Do you feel that your enterprise system doesn’t let your business move forward as fast as you’d want? The chances are, your system might require updating. Learn what strategy to take to update your software with minimal necessary effort

What is a legacy system?

Usually, by “legacy” system, people mean “old.” Legacy systems were great some time in the past, usually between 2000 and 2010, but now that new technologies have emerged, they’ve become obsolete. Without legacy system modernization, businesses suffer from lots of consequences. As companies change, they develop and purchase new software to provide their customers with better products and services, and they try to integrate this new software into their existing systems. This is where the problems begin.

“Legacy” doesn’t always mean “old” – an architecture that slows your processes down can also make your software need modernization

A legacy system definition doesn’t always include age, however. Even a system that’s a couple years old can be insufficient because of poor architecture decisions, the wrong technology, a lack of scalability, and so on.

A legacy system is any system that hampers further development, doesn’t allow for the easy integration of new features, and slows down a business’s day-to-day operations. In short, a legacy system is hard to maintain, support, and extend.

How legacy systems hold businesses back

Most business processes rely on legacy systems in daily operations, and supporting them requires lots of effort and money. Each time you want to integrate a new piece of software, you need to confirm that it’s compatible with your current system.

As technology evolves, new software stops supporting outdated technologies and becomes incompatible with them. This slows your business down, as you can’t make new and old software work together. And even if you manage to do so, integrating new software into a legacy system requires significant IT support and custom solutions that make the code bulky and hard to maintain.

All this makes legacy systems one of the most prominent challenges for both small and large businesses. According to a survey by Deloitte, upgrading legacy systems is the third biggest challenge for businesses:

application transformation strategy
Updating legacy software is high on enterprise digital transformation challenges

According to a survey of CIOs by Logicalis, over half of CIOs surveyed spend 40% to 60% of their time managing obsolete systems instead of developing a further technological strategy for the business. If this time was used more productively, businesses could move forward much faster.

Surely, modernizing a legacy system isn’t easy, and it’s not a once and done activity. According to Flexera, most products have a five-year cycle. This means that each system you build for your business has to be revamped at least every five years. In most companies, however, systems function for 10+ years, until they can’t be maintained and scaled at all.

legacy systems vs modern systems
Most software products need revision every 5 years

Because businesses need to update their software relatively often, few actually manage to overcome operational challenges and start to upgrade their software. As a result, 31% of technology in most organizations consists of legacy software according to Avanade.

What does this cost businesses? In terms of growth, legacy systems slow down business development, keeping organizations from optimizing their processes with the help of new software.

In terms of finances, losses are even more noticeable: according to Metaphorix, companies spend on average 60% to 80% of their IT budgets just to keep obsolete systems running instead of investing this money into something new and better. The most tragic thing about this situation is that each year, a system will require more and more time, effort, and resources for maintenance.

Companies spend 60% to 80% of their IT budgets on maintaining obsolete systems

Though modernizing legacy systems is the best — and, frankly, the only — approach to staying competitive, it’s also a major challenge for companies. According to a 2020 report from Advanced, 74% of all companies that start the legacy modernization process fail to complete it.

The major reason is lack of funding: only 12% of surveyed managers reported sufficient funding for their modernization activities. At the same time, 53% reported they fail to get necessary funds and commitment from their leadership teams because of fear of change.

10 reasons to modernize your legacy system

1. Real costs of keeping a legacy system

Money isn’t the only thing companies sacrifice when they don’t modernize their systems, but it’s a significant part of what you lose with an outdated system. Monetary losses happen each time your competitors get an advantage with a new piece of software you can’t integrate because your system doesn’t support it. Each dollar your competitors make is a dollar you’ve lost: this is called lost business opportunity.

Apart from that, there are some clearer and more tangible expenses for:

  • maintenance, the cost of which increase each year
  • dealing with repeated and archaic code
  • managing a growing number of support tickets
  • trying to integrate new pieces of software
  • supporting multiple data centers
  • wasting way too much time on scaling your product

All this takes up over half of the IT budget for many companies. Is upgrading to a new system more costly than staying with what you have now? We’ll discuss this later.

2. Security issues

As software evolves, hackers evolve as well. They come up with new ways to infiltrate systems, and legacy systems are the most susceptible to attacks.

As the number of bugs, inconsistencies, and legacy code increases, a system becomes more vulnerable. Entry points for hackers also appear in third-party libraries, frameworks, and other software.

Each product you use in your system should be regularly updated, as developers of those products release patches that patch potential vulnerabilities. However, legacy systems usually can’t keep up with new versions and stop supporting them.

