Why Legacy System Modernization is the Key to Unlocking Digital Transformation

In an era of big data and artificial intelligence (AI), legacy platforms can anchor your agility. Most enterprise organizations experience technical debt from legacy systems; stay in business long enough, and it will happen to you, too.

According to Accenture, 72% of the C-suite say their legacy platforms are holding them back. The drain on productivity caused by legacy software and hardware costs U.S. companies an estimated $1.14 trillion annually.

Yet, we increasingly feel the push toward digital transformation. Gartner says 91% of businesses are undergoing some innovation initiative. However, achieving successful digital transformation is often hindered by legacy systems that struggle to keep pace with the demands of the modern world.

Legacy system modernization is the rallying cry of CIOs everywhere. Here’s why it’s so essential for unlocking a successful digital transformation.

The Challenge of Legacy Systems

The yin and yang of legacy IT is that these systems are the backbone of many organizations—but they may lack the functionality, security, speed and data storage of more modern tools.

Accenture says the adoption of digital technologies increased organizational growth in the cloud, compute, connected endpoints, data, devices and storage by 162 times in the past 15 years. However, our network capacity to handle this growth has increased only 43 times in the same period. Digital innovation requires a wider pipe, better storage bandwidth, tighter security and higher reliability.

But we’re not there yet. Most high-tech companies with legacy platforms experience significant network issues because of their legacy tools. IDC predicts that in next few years, businesses will “face two to three network outages per year.” Organizations spend most of their budgets on “keeping the lights on” via legacy tools. Forbes says, “The disconnect lies in that nearly half of that network budget is often spent maintaining legacy networks instead of modernizing them.”

Legacy systems are the backbone of many organizations, providing critical functionality supporting business operations for years, if not decades. These systems encompass a wide variety of technologies, including outdated hardware, software and data storage solutions. While they have served their purpose well in the past, they now present significant challenges in the digital transformation era.

1. Inflexibility: Legacy systems are typically inflexible and difficult to modify or adapt. They were often built with specific, rigid requirements in mind, and any attempt to change them can be time-consuming, costly and risky. Organizations need more agility to respond swiftly to changing market conditions or customer expectations.
2. Integration difficulties: In a digital ecosystem where data and applications must seamlessly interact, legacy systems pose integration challenges. They often rely on outdated protocols and interfaces incompatible with modern technologies, hindering efforts to create a cohesive digital infrastructure.
3. Security risks: Legacy systems are more susceptible to security vulnerabilities because vendors no longer support them or receive security updates. This reality makes them prime cyberattack targets, putting sensitive data and business operations at risk.
4. Scalability issues: As organizations grow and their digital needs expand, legacy systems struggle to scale to meet increased demand. This inability to support growth can be a major obstacle to digital transformation efforts.
5. High maintenance costs: Maintaining and supporting legacy systems can be expensive. The need to retain specialized skills and the cost of sourcing spare parts for aging hardware can drain resources better invested in modernization efforts.

The Case for Legacy System Modernization

Legacy IT can become inflexible and unresponsive. It’s an albatross that you must address to digitally transform. But what are the signs you’re suffering from an outdated set of network tools? Ask yourself these questions:

• Are your IT maintenance costs increasing?
• Is it getting harder to hire experts to work on these systems?
• Are license fees increasing for core technologies?
• Is it taking longer now to add new features than in the past?
• Is your technology team talking more about legacy software or hardware enhancements?
• Are your customers complaining about the tools you use?
• Do you have two teams: Old platform—and new?

Legacy systems often have multiple pieces that force end-users into redundant workflows and workarounds. You may have overlap between systems when they duplicate products or processes. The code behind the applications is a snarl; the tools are old, documentation is nonexistent and fixing things is increasingly dicey, resting in the hands of just a few people who can keep the lights on.

If all this sounds familiar, legacy system modernization should be the crucial next step toward digital transformation. You simply can’t leverage AI and big data tools without finally tackling this 800-pound gorilla.

Benefits of Legacy System Modernization

Modernizing legacy systems is the process of updating or replacing these outdated technologies to align with current business needs and technological trends. It is a strategic imperative for organizations seeking a successful digital transformation journey. Legacy system modernization can:

• Enhance agility and innovation: Modernized systems are inherently more agile and flexible. They enable organizations to quickly adapt to changing market conditions, customer preferences and emerging technologies. This agility fosters a culture of innovation, allowing businesses to experiment with new ideas and products more efficiently.
• Improve the customer experience: Legacy systems hinder the delivery of seamless, personalized customer experiences. Legacy system modernization allows organizations to leverage data analytics, AI and other advanced technologies to better understand and serve their customers.
• Increase efficiency and cut costs: Modernized systems streamline business processes, reducing operational costs and improving efficiency. Automation, cloud integration and optimized workflows are just some benefits resulting from modernization efforts. These efficiencies contribute to the bottom line and enable organizations to allocate resources strategically.
• Improve data accessibility and insights: Legacy systems often silo data, making it difficult to access and analyze. Modernization promotes data integration and provides organizations with a holistic view of their data, empowering data-driven decision-making and unlocks valuable insights that drive business growth.
• Enhance security and compliance: Innovators create modern systems with security in mind, offering robust features and regular updates to mitigate risks. Legacy systems, on the other hand, are vulnerable to security breaches and may not comply with the latest regulatory requirements. Modernization helps organizations stay ahead of security threats and maintain compliance.
• Increase scalability and futureproofing: Modernized systems can scale effortlessly, accommodating increased demand and growth. This scalability future-proofs the organization, ensuring it can adapt to evolving business landscapes and emerging technologies.
• Give you a competitive advantage: Organizations that successfully modernize their legacy systems gain a significant competitive advantage. They can innovate faster, respond to market changes more effectively and deliver superior customer experiences. This kind of company is well-positioned to lead their industry.

