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Revealed: Companies Who Continue to Use Legacy Software are Losing the Race

Tech Business

How Legacy Systems Can Hold Your Company Back

Legacy software and hardware are still widely used by numerous companies.

What is “legacy software/hardware”? Well, exact definitions vary, but basically, legacy is a synonym for OLD.

And several companies’ most crucial functions (accounting, payroll, database management) are performed by systems dating back to the 70s or 80s.

There are a variety of reasons why companies don’t want to upgrade that we’ll go into in a bit.

However, the gist is that upgrading can be a costly, risky and time-consuming process.

As we’ll go into later on in this article, sticking with legacy systems is becoming more and more difficult to do as time goes on.

Again, we’ll break down the details, but in a nutshell: It’s getting harder and harder to support these old systems, and they are becoming less and less able

to deal with the demands of a global modern marketplace.

3 Reasons Why Companies Continue to Use Legacy Systems

Legacy Systems

Source: Voices From The Community

Companies wouldn’t use legacy systems if they didn’t have at least a few good reasons for doing so. A few of these reasons are rational while others are primarily emotional (not wanting to get fired, for instance). All of the quotes in this section come from a Computer Weekly article titled:

“Legacy Systems Continue to Have a Place in the Enterprise”.

#1: It Can Be a Lot of Money to Upgrade

Although cost is actually the least important reason why companies continue to use old systems, it’s still relevant.

Especially for bigger companies, upgrading to a modern system can cost millions of dollars.

While smaller companies may not have to spend quite as much, they also may have less liquid financial reserves that can be used for things like upgrading legacy systems.

Dharmesh Mistry, chief technology officer for the software company edge IPK, states:

“….money for upgrades is difficult to obtain because budgets are divided between keeping the show on the road and providing new functionality.

Legacy systems upgrades can often only be achieved at the expense of investment in newer systems elsewhere.”

In other words, companies have to pick and choose between upgrading old systems for “boring” but essential functions and investing in new “sexy” systems for sales and marketing.

Since sales and marketing are more exciting and provide revenue for the company, they often get priority.

#2: It Can Take a Lot of Time and Energy to Upgrade

Not only does upgrading cost money, it also costs time.

You have to:

  • Research which new solution will work best (finding several options)
  • Negotiate with several different vendors to get a good deal
  • Customize the vendor’s solution to your company’s needs

And also:

  • Dedicate time to training your staff on how to use the new solution
  • Plan out the upgrade and transition process
  • Develop new SOPs for the new system

All of this work can be intimidating.

As the above Computer Weekly article states:

“The time and cost involved in system testing and the prospect of a massive end-user retraining programme can prove daunting.

Against this, a stable platform with tried-and-tested processes can look extremely appealing.”

#3: Pushing for Upgrades Can Be a Risky Endeavor for Your Career

Your Career

Source: LinkedIn.com

Imagine you’re the CIO of a company. You just got the job, and you’re excited to start using modern accounting systems that weren’t built in the 70s.

So, you task one of your IT managers with implementing a new accounting solution.

That IT manager is probably going to be pretty unhappy.

Why?

Well, implementing a new accounting system is like being the extra point kicker on an American football team when the game is on the line.

If you successfully make the kick (aka integrate the new accounting system without any disruptions in company function), nobody is going to celebrate your achievements.

(If you don’t know much about American football, an extra point kick is a very easy kick that is almost always made.)

The prevailing attitude, for both extra point kicks and accounting, is that things should JUST WORK.

So, when they DO WORK, people think, “Yeah, that’s what is supposed to happen. What’s so special?”

However, if you happen to fail to make the kick – or make the new accounting system work – then EVERYONE is going to blame you for the results.

In other words: From an individual’s career advancement perspective, there’s a whole lot to lose and not too much to gain.

The research of financial services analyst, TowerGroup, supports this viewpoint:

“Outdated platforms often survive because of the risk and cost of replacing them.

Legacy replacement projects can fail, not only damaging the credibility of the IT department but also the careers of the managers put in charge of them.”

3 Downsides of the Status Quo

Downsides of the Status Quo

Source: RCOR Technologies

Due to the potential time and money involved in an upgrade, and the career considerations, it’s understandable that companies are reluctant to make the change.

Here’s a final quote to drive home the point from Dharmesh Mistry:

We felt that if it was not broken, why fix it?” he says. “If you look at the lines of code involved in migrating to something new, why bother?”

