Legacy Systems & the Need for IT Modernization – Assessing the Optimal Approach

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More and more well-established, large-scale companies and corporations are finding themselves burdened by their legacy systems and their need to modernize: but how? Is it really necessary? What risks are involved? Can they be mitigated and are they worth taking?

Why are legacy systems still in use?

A legacy system is any kind of technology which is now outdated but is still in use by organizations and companies, because it has become critical to the functionality of the business. Some systems are now 20 years old, but are so entrenched in the life of their business, that they are still in operation – even in major banks and insurance firms. Sometimes the technology was tailor-made in the first place, and so companies are reluctant to invest in something new when the legacy system has become critical for business performance. Some firms feel the risk of updating or replacing is too high, in case key data becomes corrupted or lost. And there’s that old adage: ‘if it ain’t broke, don’t fix it.’ If your legacy system is working, why change it?

So, look around and you’ll see legacy systems all over the place: insurance, hospitals, manufacturing, energy, transport, banks and government all rely on technology that is outdated but is deemed irreplaceable. The trouble is, they simply can’t go on forever. They are a risk in terms of security, they generally are not as user-friendly as modern options, and there is a growing skills shortage in terms of operating and maintaining them. In the last few years, so much of the IT landscape has changed. Digital technologies have been completely transformed by the cloud, IoT and RPA. These advancements have allowed enterprises to modernize not only the way they deliver services to their clients but how these services are conceived, developed, deployed and tested.

We have entered a new age of technology and in order to keep pace, modernization and adaptation are essential.

How to modernize

How a company goes about modernizing its IT systems depends largely on what problem the legacy system is throwing up. Whatever the issue, businesses need to start to accept the growing costs of technology – and its maintenance. In fact, it is believed that every dollar invested in digital innovation through the year 2020 will require a spend of three times that to continuously modernize the legacy application portfolio. Technology costs are therefore inescapable; it’s all about trying to target that money effectively and modernize in a way that is as low-risk and undisruptive as possible for their firm.

Revolutionize or evolve

There are two main approaches to modernizing: revolutionary and evolutionary. Both have their pros and cons, but deciding  which approach is best for your company is the foundation for determining a strategy for modernization. The revolutionary method involves building a strategy to completely replace the legacy system. The old system is discarded and shut down permanently, with a new one designed and built to replace it. The potential risks here put many businesses off, as well as the potential for large scale disruption. However, in the long run it can be a wise decision: you’re lancing the boil, rather than putting a sticking plaster over it. Plus, security breaches and lost data become less likely, and in many cases, the existing system is no longer fit for purpose – so why use it as a basis for a new system? Many businesses take up the evolutionary approach when replacing their legacy system. This involves modernizing their existing systems, one step at a time. Most of the time, this method is less disruptive, with the usual business processes not being affected. However, it is not a wholesale solution, and focuses on solving the problems instead of removing the factors that cause the problems in the first place.  

A British multinational investment bank and financial services company has focused their energies in 2018 on replacing 14 separate legacy systems, some of which were 30 years old. They are also increasing automation, driving up use of the cloud and consolidating their data centers by shrinking their real estate footprint. Whilst they acknowledge considerable upfront investment, they anticipate huge efficiency savings as well as improved resilience and security.

Types of modernization

Enterprises have a number of options available to them when deciding to modernize their legacy systems. Some of the most cutting-edge solutions include:

  • Architecture modernization, which makes software more agile and responsive to the user, improving the customer’s experience.
  • Technology modernization, which aim to reduce costs and derive better value for the enterprise. Existing applications can be migrated across to newer technology, which allow a more scalable and modular approach.
  • Delivery process modernization, which allows a business to customize its processes. This ensures efficient, tailor-made software.
  • UI modernization, a method focused entirely on the user. Customer engagement is enhanced through a focus on user-centric, personalized solutions.

Next steps

If you’re wondering what to do about your legacy system, you should begin by deciding whether or not you need to replace or modernize your current system. Consider where you are and where you would like to go. It is important to keep a competitive edge and supply your customers with fast and reliable service.  How you go about this modernizing your legacy systems is up to you and your enterprise needs, but one thing is certain – modernization is necessary for continued success.

By,

Market Research Team, RapidValue

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