A Business Guide to Legacy System Modernization

Another question that often arises is: Where do you start with IT infrastructure modernization? It definitely requires proper planning, because you don't want to break your budget, and at the same time, you want your infrastructure to keep running smoothly. That's exactly why we're sharing modernization strategies you can use for a smooth legacy system upgrade.

Well, a good starting point is simply looking around at our current setup. Are you seeing a continued climb in what it costs just to maintain? Is it becoming a blocker when we try to adopt new tools? Or, are your teams spending more time fighting the tech than actually getting things done? These are the kinds of real business impacts that can signal it's time to seriously consider an upgrade.

The Hidden Benefits of Legacy System Modernization

Many organizations continue using outdated systems simply because they still work. The logic is straightforward: if it’s not broken, why fix it? So they avoid putting in the time, energy, and resources needed for modernization.

1. High maintenance cost

According to a 2023 report, COBOL, a 64 year old 45 old programming language, is still being used by a large number of federal agencies. The COBOL workforce is aging, with the average programmer now older than 50, and most universities do not teach it. Subsequently, it became challenging for the business owners to switch to COBOL, leading to high development costs and a longer development cycle. 

Therefore, for many organizations, finding COBOL programmers is now difficult. Several companies report that the demand for specialized roles is adding to the recruitment costs and hiring cycle. On top of that, obsolete systems don't integrate well with modern platforms, proving to be a substantial challenge to modernization strategies. 

They often need middleware or third-party solutions that add to the IT maintenance budget. These rising costs, coupled with the increased risk of system failures and the inability to leverage modern technological advancements, build a compelling argument for the strategic modernization or complete replacement of such legacy infrastructure.  

2. Security vulnerabilities

In 2017, a global ransomware attack hit more than 200,000 computers worldwide, affecting about 80 of the 236 UK National Health Services (NHS) trusts. It was partly due to its use of outdated and unpatched security systems. 

A few years ago, Windows XP was everywhere. Offices, banks, even ATMs, all use it. But Microsoft stopped supporting it in 2014. Still, many businesses continue using it. Now here's the issue: once support ends, there are no new security updates. And then the system becomes an easy target for cyberattacks. 

Even today, many companies are still using legacy systems and outdated technologies. Kaspersky, in its report, notes that more than 40% of companies still rely on outdated software for their critical infrastructure. Once vendor support ends, these systems become more vulnerable to security risks. 

For example, the Apache Struts flaw from 2017 ended up costing a company $575 million in settlements. Protocols like SHA-1 and TLS 1.0 are no longer considered secure because they can now be decrypted. We're seeing more and more cases where these types of encryption are proving to be unreliable. That's why the digital world is now shifting towards quantum encryption, since traditional technologies no longer seem completely secure.

But security isn't the only concern. In sensitive industries like fintech and healthcare, developing in a way that meets regulatory standards is also a big challenge for developers.

3. Lack of Vendor Support

Major manufacturing companies still operate on legacy industrial control systems that are no longer supported by their original vendors. Recent surveys from 2024 indicate that at least 40% of manufacturing units rely on outdated software that no longer receives security updates or technical assistance, including assembly line equipment, quality control systems, and even systems used in some power plants.

Another contemporary example is the upcoming end-of-life for a prominent Indian accounting software. Currently, thousands of small and medium-sized enterprises (SMEs) operate on older versions of this software, and they will need to migrate to a new platform or face higher costs for extended support and maintenance, as well as a lack of future development.

In other words, these legacy tools may still perform their intended functions adequately. However, due to the absence of vendor support, they are becoming increasingly outdated and would require significant investments to bring them up to modern standards.

A Framework for Legacy System Transformation

We've successfully executed over 50 modernization projects so far. You can use this framework to simplify your infrastructure modernization.

1. Analyse your infrastructure

Before moving ahead, businesses must understand their IT infrastructure. Thoroughly document the legacy systems/applications. Then evaluate them from a business and technical lens. On the business side, keep three factors in mind: 

-Fit (does the app align with current goals?)

- Value (does it support business outcomes?)

- Agility (can it adapt to change?).

From a technical perspective, consider the ownership cost, implementation intricacies, and probable risks associated with them. By recording these important points, companies can build a strong roadmap for IT infrastructure modernization.

2. Plan strategically

This phase involves creating modernization goals and objectives. Once the goal is clear, it's time to move to choosing a different modernization option. Pick the best approach based on your budget and time. A strategic plan should outline timelines, resource allocation, key performance indicators (KPIs), and a roadmap to digital transformation. 3.

3. Implement and deploy

In this phase, applications are prioritized based on business implications and risk. Once applications are prioritized, the selected modernization strategies are executed and may include data migration, wrapper new systems around the legacy systems, building new applications, or some combination.

After implementation, the modernized applications require management of the deployment which often a phased rollout. Also, as part of this, there will need to be ample employee training on the new modernized systems, and support services must be developed and established to support the transition to modernized systems and to help reduce disruption.

Modernization Options

Organizations can employ several common strategies when modernizing legacy systems, each with its own advantages and considerations:

1. Replace the Entire System (Rip and Replace)

This involves a complete overhaul. The legacy system is entirely discarded, and a new, modern solution takes its place. While potentially offering the greatest benefits in terms of performance and features, it can also be the most complex and resource-intensive approach.

