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Over the recent years, advanced technology has propelled businesses to the new digital frontier, driving changes for stellar outcomes. Yet, not all companies have hopped on this transformation train.
This article looks into common examples of companies that stick with legacy systems, the reasons behind it, and the problems they might face.
Types of legacy systems
A legacy system is any outdated technology, both software and hardware, that is still in use. Business leaders usually define such systems as those if they are:
- Outdated versions and software no longer supported by a provider.
- Systems with persistent security vulnerabilities.
- Technology with higher operational costs if compared to modern alternatives.
- Solutions that do not align with current needs (scalability, advanced analytics, enhanced customer engagement, etc.)
- Custom-built systems using an outdated technology stack, so few specialists on the market would know how to operate it.
Legacy system examples: banking, healthcare, ERP, CRM
Let’s dive into some common use cases of legacy software in use across industries.
Banking
According to Reuters, 43% of the USA banking systems run on COBOL, the common business-oriented language built around 70 years ago. More than 80% of in-person transactions worth $3 million flow through such legacy software. It is obvious that outdated systems cannot keep up with the pace of technology advancements. On top of that, the lack of experienced talent and documentation for effective maintenance and troubleshooting is also a challenge. Then how could financial institutions still rely on them?
IBM has launched training programs on COBOL and is even accelerating it with Generative AI. COBOL has powered mission-critical apps across industries, especially in finance, for decades, demonstrating the capability of handling complex business logic even now. In this scenario, maintaining legacy apps can be a justified strategy. However, the need for a modernized approach goes without a doubt, as the risks of technical dept and security vulnerabilities still persist.
Healthcare
Nearly 73% of healthcare providers use legacy software to store sensitive patient data, manage administrative tasks, and oversee billing operations. Usually, organizations do not rely on a single system but use a suite of apps (up to 900), a 2022 Mulesoft report shows.
Healthcare organizations stick to their legacy systems that are usually time- and resource-draining. Companies have to hire specialized staff to maintain those systems, but they usually end up tackling multiple disperse apps with similar functionalities.
Cybersecurity, on the other hand, is also a daunting issue, and healthcare providers saw a 94% increase in ransomware attacks in 2021. The aftermaths may be drastically serious: the risk to lose most of sensitive data, high recovery costs, and the potential damage to company’s reputation and patient trust.
Manufacturing, retail, and service business
Many legacy ERP systems, such as DTR or Forth Shift, were first introduced in the 1980s and are built on outdated technologies. Meanwhile, old custom-built systems, previously created to serve specific purposes, are today of less value as their creators retire.
Still, many manufacturers rely on legacy systems, including outdated ERP systems or even spreadsheets to do the tasks. In such a scenario, the risk of insufficient, inconsistent, and out-of-date data increases. Meanwhile, CEOs might believe they are informed and insight-driven. In reality, companies just spend hours or even days searching through disparate legacy systems trying to unlock valuable data.
Another example is keeping old CRM systems that store critical information but miss out on valuable features, such as basic analytics and integration capabilities. So, instead of optimizing processes, developers are forced to find workarounds that are inefficient and time-consuming.
Why are legacy systems so extensively used despite the apparent challenges?
4 reasons why legacy software are still in use
Companies may still rely on old systems and frameworks, e.g., Delphi, VBA, etc., because of their familiarity, the fear of technology risks caused by modernization, or the lack of a clear path forward. Let’s break down some of the most common reasons.
1. Security and privacy concerns
Legacy system transformation can increase exposure to cybersecurity risks. While the new technology is essential for scaling and optimization, it also expands the organization’s attack surface level. However, this is not merely a technical challenge hard to eliminate. By prioritizing security as a crucial part of modernization, businesses can recognize it as a commercial opportunity, ensuring a competitive advantage.
2. The system performs well
At least up to the moment, the system may handle ongoing operations. But at some point, businesses have to make strategic upgrades to get ahead. However, KPMG Global Tech Report 2023 showed that more than a third of organizations describe their culture as risk-averse. This means they would prefer to preserve the status quo rather than disrupting operations with modernization.
3. The pressure to deliver service non-stop
Enterprise leaders usually depend on legacy systems because of the fear of potential service disruption caused by an upgrade. When continuous operations are a high priority, e.g., in healthcare or governmental institutions, a reasonable solution is to run modernization in parallel to the legacy system. But here, businesses need a robust strategy and meticulous resource allocation, which seems complex head-on.
4. The lack of corresponding tech expertise
Legacy systems are usually tricky to replace. Thousands, or even millions, lines of code, a rigid business logic, and tons of dependent processes create enormous challenges. Without capable talent on board, from business analysts to experienced software engineers, companies decide to build and modernize around legacy apps instead of switching, as the costs and related risks seem too big.
What is your strategy: making bold moves or playing it safe?
Replace or keep your legacy?
While some companies hold onto legacy software for many reasons, such systems may cause significant operational drags.
As we looked into the reasons why organizations still use them, below are 4 reasons why companies should consider modernization.
1. Security risks
Exposed to critical vulnerabilities, legacy systems pose a bigger threat than the security risks during migration. When deciding to upgrade, put security at the forefront of your operations, including thorough risk assessment, ensuring regulatory compliance, and implementing modern cybersecurity practices.
2. Performance issues
Legacy systems continue to age, so they become inefficient and more of a burden, rather than an asset.
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3. Higher cost of maintaining legacy systems
Modernizing software is a bold move, while sticking to your legacy can be more daring. So, is it worth investing in additional staff or hardware/software to maintain such systems with little business value?
4. Undermined reliability
When systems face a significant risk of failure, lack vendor support, operate in isolation without efficient integrations, and lack proper documentation, the challenges can extend even further. And it sounds like a complex puzzle.
Do not know where to start? Let’s see how to approach the decision-making process.
Partner with TYMIQ
Organizations often tear between the need for innovation and maintaining the current infrastructure out of practical reasons. Crafting a thoughtful strategy is essential for making informed decisions. Explore the TYMIQ approach.
1. Start with a strategic assessment
By analyzing existing systems and apps, our team can quickly identify immediate targets for modernization and those that can wait. Based on that, you can create a clear and transparent roadmap for an efficient process.
2. Streamline modernization efforts
We help prioritize modernization based on your crucial factors, such as cybersecurity concerns, maintenance requirements, and operational costs, ensuring a tailored modernization strategy.
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