3. Compatibility with newer software

Legacy systems that are built with old technologies or structured in such a way that it’s hard to add anything are incompatible with most new software. While competitors increase their efficiency and consequently revenue, your IT department needs to come up with ways to integrate new products into a big system.

Compatibility issues are huge for legacy systems: often, you can’t integrate anything new without breaking the business process, which isn’t acceptable for a business that has many people depending on it. There are three options to choose from:

  • Stay with what you already have but lose your customers to more advanced competitors
  • Adopt new technology but keep it separate from your system (which makes it hard for employees to synchronize their data, processes, and work)
  • Start modernizing your legacy system

At the end of the day, you’ll need to choose the third option to stay competitive, but the costs of legacy application modernization will grow each year you delay.

Let me give you an example. Say you’re the owner of a logistics company. You have a large system that coordinates managers, drivers, warehouse workers, and so on. Once a new technology appears — for example, an AI-based tool for supply chain management — you won’t be able to integrate it into your current system. Once your competitor does integrate this tool, however, they’ll be able to work more efficiently and offer new possibilities to their clients: for example, one-day delivery.

This means that each day you postpone modernization, you lose more and more money that is instead made by your competitor. Moreover, each day your system becomes more obsolete, and it’s becoming harder to modernize it in the future.

4. Increasing maintenance costs

I’ve already stressed that with time, the costs of maintaining your system will only grow. These maintenance costs go toward refactoring, code review, updating libraries, and other common maintenance activities that are inevitable for any software. The difference with a legacy system, though, is that each of these activities will be a constant challenge, and something will always be a bottleneck.

Also, remember that legacy systems are prone to breaking and lagging. According to Statista, for over a quarter of all companies, an hour of server downtime costs between $301,000 and $400,000.

legacy modernization mainframe
Even a temrorary system breakdown can cause million-dollar losses

To avoid this, modern systems use AI-based products that are able to quickly detect a breakdown and immediately report it to get things back on track as soon as possible. Older systems, however, can’t use this AI-based technology, as it’s impossible to integrate. This makes it hard to quickly react to any malfunction and restore the system.

5. Employee demotivation

It’s easy to get frustrated when you work with an outdated system that constantly messes with your work. Crashes, having data stored in different places, and the inability to use newer, better software can make work torturous.

Moreover, with an outdated system, it’s hard to attract new employees to work in your company, as people understand that working with outdated technology won’t look good on their resumes and won’t further their careers.

Demotivating your workers will make them leave, and you’ll need to put extra effort into retaining those who know how to use your legacy system and teach other employees.

6. Decreased productivity

Dissatisfaction with work and a lack of new technologies in a high-paced environment will inevitably cause decreased productivity. Upgrading your legacy system can result in a drastic productivity bump.

One of the greatest examples of legacy software that brought great results after modernization that we’ve encountered was a logistics company. We enhanced a client’s logistics system with a React Native chatbot. When we integrated the chatbot into the system, the client was able to unload their call center support and answer common queries of 70% of all contacts. Eventually, 41% of all requests were fully resolved with the chatbot.

Integrating a chatbot allowed our enterprise client to resolve 41% of all issues without the help of human support

This allowed our client to save money and time on call center operations and improve the customer experience, as users were able to get answers to their questions immediately.

It also increased productivity, as human operators were able to resolve complex issues without having to answer simple questions.

7. Inefficient operations

Inefficient legacy software results in inefficient work processes. Think about old organizations that use Excel sheets, outdated operating system versions, and a dozen different products to coordinate employees instead of having a modern CRM that allows them to store all their information in one place.

As a result, employees in such organizations have to look for what they need in different places, and it’s hard to train newcomers.

8. Poor customer service

If you have customer-facing software that doesn’t reflect modern trends, your customers will most likely leave you for a competitor that provides a convenient and user-friendly service.

A great example is mobile technology. People are used to having everything on their phones, and if a business doesn’t provide a mobile solution, it misses out on a large potential audience.

However, having a mobile solution isn’t enough: because competition on the mobile market is so high, obsolete apps rapidly lose users. People use apps with great designs, smooth performance, and the latest technologies that add value to the services they already get from a business.

9. Loads of unstructured data

According to ZDNet, 45% of all companies run big data workloads in the cloud. As stated in a Forbes publication contributed by Louis Columbus, 53% of companies are adopting big data analytics, and the biggest problem with big data is loads of unstructured data: over 95% of businesses list a need to structure their data as one of their biggest challenges.

Running big data in the cloud is a trend that allows for more efficiency and scalability for enterprise companies

Because legacy systems often use outdated data formats that aren’t supported by modern products, if they integrate with something new, they need to convert data into a new format. The reality is that most companies continue to store old data in outdated formats while piling up new data.

