When is the right time to invest in the modernization of legacy systems?

A blog post by Vuk Stanivukovi?, Marketing Manager and Business Analyst, Enlight IT.

Nowadays, every company is a technology company. Every organization, regardless of industry, requires strong software to function. Previously, you’ve been using IT to support your business, but today, IT is not only supporting, but driving your business forward and helping you grow. IT has shifted from business-serving to business-changing levels.  

That’s why a modern IT system is the core of every company. That also means that having an outdated legacy system has direct consequences and risks on business operations and future growth.  

What are the requirements for success in the digital age?  

Let’s first look at what usually is the case on the market.  

There are a few common situations companies face as they grow, and you might be experiencing them if:  

• Your business is growing faster than your IT infrastructure, technology and processes 
• Your software choices were based on current, rather than future needs. 
• You found a "simple and fast" solution that ended up making your IT system extremely complex and slow  
• You are used to running and using your old software. Your employees like what’s familiar and they resist or delay change even if it’s for the better  
• Your current system, even though it’s outdated, has a lot of trapped value – valuable data which is crucial for everyday business  
• You don’t know how to modernize your IT system or how to create a new one 
• You’re afraid it’ll take a lot of time to migrate from legacy to the new system and it’ll be difficult to integrate.   

If you’ve been running an outdated software system you’ve accumulated a lot of technical debt that’s causing harm to your company, hindering your business growth and it’s costing you money, time and opportunities.   

If you think that you’re saving money because you’re deferring the software system upgrade, think again. Ask yourself – where is your money better spent: on maintenance of your outdated system or on creating and driving new business value and opportunities?  

Your company can grow as much as your IT system can follow.  

Other than people, a reliable, agile, scalable and future-proof IT system is the main requirement for business growth and long-term success.  

What exactly are the direct costs of running outdated, legacy systems?  

You’re not just losing money, but also productivity and opportunities. Not to mention a potentially huge reputational risk.  

• Operating and maintenance costs. That’s the money you’re paying for different licenses, people, and the time they must invest for the current system to work. These costs can be extremely high, as some research indicates that 80% of the IT budget is used for operating and maintaining the legacy system (“keeping the lights on”) and only 20% is being invested in developing new ones (innovation). Also, Accenture’s analysis of Appmarq data from CAST, a leading provider of software intelligence solutions, shows that it is 2.5 times more expensive to manage legacy applications that are ten years or older compared with new applications.  
• Workaround costs – these costs emerge when you need to invest additional resources to resolve an issue because your current system can’t support it. These additional resources can be money, people, different part-time solutions etc.   
• Reputational risk  – Security and liability are the key issues with legacy systems, especially in a time when software rose to mission-critical levels. New systems are more reliable and secure as they use advanced technology.  

What are the most important indirect costs of running an outdated, legacy system?  

 Opportunity costs. The main reasons for missing business opportunities are a lack of speed and the inability to make truly informed decisions. Informed decisions are based on data and analytics. Using outdated, legacy systems makes it extremely hard to use and effectively manage data that's trapped in it.  

As we’re experiencing a “big data revolution”, being able to store and manage huge amounts of data is crucial to your business results. Without data and its proper management, you’re unable to provide a personalized and spotless customer experience and introduce new products that will satisfy your customer's needs.   

Outdated systems are slow, and they inhibit your business growth. They often result in poor customer experience and low employee productivity. If your competition has a modern and resilient IT system, your company is in danger of losing market share and position.  

More than 58% of organizations revealed they had 2-3 major disruptions in the past decade. This means that the legacy systems put companies in great danger.   

What is the solution?  

 80% of companies are aware they should upgrade their legacy software systems. The problem is not that they are not aware, but that they don’t know how to change.  

Existing legacy systems must be modernized iteratively. It’s called digital decoupling. Separating legacy from the new solution and gradually reducing the technical debt. Modernizing your old system piece by piece and replacing it with new. That will allow you to develop new systems while your business is working uninterruptedly on old ones until you can completely switch to new ones. That’s like changing one piano key by one, and after a while, you’ll have a completely new piano keyboard without the need to completely stop playing.   

The new system must be future-proof. That means that it should be built not only to satisfy your current needs but also to take into account your future needs (scalability and agility at the forefront) so it can support your business in the next decade, not just today.   

This is not easy. If it was, everyone would have done it, and technical debt wouldn't be such a pressing issue. Modernization is complex and it requires knowledge, skills, and capacity to engineer a tailored transformation roadmap for each specific company.   

First, it requires someone to decide whether to upgrade or completely change the existing system, in which order, and to engineer the way that doesn’t harm the current daily business operations while keeping the costs within the budget.   

Second, your IT partner must understand your industry and your business completely, so that they can engineer the solution that will encompass each business operation you need.  

Third, each company is like an organism – every department is connected to all the others. That means that the IT solution must be well connected so that every part of the IT system communicates with all the others. Developing these solutions is challenging because an error in one part of the system means that the entire system might not be working properly.   

Your IT partner must understand your business and possess adequate engineering capacities and expertise to help you solve your technical debt problems. They also must be the consultant, and not just a vendor, to advise and suggest the best future-proof solutions for your business. 

A good engineer will help you solve your current issues, but a great engineer will understand your business in-depth, predict your future needs and design the solution that will support your growth not just today, but in the years to come. That's the promise and core vision of Enlight IT. 

Should you modernize your legacy system or develop a new one?  

The exact answer to this question naturally depends on the specifics of each project. But as a general rule, the decision boils down to two key factors:  

• The value of data “trapped” in the legacy system  
• The level at which the system requirements are known  

The higher the value of data locked in the legacy system, the more we are inclined towards modernization. Added effort of modernization is more than justified by the potential for innovation and business growth that big data provides.  

On the other hand, the better the system requirements are understood, the easier it is to engineer a new solution.   

Good SMEs, business analysts and software architects need to have a truly holistic perspective when deciding on a solution to be implemented in each specific case.    

Let’s work together  

 We leverage our deep understanding of modern technologies, applications, IT infrastructure, security, operations, industry domains and human-centric design to mitigate transformation risks and help you drive your business forward.   

In addition, we envision and deploy tailor-made solutions within the agreed budget and time—all to help you upgrade your current IT system to future-ready levels.   

As an example, we created new software for our client Eurofins.  

Eurofins offers a portfolio of over 200,000 analytical methods for evaluating the safety, identity, composition, authenticity, origin, and purity of biological substances and products. They also offer innovative clinical diagnostics. However, the systems they were using for performing lab tests were becoming obsolete. Blome, the system they used for doing lab analysis, was complex to manage and the process of testing the substances was slow.  

Since Eurofins is a global company with over 900 laboratories worldwide, it is challenging to integrate every lab site into the same central testing system. A lot of the time, Eurofins uses small local laboratories as its subsidiaries and provides them with the support they need for operations.   

Because of this, some of the local lab sites are still operating on their individual testing systems. It makes communication between the center and local lab sites overly complicated and slow.  

Read this case study to learn how we approached this project.