2. Re-platform

This strategy focuses on migrating the existing application to a new infrastructure, such as different servers or a new operating system. It avoids significant changes to the core functionality. This aims to improve performance and reduce infrastructure costs while preserving the application's core business logic.

3. Re-architect

This fundamentally changes the application's architecture. Often, it breaks the system down into smaller, independent services known as microservices. This approach enhances scalability, maintainability, and resilience, allowing for more agile development and deployment.

4. Enhance/Extend

This strategy focuses on adding new features and functionalities to the existing application instead of replacing or significantly altering the core system. This can address specific business needs or integrate with newer technologies while leveraging the existing investment. 

4. Migrate to the Cloud

This involves moving parts or the entirety of the legacy system to cloud-based services. This can offer benefits such as scalability, cost-effectiveness, and improved disaster recovery capabilities. Different cloud migration strategies exist, ranging from simply "lifting and shifting" to fully re-architecting for the cloud.

5. Build custom applications

This approach involves building new, modern applications that can either integrate with existing legacy systems or gradually replace specific functionalities. This allows organizations to address specific business needs and enhance customer engagement with modern interfaces and capabilities while strategically phasing out outdated components.

6. Continuously optimize

The modernization journey does not end with deployment. Continuous monitoring of the modernized systems is essential to track performance, identify potential issues, and gather user feedback.

This data-driven approach allows for ongoing optimization and iteration, ensuring that the modernized environment continues to meet evolving business needs and delivers the anticipated benefits, such as improved efficiency, enhanced data management, and greater agility. By embracing a continuous improvement mindset, organizations can maximize the long-term value of their modernization investments.

Strategic Imperatives in Legacy Modernization

Approaching this decision with a clear understanding of the business landscape and potential implications is paramount. Several critical questions warrant careful consideration:

1. Align goals with tech

What are our fundamental business objectives, and how can modern technology act as a catalyst to achieve them? Understanding this alignment will prioritize modernization efforts and ensure investments yield tangible business outcomes.

2. Spot system pain points

What are the most significant frustrations and limitations imposed by our outdated systems? Quantifying these pain points, and their impact on productivity, customer satisfaction, and operational costs, underscores the urgency and necessity of modernization.

3. Set budget and timeline 

What is a realistic financial commitment and timeframe for this transformation, considering both direct and indirect costs? A phased approach can help manage both budget and timelines effectively. A clear understanding of the return on investment (ROI) is crucial.

4. Look at risks & fixes

What are the inherent challenges associated with this undertaking (e.g., data loss, integration issues, resistance to change)? Proactive identification and robust mitigation strategies are essential to minimize disruptions and safeguard the investment.

5. Check internal resources

What are our in-house IT capabilities? Do we possess the necessary skills for planning and execution, or is external support required? Understanding existing skill sets informs decisions about the modernization approach and the level of external assistance needed.

6. Consider custom app dev

Exploring custom application development becomes a relevant consideration within legacy modernization under specific circumstances:

7. Tackle unique process needs

When the company's core operations rely on highly specialized or proprietary processes that standard software cannot adequately support, custom development allows for the creation of applications precisely aligned with these unique requirements, potentially offering a significant competitive advantage.

8. Fix integration issues

Integrating with deeply entrenched legacy systems can be challenging and costly with off-the-shelf solutions. Custom-built middleware or integration layers can provide a more seamless and efficient flow of data and processes.

9. Boost customer engagement

For businesses seeking to create unique customer experiences through tailored interfaces or functionalities not available in standard platforms, custom app development offers the flexibility to build bespoke solutions that directly address customer needs and foster brand loyalty.

10. Stand out strategically

Building custom applications can provide a distinct technological edge, setting the business apart from competitors and enabling the delivery of innovative products or services.

11. Go for gradual replacement

Custom development can facilitate a phased approach to replacing legacy system components. New, modern applications can be built to address critical pain points or new requirements while still interacting with the older systems, allowing for a less disruptive transition.

Ultimately, business owners must weigh the costs and benefits of custom development against off-the-shelf solutions. However, when strategic alignment, unique operational needs, or enhanced customer engagement are paramount, custom application development can be a powerful and strategic tool within a broader legacy modernization initiative.

Conclusion

The decision to address legacy systems is not merely about updating technology; it represents a critical investment in the long-term viability and success of your business. While these foundational systems may have served your organization well in the past, their inherent limitations increasingly hinder agility, escalate costs, and expose you to unnecessary risks in today's rapidly evolving digital landscape. Proactive consideration of legacy system modernization is therefore not a luxury, but a necessity for sustained growth and competitive advantage.

Looking ahead, the integration of modern technology unlocks significant potential for innovation and expansion. By embracing contemporary platforms and architectures, businesses can streamline operations, enhance customer engagement, and adapt swiftly to market demands. In this journey, the possibilities offered by custom application development stand out as a powerful tool. Tailoring solutions to your unique business processes and customer needs can create distinct advantages, fostering deeper relationships and enabling the delivery of differentiated value.

Investing in the modernization of your technology infrastructure is an investment in your business's future. It paves the way for greater efficiency, enhanced security, and the ability to capitalize on emerging opportunities.

Explore our resources on digital transformation to learn more about how modern technology can empower your business, or contact us for a preliminary discussion about your specific technology needs and modernization pathways.