Mistry’s attitude is a common one. Why should we push through this mindset in order to upgrade our legacy systems?

There are three main reasons:

  1. Support staff is getting harder to find
  2. Potential security vulnerabilities
  3. Inability for your company to offer customers the services they want

Let’s break these down.

#1: It’s Getting Harder and Harder to Find Skilled Support

This may be the most pragmatic reason why companies should make the switch from legacy systems: Soon, they might not be able to find anyone who knows how to fix them!

The number of people who know how to support these systems is waning by the year as legacy support skills aren’t being learned by new professionals.

That means every year you have to pay more and more and depend on fewer and fewer people for your KEY company processes to keep running.

As Alan Rodger, senior research analyst at Butler Group, states in a Computer Weekly article:

“There is definitely a skills shortage.…

It is a ticking clock because you cannot expect to be able to find people with specific legacy skills forever. Legacy skills are not attractive ones to have.”

The article goes on to use the example of a contractor who is an expert in the Pick operating system developed during the 1970s.

Due to this contractor’s unique expertise, he has several clients who are completely and utterly dependent on him being available at all times.

As a result, this contractor can charge his clients accordingly – he only needs to work the equivalent of a three-day work week to make full-time money.

This contractor will not be around forever, and it will be hard to find a replacement for him once he retires.

This is a trend that all companies who use legacy systems will have to deal with.

#2: Legacy Systems Limit Your Company’s Service Offerings Without Expensive Workarounds

Expensive Workarounds

Source: Only Dead Fish

There’s an interesting thing happening in the insurance industry. While companies are aware their legacy systems are hindering them, they are still divided on whether to replace them or not.

As a Computer Weekly article titled “Insurers Split Over Dealing With Legacy Systems” states:

“Insurers are split over how best to update legacy systems and deal with the widespread lack of IT integration that affects the industry, according to research conducted by the Economist Intelligence Unit on behalf of BT Global Services.

Whereas 37% of insurers’ questions said they planned to upgrade existing legacy systems, 42% said they would rather adopt new ones.

But some 38% of insurers admit their current systems are hindering their ability to be agile and, in particular, to target existing and new customers to generate more business.”

But how, specifically, are these current systems not working out? Well, they were developed at a time without the internet or a largely global economy.

As a Wall Street Journal article titled “When Companies Become Prisoners of Legacy Systems” states:

“In many cases, these systems have difficulty scaling. They strain to support the complexity and variety of current products and services.

And their functionality has not kept pace with the times. Some large banks, for example, run systems so old they’ve had to “wrap” them in expensive data management systems to give customers online access.

Such limitations may prevent companies from surging ahead in the marketplace, introducing new products, moving into new geographies or expanding services to customers on new platforms.”


These kinds of limitations start to alter the ROI equation of switching to a new system.

If your legacy system has all the functionality your company needs, it may not make sense to switch to a new platform.

However, if your legacy system is making your company less agile and less competitive, you have to reconsider things – or risk losing ground to more innovative competitors.

#3: There Are Security Issues Associated With Legacy Systems

Yes, legacy systems are less likely to get infected with common viruses.

However, they are more vulnerable to a dedicated attack.

For example, if you’re using a super-old version of Windows to run your company’s database, it’s unlikely you’ll be infected by a run-of-the-mill variety bug.

However, hackers who are more dedicated have a HUGE advantage: They know your system is static – because it’s so old you aren’t getting security patches anymore.

Once hackers figure out a flaw in your system setup, they can be confident you’ll have a tough time addressing that flaw without doing a serious overhaul.

As Vijay Samtani, manager in Deloitte’s security and privacy services states:

“Users of legacy operating systems do have to confront the fact that they will not have security patches delivered to them.…

So, to go alongside their patching strategy, they need to develop a strategy to manage the risks of having unpatched software in their enterprise.”

Conclusions

Ultimately, while most companies would rather use their legacy systems until 2200, if they could, external forces will likely force CIOs to upgrade.

As Adam Schneider, principal and chief advisor for Deloitte Center for Financial Solutions, states in an article for The Wall Street Journal:

“Legacy systems’ lack of business capability, combined with the retirement of the baby boomers who developed, implemented and maintained them, will likely force CIOs to address them.

And as they consider future technology investments, they should look to confirm they’re making decisions that won’t imprison their companies tomorrow.”

Is your company still using legacy systems? What are your thoughts on upgrading versus sticking with them?

 

 

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