This mix of data is hard to unify, manage, and analyze, so you risk never using your big data analysis platform you invested in.

10. Reputational damage

Clients, businesses, partners, agents, managers, suppliers, and other actors that are involved in your business or are interacting with it will notice your outdated processes even if they don’t personally use your software.

Such things as customer satisfaction and employee loyalty influence your brand reputation. Outdated systems that nobody wants to work with can damage your reputation and make attracting new customers and employees a bigger challenge than it has to be.

Now that we’ve discussed all the reasons a legacy system can damage a business, let’s list the legacy modernization benefits.

4 reasons to start modernizing your legacy system now

1. Get ahead of competitors

Your competitors may also have outdated systems, but you never know when they plan to upgrade them. Time is vital, as modernizing a legacy system isn’t a quick process. If you put it off until your system isn’t able to support your daily operations, it may be too late.

Get the flexibility to change and adapt before your competitors to get the advantage of being first.

2. Turn new customers into regulars

Great service is what makes your customers return again and again. New systems that don’t lag and don’t let people down when they’re needed help to provide great service.

A system that works with new products allows you to be flexible and quickly integrate additional services. For example, you can integrate augmented reality (AR) functionality into your customer-facing mobile app to enhance the customer experience or encourage customers to visit your app more often.

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3. Use the latest technology to your advantage

The latest technologies like augmented reality or virtual reality (VR), machine learning, big data, blockchain, and chatbots can help businesses grow extremely fast. How exactly? AR and VR can help your workers on-site and enhance your customer experience. Big data can help you personalize your service and target potential and existing customers with the right offers at the right time.

However, integrating such technologies requires the latest software. Only by modernizing your legacy system will you be able to upgrade your business processes and services with the help of these technologies.

4. Cut expenses and increase revenue

At the beginning of the legacy system modernization journey, you’ll probably need to invest significant resources into new technologies and systems. However, supporting them will be much cheaper in the long run, unlike supporting your legacy system, which becomes more and more expensive each year.

New possibilities like optimizing your business processes and being able to complete tasks faster than you previously could will lead to revenue growth. If you modernize your customer-facing applications, you’ll be able to grow your user base and further monetize new features and services.

Top 7 approaches to modernizing a legacy system

So you’ve decided you want to roll up your sleeves and start modernizing your legacy system. Now you need to figure out the best way to do it. At first glance, there are only two legacy system modernization approaches: develop a new system from scratch or rebuild what you already have. These approaches are called revolutionary and evolutionary, respectively.

The revolutionary approach means you completely abandon your old system and build a brand-new one. This is the most radical legacy modernization approach, and it isn’t always necessary. However, there are cases when there’s no other choice: for example, if your current system is so overloaded that security risks are inevitable and the system can’t sustain itself any longer.

The evolutionary approach is far less radical, as it involves a gradual, planned legacy software modernization that allows for a flexible transition without risks and the downtime required for building a new system and teaching staff to use it. The evolutionary approach is the best option when your current system is still working, only not as efficiently as it could.

The challenge of the evolutionary approach is to integrate new elements into the existing system and conduct modernization while also being able to use what you already have. To pull this off, you’ll need experts in enterprise system architecture and talented engineers.

Evolution of your software should become a priority in your enterprise resource planning (ERP), so you can allocate necessary resources to constant updating of your system.

Though I’ve mentioned only two approaches to modernizing legacy systems, there are many approaches to modernization, and most application modernization best practices fall into the evolutionary category. According to Gartner, there are seven approaches to modernizing enterprise legacy systems.

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1. Encapsulation through APIs

If you have hundreds of features in your software system and find it hard to manage them because each is connected to another, it’s a great idea to encapsulate them. In this way, you can turn groups of features into separate services that will connect with each other and the main system through an API. Compare it to how you integrate all your third-party services.

API encapsulation will help you build your information flow and keep the structure of your software separated.

2. Rehosting the system

This approach means moving part of your system to another physical, cloud, or virtual server. When rehosting, you don’t recompile the code, modify any features, or alter the architecture. Rehosting is a great solution for legacy systems in business that has scalability issues.

legacy system integration
Rehosting is an effective way to increase scalability instantly

According to 2020 research on mainframe modernization by Advanced, 98% of companies surveyed plan to move their legacy software to the cloud for better agility, scalability, and flexibility. By choosing a cloud system, they also hope to attract talented new employees that want to work on the latest technologies.

Moreover, moving to the cloud is cost-effective: according to the Advanced report, companies can save around $31 million annually if they move the most significant parts of their software to the cloud.

