is being raised by more and more experts all over the world, making it an issue that keeps managers up at night. To better show you the scale of the problem, before diving into costs related, let’s take a look at some statistics. For example, according to the MIT Technology Review report, the legacy system is the main roadblock of moving to the multi-cloud environment, as stated by 62% of the interviewed IT leaders. But Cloud adoption is not the end of the story. According to the Gartner survey, 45% of respondents stated that “application modernization of installed on-premises core enterprise applications” is one of their current top five IT project priorities. These reports indicate that modernization is not some kind of daydreaming, but something that should be done as fast as possible.
Knowing this we can move to the main part of this blog and analyze step by step what the cost of legacy systems maintenance is and why no one can’t afford it. Yet rather than starting with maintenance costs in general, we are going to list and briefly describe the most important elements that sum up to the final astonishing numbers, so be sure to check all the paragraphs.
Rather than slowly and gradually getting to the biggest costs of legacy system maintenance, let’s just start with full speed. Nowadays security is an extremely important matter, and companies put a lot of effort to protect their data from malicious attacks. According to IBM research average total cost of a data breach is around USD 3.86 million, so it’s no surprise that everyone wants to be rather safe than sorry. But if apart of all the security measures a company upholds, they would maintain a legacy software, they leave a wide loophole for all kinds of cyber-attacks and remain much more vulnerable than in the case of utilizing modern software solutions only. Why? Legacy software is often no longer supported, so it’s not being updated to current standards and does not include protection measures relevant for the modern threads. What’s more, if you work with in-house software, and have developers knowledgeable enough to expand it, it still may not be capable to address all the potential vulnerabilities due to the technical limitations related to old technologies.
How big is the risk? We can for example look at British Airways who according to ICO official statement “was processing a significant amount of personal data without adequate security measures in place” and had been billed with £20 million fees since ICO investigator found that BA “ought to have identified weaknesses in its security and resolved them with security measures that were available at the time”. This example perfectly illustrates why companies should always update their systems to current security standards, and if the legacy system cannot meet these don’t think twice before starting to plan system modernization, as the risks it poses are horrendous.
Talent acquisition and retention
Working with a legacy system will make your life harder and more cost-demanding when it comes to both talent acquisition and retention. Nowadays the technology is changing on an almost daily basis, best developers work their fingers to the bones to stay on track of all changes and improvements, and want to use this knowledge at work, rather than utilize old, sometimes almost forgotten technologies. Thus, the older your tech stack is, the fewer people familiar with it would be in the talent pool, and even fewer people would want to take such a job. For example, we can take a look at the PwC survey, which shows that 59% of Millennials state that employer’s provision of state-of-art technology affects their employer choice and that almost 80% of them said that access to the technology they like to use makes them more effective.
But it’s not only hiring that would become more and more challenging and costly due to working with legacy systems, but it’s also employee retention. For those who feel secure, having team experienced with their legacy system and technologies used – don’t be fooled that they would stay with you forever. According to the State of Software Happiness Report 2019, more than 50% of employees are unhappy due to the tools they need to use at work, and around 24% of employees state that software they are forced to use at work makes them consider a job change. As it implicates, utilizing legacy software will make not only hiring but also retaining talents harder, and thus require more and more resources to be spent to compensate for legacy-related inconveniences.
Performance issues and technology limitations
This paragraph would especially be relevant for all of those who think that “if it’s working, we shall keep it as is”. Well, the question one should be asking is not “if the system is working”, but rather “how well does it serve its purpose” or “how upgrading the legacy system would boost our overall effectiveness or capabilities”. Previously we said that having a legacy system would make it harder to acquire and retain talent since people want to work with the latest technologies and these technologies are not an “art for art’s sake” – these constant improvements are supposed to allow doing things that a few years ago were beyond our imagination. Let’s simply look at an extreme example, mobile devices which now most of us can’t live without – the first smartphone was released in 2008 which is not so long ago, and changed the whole market once and for all, enforcing companies to adapt their solutions to these new technologies. The longer one decides to maintain a legacy system without implementing improvements the more the technological gap would be visible, and that can affect not only your employees but also clients if the system is client-facing. To back these two theses with some stats we can refer to an English study which found that in 2015 “48% of UK employees waste three hours or more a day working with inefficient systems”, and when it comes to client experience take a look at Flexera 2020 CIO priorities report, that indicates customer experience being the main driver of digital transformation efforts, rated by 69% of respondents as very important.
What’s more, the technical debt incurred by legacy code makes it much more difficult and costly to introduce new features needed by the business or to change existing ones, thereby limiting the potential to create business value. For example, we can look at the modern solutions that are now being adopted by businesses all over the world like APIs connections, Big Data, Machine Learning, or AI. All of these are meant to improve the business model and thus company performance, and lots of elderly systems make it simply very difficult to integrate with new technologies, or even if this connection is possible, the cost of integration with external service might be enormous in case of for example monolithic applications. Thus, while “the system works” one should consider how the limitations hold the company back, and if the competition’s ability to include all these modern solutions in their systems would allow them to get ahead simply due to technical possibilities that are beyond your reach.
Cost of maintenance
Last but not least, the overall costs of maintenance, and rather than beat around the bush, let’s dive straight into some statistics. Studies show that among businesses that utilize the legacy system, the greater portion of their whole IT spending is related to these systems’ maintenance. For example, according to the PricewaterhouseCoopers report, among insurance companies maintaining such a system makes up for about 70% of the whole IT budget. But the Insurance industry is not something unique when looked at from this perspective. The cut of the budget is similar among Banks as stated by authors of “Managing legacy system costs: A case study of a meta-assessment model to identify solutions in a large financial services company”. This number is probably similar among other industries as well since the cost of legacy systems maintenance is caused by their outdated character and problems related and it’s almost certain that with each passing year, the maintenance of the legacy system would cost more and more, as the problems would build up.
Modernization is the only way to stay afloat
We could go on and on with this list, mentioning problems with integration, stability, and following issues causing problems for legacy system owners, yet these 4 general matters are not only the most important ones but in general cover the rest (integration problems are a part of technology limitation, while stability impacts performance and general costs). Thus, each month spend with the legacy app, without considering its modernization and undergoing digital transformation might be considered as wasted time – the company burns money and loses competitive advantage against those who use the latest technological solutions, and as results can solve their clients’ problems more effectively. Yet, we are completely aware that digital transformation is a complex process, that requires extensive experience to be run successfully. We’ve been there, we’ve done that, and now we’re happy to share our experience with each step of the way from initial planning, through the whole development and further maintenance. If you want to talk through your needs and see if we can help, simply use the contact form – we are eager to share our experience and positive that a non-binding talk can only bring something valuable for both sides.
About the authorLeszek Czarnota
Director of Digital Growth
A Director of Digital Growth with over 20 years’ experience in the IT industry, Leszek combines a technical background in application development services with business knowledge from the financial and telecommunication industries. This extensive experience and passion for innovation enable him to create and implement effective strategies for generating new business.