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The true cost of retaining legacy systems in a digital age

(Image credit: Image source: Shutterstock/Wichy)

As digital transformation continues to impact each industry today, the once dominant goals around enhanced profitability and cost reduction have given way to the increased focus on the customer. Consumers have fully embraced digital technologies as a normal and persistent part of their lives, and their heightened expectations around brand interactions and experiences continue to challenge companies to adapt and innovate, or risk losing loyalty and a negative impact on bottom line results. 

For enterprises rooted in legacy systems, versus those born in the digital age, the task of adapting with the times can be especially daunting. Institutions like banks, insurance companies, and other financial brands - that are much older than newer, tech-centric counterparts - typically run on cumbersome, outdated and complex platforms. While they might recognise the need to transform to ensure seamless customer experiences, the solution is not as simple as implementing a mobile app or a creative new website. And while historically, mainframes could at one time be augmented to some extent to meet modern expectations, digital transformation is so rapid now that there’s a growing wedge between those legacy systems and their ability to offer user-friendly experiences.

Any company that either delays application and system modernisation, or considers it irrelevant to their organisation, will eventually find it much harder to capture customer attention and stay competitive. The risks of maintaining legacy systems are real, and those that don’t recognise this reality and address it strategically by incorporating the right processes and technology now will continue to fall short in the long term. 

Legacy systems aren’t always the cheaper solution

Many organisations avoid upgrading their systems and processes to avoid incurring additional expenses, but this approach can cost organisations even more money down the road. In fact, maintaining legacy systems and applications has been shown to carry a significant price tag.

In addition to the threat of losing customers and accompanying revenue streams to competitors, as much as 25 per cent of maintenance costs are the result of program and system complexity in outdated systems, making it difficult to unlock the potential of key data and information. Today, 80 per cent of the world’s corporate data resides in mainframes running technology that is more than half a century old. As a business’ technologies, infrastructure and architecture change to adapt to the modern world, retaining legacy systems will continue to require extensive maintenance and configuration, leaving them to incur additional and ongoing costs.

Finding light in the “black box”

In addition to being expensive to maintain, legacy systems are often referred to as a “black box,” or complicated web of code written by developers who are no longer with an organisation and who left little relevant documentation around how to navigate it. These unknowns can make transformation especially difficult, but are even more challenging to maintain.

Organisations are better equipped to access vital information by establishing a clear understanding of business processes locked within its mainframe. By doing so, companies are uniquely positioned to isolate and extract key functions from their existing systems and utilise them for modernisation and modularisation. This allows a company to maintain key workflows in a fashion that’s adaptable to shifting consumer demands, thus priming the system for the company’s transformation efforts.

Unlocking the potential of your data

In order to succeed, organisations require a broad view of their data around key business functions, including management reporting, BI, analytics and decision support. However, their existing databases have likely changed hands multiple times and can be especially difficult to integrate with modern platforms because of their non-extensibility, incompatibility and limited openness of core hardware and software. As a result, companies are better positioned to retrieve essential data through conversion to relational models, thus enabling them to uncover business-critical information for enhanced decision-making faster and easier.

Digital aid for the digital age

For businesses aiming to bring their functions into the modern age, there are a variety of resources and technological solutions available to aid in this process. However, when it comes to this transition, there is no one-size-fits-all approach for organisations. Instead, it’s key that business leaders explore a variety of options before selecting a strategy that is best suited for their organisation. To expedite this transition, tools such as automated conversion technology can be used to convert legacy applications and databases into modern coding languages and fully modernise every aspect of a business. This process ultimately extends application functionality, enhances its integration capabilities and customisation to meet an organisation’s specific business requirements.

Another option for those that don’t necessarily require fully-fledged digital transformation might be replatforming – lower in cost and risk and allows companies to continue to leverage legacy developers while making space for improved scalability, integration and ease of use.

Looking ahead

The process of ongoing digital transformation is here to stay, and organisations that can’t adapt to a digital environment put themselves at risk of losing key revenue streams, while absorbing additional and sometimes unrealized maintenance costs. While it’s the responsibility of an organisation to choose the modernisation strategy and process that is best suited for their needs, failure to adopt is no longer an option.

Cameron Jenkins, EVP, Modern Systems, an Advanced company