Take These Steps Right Now Toward Legacy System Modernization

Before we tackle the steps necessary to modernize legacy platforms in your organization, there is some necessary pre-work that will pave the way.

Step One: Shift budgets toward legacy system modernization. Accenture says organizations that move their spend to modernization by 30+ percentage points for three years can expect their total spend for supporting legacy networks to reduce by 21% annually.

Step Two: Increase reliability by stabilizing the current network, not with patches and a piecemeal effort, but strategically with initiatives that reduce technical debt as it modernizes.

Step Three: Establish forward-thinking best practices that align digital transformation goals with legacy system modernization. This effort could include developing and implementing multi-cloud redundancies or investing in reskilling current staff. The idea is to retool every IT initiative possible to focus more on legacy system modernization across the enterprise.

Step Four: Redefine or decouple your data. Analyzing and retooling data systems into smaller, more bite-sized units, such as core business functions (sales, operations, customer care and the like), legacy data from obsolete systems, business processes or other core functions. You can start to duplicate running instances to carve out these natural points of separation. This effort can make data migration to the cloud easier down the line.

Step Five: Learn to be agile. Within this context, agility is more of a mindset, not a framework. Agile organizations take ownership on the ground, prioritizing, strategizing and owning your legacy system modernization effort. Most high-tech organizations understand the imperative of legacy system modernization. However, only 22% of IT leaders say they have the right skills in their organization to undertake these efforts. During this process, invest in your teams, reskilling them to prepare them for the next level of architecture at the end of the modernization effort.

Strategies for Successful System Modernization

Before embarking on the journey of legacy system modernization, conduct a comprehensive assessment of your current network:

• System inventory: Document all legacy systems and their components, including hardware, software, databases and interfaces.
• Business impact analysis: Understand the criticality of each system and its components to the organization’s operations. Determine which systems directly impact revenue, customer experience and regulatory compliance.
• Technology stack evaluation: Assess the current technology stack, including programming languages, databases and infrastructure. Identify obsolete or unsupported components.
• Data analysis: Analyze the data stored within legacy systems, determining what data is essential to migrate and what can be archived or retired.
• Integration points: Map out the integration points between legacy systems and other applications within the organization. Identify dependencies.
• Regulatory compliance: Ensure your modernization efforts comply with industry regulations and data protection laws.

Once the assessment is complete, create a modernization plan that prioritizes systems based on their impact on the business, potential return on investment (ROI) and alignment with strategic goals. A well-structured plan can serve as a roadmap for the entire modernization process.

There are several approaches to legacy system modernization, and the choice depends on various factors, including budget, timeline and the specific organizational needs. Some common modernization approaches include:

• Replatforming: This process migrates existing applications to a more modern platform. It allows organizations to retain their business logic while utilizing a more modern infrastructure.
• Rewriting: In this approach, organizations develop new applications from scratch while retaining the business logic and functionality of the legacy system. While it provides the opportunity for a clean slate, it can be time-consuming and costly.
• Replacing: Some organizations entirely replace legacy systems with off-the-shelf solutions or software-as-a-service (SaaS) platforms. This approach can lead to faster deployment but may require customization to meet specific business needs.
• Refactoring: Refactoring involves restructuring existing code to improve efficiency, maintainability and scalability. It can be a cost-effective way to modernize legacy systems while preserving existing functionality.

The approach should align with the organization’s goals, budget and the complexity of the legacy systems you are modernizing.

Companies That Successfully Modernized Legacy Systems

Many companies have an ongoing love affair with legacy system modernization. Some of the most widely publicized case studies include:

• Lowe’s Companies, Inc.
  Lowe’s, a multinational home improvement retailer, embarked on a journey to modernize its supply chain and ecommerce systems. By replacing legacy systems with modern cloud-based platforms and leveraging data analytics, Lowe’s improved inventory management, reduced costs and enhanced the customer experience. Find out more.
• Delta Airlines
  Delta, one of the world’s largest airlines, invested in modernizing its reservation and booking systems. The modernization effort improved operational efficiency, reduced downtime and enabled Delta to introduce innovative services like mobile boarding passes and real-time flight updates. Find out more.
• General Electric (GE)
  GE, a global industrial conglomerate, embarked on a digital transformation journey that modernized its manufacturing processes. By implementing the Industrial Internet of Things (IIoT) and analytics, GE optimized its production lines, reduced downtime and achieved substantial cost savings. Find out more.

Full Lifecycle Support and Modernization with Red River

Red River’s Lifecycle Services team helps organizations maximize their technology investments. We guide organizations through legacy system modernization, from planning to implementation and post-go-live monitoring.

Many organizations rely on legacy systems, which, once cutting-edge, need to be updated and more efficient. These legacy systems can hinder innovation, slow processes and pose security risks. However, modernizing these systems is often daunting, time-consuming and expensive.

That’s where our team comes in – we specialize in legacy system modernization and can help your organization unlock its full potential. Red River offers experienced professionals who understand the intricacies of legacy IT and the complexities of legacy system modernization. We have successfully handled similar projects across various industries, giving us the insights needed to navigate the challenges specific to your business.

Contact us to find out more.