Rehosting a system is an easy way to make your product more scalable: it will allow you to add new features and host more users. When taking this approach, companies often use infrastructure as a service cloud solutions that don’t require large investments and provide instant results.

The downside of this approach, however, is that you don’t solve any problems other than scalability. You still have the same code, technological debt, and other issues, including security risks.

3. Changing the platform

Platform migration means moving an application component to a new platform without making significant changes to the code, its structure, or its functionality.

Legacy system migration works great if you need your core functionality to work better. Legacy system migration strategy can help you integrate new services that are compatible with the new platform.

The downside here is similar to the downside of the previous approach: because you don’t make changes to the code itself, you’ll still have mostly the same problems. However, replatforming only your core functionality will allow you to keep your business processes running while winning time to work on other parts of your platform.

4. Refactoring

Refactoring your code is something you should do on a regular basis. Refactoring is part of software maintenance, and its goal is to make code simpler, more readable, and more maintainable. By refactoring, you get rid of excessive and redundant code. This makes it easy for new members of your development team to get a grasp of what your software is doing.

Also, refactoring optimizes the work of your software, making the code more logical. Because refactoring is performed in small, gradual steps, the risk of breaking something in the system is rather low, so you won’t need to stop your current business operations to improve your code.

The only time refactoring won’t help is if your project’s architecture doesn’t correspond to your business goals whatsoever and the code is so cluttered that it’s hard to do anything about it without breaking the whole structure.

5. Building a new architecture

Sometimes, the architecture is wrong at the very start due to poor engineering decisions. Other times, an architecture that worked great for a couple of years is no longer enough and can’t support your current technological needs.

These are cases when you should consider changing your software architecture. Changing the architecture is a challenge, because it’s the backbone of your system. However, a new architecture can significantly improve your software’s scalability and open new capabilities for integrations.

6. Replace what doesn’t work

A legacy system replacement strategy suggests replacing components that don’t work, slow down your work, or don’t correspond to your goals. There are a few options for replacing a component. You can either build it from scratch or use an off-the-shelf product such as a software as a service (SaaS) solution.

On the one hand, building a component yourself will ensure you have exactly what you need for your business. Custom software is always more customizable and secure. However, a ready solution won’t require any time for development (except for integration), and you won’t need to support it.

7. Build your system from scratch

You can either rebuild the whole system or just one component. This is the revolutionary approach. Though it’s costly and time-consuming, it’s the most effective way to completely revamp your current system.

By rebuilding a system, you can start with new technologies, new approaches to your business processes, and so on. For example, you can build your system to be cloud-first, or use a new technology that you couldn’t previously implement without breaking the system. Other benefits of building a completely new system include:

  • Getting the biggest advantage over competitors
  • Removing constraints imposed by old components, resulting in improved flexibility in terms of both design and architecture
  • Being able to seamlessly integrate new technologies
  • Making an investment in the future, as new technologies will stay relevant for another 5+ years

When should you consider total legacy software transformation? There are a few cases when it’s necessary:

  • Your current system can’t support changes that are required by the market
  • Your vendor no longer supports your system’s technology
  • The cost of licencing your current software is very high and other companies are choosing more cost-effective options
  • You’ve acquired another company and now you need to merge two systems into one
  • You’ve chosen a path of aggressive expansion, and you need the latest technologies to support your strategy and go way ahead of your competitors

To successfully create your system from scratch, you need to take a few key steps. First, you need to conduct a thorough assessment and planning stage. You need to organize your team that will be responsible for transformation and establish communication between stakeholders, developers, and end users.

If you have an in-house IT team, make sure they’re able to learn new technologies, or hire new specialists with experience building large enterprise systems. These professionals should understand data structures and know how to ensure data quality to effectively migrate data to the new system.

Remember that choosing complete modernization is suitable only for mature companies that are capable of investing in constant IT support and have enough engineers at their disposal.

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How to choose the best modernization strategy for your system

As you can see, there are lots of ways to modernize your system without having to rebuild it from scratch. The challenge is to choose an application modernization strategy that will lead to the optimal results in the shortest time.

You’ll most likely need to consult with technical experts to figure out the best of all legacy system modernization strategies. Right now, you can prepare the answers to a few questions that will make the process easier and prepare you for a consultation with engineers.

1. What’s working well in your current system?

Maybe you have a hard time integrating something new into your legacy system because of old technologies, but the system itself works fine. Or at least it helps you and your employees complete daily tasks without much hassle.

Make a list of functions your legacy system currently handles well: this will be your backlog for modernization, as it’s vital to first change parts of your software that are holding your business back.

