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Replacing vs. maintaining legacy systems

As CIOs embrace more digital technologies, it's important that they determine the current status of their legacy systems and whether it's worth upgrading or maintaining them.

Veteran IT leader and CIO at Absolute Software Dianne Lapierre has seen technology come and go. In many cases, she said it was clear when the tech needed an upgrade; in other cases, she knew replacing a legacy system wouldn't yield worthwhile gains. And still, at other times, deciding whether to upgrade or maintain the existing tech was difficult to do.

"They were tough discussions to have, on why to divert all that money to replace a system that wasn't really broken," she said.

And many CIOs can likely relate.

The 2021 "IT Trends Study" from the Society for Information Management (SIM) found that replacing legacy applications was one of the top 10 largest IT investments for organizations in 2020, as it has been for each of the three previous years.

Similarly, a survey commissioned by Tata Consultancy Services and AWS found that 70% of chief experience officers at global companies list legacy modernization as a top strategic business priority.

Although executives list modernization as a priority, nearly all organizations contend with some amount of legacy technology. That means CIOs and their C-suite colleagues must decide what to upgrade first and what can wait.

IT leaders said multiple factors influence that decision, but they agreed business needs should dictate what modernization efforts top the priority list.

"You want to be using technology in a way that augments the business, increases profitability, decreases expenses or otherwise creates value," said Ken Presti, vice president of research and analytics at Avant Analytics. "If a new technology can do that, you go with that. And you want to look at this on a very regular basis, so you're using technology effectively, to differentiate. That doesn't mean you buy something as soon as it hits the market, but it might mean looking at it to evaluate its potential."

Replacing vs. maintaining legacy systems

Despite the need to modernize and digitally transform, organizations may opt to maintain legacy systems for several reasons, according to experts.

First, there are cost considerations. It's true that upgrading to new technologies generally brings business value -- i.e., increased revenue and/or lower operating costs. However, the cost of upgrading can sometimes exceed the business value, at least in the short run. That, in turn, can incent some companies to stick with what they have.

Lapierre said that's especially true if the existing system is particularly cost-effective and still performing adequately.

"Older systems may be cost-efficient in managing current business requirements; they are already paid for and require no additional cost outlay beyond current support costs," she explained.

Reliability can be a factor, too. "Unless the driver to modernize is due to reliability factors -- versus functionality [and] technical factors -- chances are the legacy application is reliable in how it supports the business needs today," Lapierre said.

Familiarity can also factor into the decision to continue maintaining a legacy system.

"Technically, the legacy system is likely fully integrated up and downstream with the rest of the application architecture and business functions," Lapierre said. "It's what the business uses today, is familiar with, and all supporting processes are already in place."

Simon Ratcliffe, a principal consultant in advisory at Ensono, an IT service management company, agreed -- adding that organizations should not automatically assume that all older technology needs to be replaced.

"If the business process [it supports] is still valid, then it's not a legacy system," Ratcliffe said.

Ratcliffe cited one of his use cases, a grocery store chain that continues to use a mainframe to handle financial transactions. The technology is decades old but still works efficiently, quickly and securely -- delivering the exact functionality that the company needs to process transactions.

"It's the same type of processing they've been using for 30 years. And that doesn't need to change. What needed to change was the access to it," Ratcliffe said.

He explained that the company decided to maintain its mainframe instead of replacing it, but has added layers of technology around it to integrate the newer functionalities it needs to meet modern customer demands.

Benefits of replacing legacy systems

The decision to replace a legacy system comes down to business requirements, experts agreed.

"It's the need for the business to behave in a different way," Ratcliffe said.

As such, technology that no longer meets business needs or strategic objectives needs to go. In such cases, the business value generated by an upgrade quickly outpaces any savings that come with maintaining the older tech.

Experts cited numerous business benefits that typically come with replacing legacy technology, including the following:

  • the introduction of more digital capabilities that were not available or possible because of the legacy systems;
  • improved reliability and performance;
  • greater agility and flexibility in meeting changing business requirements and user requests;
  • increased ability to attract and retain talent, particularly IT workers, who are seeking opportunities to work with newer technologies and forward-looking companies; and
  • lower capital expenses that come with pay-as-you-go cloud-based offerings and SaaS options in place of on-premises technology.

Although business needs should drive most modernization decisions and the prioritization of such projects, experts said other factors can also impact decisions on maintaining vs. replacing legacy systems.

For example, Ratcliffe said CIOs should replace technology that is unsupportable, either because they can't get or afford the skills to maintain it, or for hardware, can't get the parts required to fix it.

Meanwhile, Lapierre said technology that's incompatible with any newer implemented products to support the business should be replaced. And older technology, where the cost of integrating it with newer offerings or where complex workarounds are required, should similarly top the modernization priority list.

Any system that presents unacceptable levels of risks, whether due to cybersecurity issues or reliability factors, should also undergo an upgrade, Lapierre said.

Challenges of replacing legacy systems

As experienced CIOs know, replacing legacy systems often comes with significant challenges.

According to experts, getting full adoption of the accompanying business process changes can be difficult, even when there's an imperative business need spurring the effort. And the resulting disruption to everyday work can likewise cause grumbling and short-term losses in productivity as everyone adjusts.

Additionally, CIOs often struggle to find new technology talent or upskill existing staff to manage the new technology and maximize its value. This is a task that can add unexpected costs, as well as delay the time it takes to realize the full return on the modernization investment.

Findings from the 2020 "Global Application Modernization Business Barometer" report reflected the difficulties of replacing legacy tech, highlighting the fact that 74% of organizations that started a legacy system modernization project failed to complete it.

Presti advised that CIOs work with their executive colleagues and trusted advisors to create a modernization roadmap, where decisions on upgrade priorities are based on ongoing assessments of whether the organization's current technology stack supports business needs, what technologies will continue to do so based on its strategic outlook, and what elements will not. He said the users should also be part of the discussions about what legacy tech needs replacing.

"People who are going to use it often have valuable feedback on how your technology evolves and what's worth investing in," Presti said.

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