2. What is your deadline?

Think about how much time you can afford to spend on modernization if some of your processes will have to stop temporarily. Your deadline will also define your modernization approach: for example, if you’re in a hurry, you’ll most likely choose to replace a certain module with an off-the-shelf solution instead of developing your own custom module.

3. What are the goals of your system modernization?

Do you want to make your system work faster, decrease maintenance costs, or transition to a new technology so you can use AI or big data in your business? Each of these reasons will dictate a different approach to upgrading your legacy technology. Write out your goals and the main issues you have with your current software.

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4. What steps should you take to achieve your goals?

This is a big-picture question that will allow you to figure out your strategy. New technologies, new modules, a reduction in spaghetti code, or a new platform should correspond to goals you’ve previously defined.

You’ll need to consult with experts to fully answer this question, as they’ll help you choose the best technologies to meet your goals; however, you may already know some steps you absolutely need to take.

How Mobindustry can help you modernize your legacy system

At Mobindustry, we use both time-proven and new technologies for the best combination of reliability and functionality. We continue to support our projects years after their release, so we know how to maintain mobile and web systems as well as when to suggest more global upgrades for the benefit of our clients.

Modernizing a large legacy enterprise system is a complex process, so we divide it into stages. Here’s how the modernization process looks at Mobindustry.

Stage 1. Define business goals

We get acquainted with your project, find out what your current business goals are, and determine the ways in which your software doesn’t satisfy them. We then analyze your business processes and suggest technologies and functionality that are lacking. At this stage, you’ll communicate with our business analysis and software architecture specialists.

Stage 2. Analyze your existing software

At this point, we sign a nondisclosure agreement (NDA) and perform a code audit if needed to figure out if some parts of your software need refactoring, rewriting, or other work. We also review your software architecture and determine issues holding back your business and technical development.

Stage 3. Map modernization requirements

After we’ve analyzed your goals and the technical state of your current software, a business analyst creates a technical specification with new features, requirements, and technology platform suggestions.

During this stage, our specialists suggest the best strategy for modernizing your legacy system. We consider factors such as the overall state of your software, your goals, business processes that can’t be interrupted, and software components that need to be modernized first.

After you get complete documentation and approve it, we start the modernization process.

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Stage 4. Develop and refine

After we have a clear modernization plan, we start the development process. At this point, we involve software developers, data analysts, and database architects. They gradually modernize your system, making necessary changes and integrations based on the agreed strategy.

During the development stage, we also test all the alterations we make to your code to make sure business processes aren’t interrupted and new solutions are of a high quality.

Stage 5. Assure quality

Though testing is a continuous process that goes along with development, we also perform full regression testing after altering each module. In this way, we check software licenses, connectivity, and the work of databases.

Stage 6. Train and onboard

Transitioning to new or upgraded software is a challenge for any enterprise. That’s why after software is ready and tested, we provide training for our clients to make sure they can use it without any issues and can teach their employees.

Stage 7. Maintain and support

If you leave your software as is when development is done, sooner or later it will again become outdated, cluttered, and unproductive. To avoid this and extend the life of your new software (and make future transitions easier and smoother), you need legacy system support.

We provide maintenance services that include:

  • updates to support new versions of operating systems, libraries, and third-party services
  • regular testing
  • security audits

We also provide additional integrations according to your business needs. Though it’s not exactly part of the maintenance process, integrating new services into a revamped system is part of the software lifecycle and your business development.

Final thoughts

Modernizing legacy systems is necessary for any business that wants to stay relevant and competitive. Though this process isn’t easy or cheap, the costs and risks of not modernizing your enterprise software to meet modern standards are way higher.

Companies that postpone modernization risk:

  • suffering from unproductive processes
  • losing employees
  • exposing themselves and their customers to hackers
  • losing money on endless and costly maintenance
  • drowning in inefficient operations instead of developing their businesses
  • seeing their systems completely shut down due to inefficiencies

Modern technological standards allow businesses to increase their security and implement technologies that can help them optimize operations, improve customer service, and increase revenue. Technologies like AI, machine learning, and big data aren’t compatible with old software, so there’s no room for improvement and integrations.

Legacy system modernization is vital for your business operations, customer service and eventually revenue

To modernize a legacy system, you can either rebuild it completely or gradually improve separate modules by replacing or rewriting them. The best strategy will depend on your goals and the current state of your software. Good application modernization vendors must be able to help you choose the right approach to modernize your legacy systems.

If you want to find out how much upgrading legacy systems costs, contact Mobindustry. We work with large enterprises in domains including ecommerce, logistics, healthcare, and banking, and we can provide you with top engineers to support your business growth.

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