Legacy Systems In Digital Transformation: Risks and Challenges
When approaching a digital transformation aimed at updating legacy technology, there are several considerations that business leaders need to take into account.
Blog Post
9 minute read
Mar 04, 2024
While the heart and soul of your business may be rooted in the people, the product, and the service that you provide, modern business operations rely on sophisticated technologies working in concert. As such, it’s vital for organizations to regularly update legacy technology so they can remain competitive with modern consumers and don’t get left in the past.
Depending on how long you’ve been using outdated systems or legacy technology, though, you might run into some pain points and obstacles when gearing up for a full-scale digital transformation.
The following sections further define legacy systems, walk through some of the common challenges digital transformation initiatives have to overcome, and review the benefits that stem from updating legacy technologies.
Some digital transformation initiatives are easier than others and can help you build momentum as you approach a larger digital transformation strategy. Watch Impact’s webinar, How to Identify High-Value Opportunities for Innovation to help you find the low-hanging fruit.
What Are Legacy Systems?
A legacy system in a business is a computer system, software solution, or similar technology that is outdated and difficult to manage. Legacy systems, however, can be vital to workflow processes within an organization. A legacy system is also known as a legacy platform or legacy technology.
Legacy systems can be a barrier to efficient operations, particularly if data sets and other information aren’t being used to the extent modern cloud systems can allow.
Often, legacy systems cannot be integrated with new platforms. Their data remains isolated and incompatible with other data processing systems. This is why a legacy system is an example of a disparate system. A system that functions independently of others, may not be as effective or productive for your company.
This also fuels digital transformation spending, which is projected to reach $3.9 trillion globally by 2027.
Despite large investments, though, a full-fledged digital transformation that includes upgrading legacy technology can be difficult, cumbersome, and unruly. That’s not to mention pushback from end users who are already comfortable with old systems and therefore reluctant to transition to a new platform or process.
Common examples of legacy systems include:
Operating systems
ERPs
CRMs
Hardware
Network infrastructure
Today, we’ll take a look at why decision makers are getting rid of their legacy systems, why upgrading IT systems in an organization is important, and what obstacles can appear with digital transformation.
Issues with Legacy Systems
Before we get into all the reasons that organizations pursue digital transformation initiatives, it’s helpful to understand why legacy technology doesn’t cut it for a modern business and how a digital transformation can bring your organization to the next level.
The cost of maintaining legacy systems is one of the most obvious issues. Updates might be sporadic or discontinued. These systems often contain large amounts of data, so it can be a daunting consideration to migrate to a new platform.
Legacy hardware is another difficult issue to handle. Outdated infrastructure can struggle to keep up with the demands of modern solutions, creating a bottleneck for your processes and operating capacity.
The staff using these legacy systems might have reservations as well. Workers who are used to legacy systems may be reluctant to change or to see the overall value in learning a new system. Conversely, you may be having problems when onboarding new staff, due to unfamiliarity with an old system.
Of course, new systems require onboarding too. Their modernity means there will be more support from vendors in getting everybody up to speed. If your organization relies on a few people to onboard new recruits for your systems, you can run into issues if those employees leave.
2. Integration
Integrating legacy systems and modern solutions can be a huge hassle for businesses seeking to improve their work processes.
Those who are comfortable with, for example, their current legacy ERP, may want to keep their system and integrate it with more modern solutions. However, many modern cloud and other SaaS solutions can be incompatible with older legacy systems. This means that to incorporate new tools and programs, extensive custom code is required to make it work.
This is a time-consuming and expensive exercise, particularly for budget-conscious organizations.
96% of enterprises utilize at least one cloud service for their organization. Therefore, it makes sense to look for solutions that have APIs which can be easily integrated.
A typical result of this lack of integration is the emergence of data silos, which is when different departments across a company cannot freely access the data they need.
Using a modern ERP helps eliminate data silos and legacy systems. It also allows businesses to use their data in creative ways. For example, using your supply chain data to make more informed decisions.
Data-driven organizations are 23 times more likely to acquire customers, six times as likely to retain customers, and 19 times as likely to be profitable as a result.
3. Cybersecurity
Outdated systems are a prime target for cybercriminals. Malicious actors seek out weak points in solutions in order to gain access. Organizations that neglect their security expose themselves to attack.
Developers work tirelessly to shut down these loopholes and prevent cybercriminals from taking advantage. Yet with a legacy system, there may no one keeping it up-to-date, leading to a system that is practically asking to be breached.
Cyberattacks are on the rise and can be extremely costly to businesses. The average cyberattack cost a business $9.48 million in 2023. If sticking with legacy systems in business, decision-makers should take extra care that they have taken the appropriate measures to ensure they stand the best possible chance against an attack.
Moving to the cloud has become an attractive option for organizations in recent years because of the cloud's strong security capabilities—stronger than most on-premise systems.
4. Missed Opportunities
One of the biggest consequences of continuing to use a legacy system is the inability to modernize and improve your organization. Evolving to remain competitive is a central goal in digital transformation strategy. Yet legacy systems in business are notoriously inflexible, an obstacle for most organizations operating in today’s digital environment.
Customers expect organizations to be digitized, and executives see digital transformation as a means to be competitive. By not investing in new technology and sticking with a legacy system, you’re hampering your own ability to compete and giving ground to your competitors.
From Legacy Systems to Digital Transformation
Now that we’ve reviewed some of the common pain points that lead businesses into a digital transformation journey, we can take a closer look at the specific benefits that result from updating legacy technology and integrating new-aged high-powered solutions.
Competitive Advantage: Modernizing a legacy system, whether it’s an ERP, CRM, or your data center, can bring a plethora of advantages to your business. This allows you to become more capable, agile, and give you an upper hand over your competitors.
Improved Employee Experience: User interfaces have evolved significantly over time, and most employees will be accustomed to the UIs that they are familiar with on their phones or laptops at home. Giving them a modern UI at work can improve satisfaction and performance over an older-style system that’s not as user-friendly.
Opportunities for Growth: Modernizing your legacy system gives you much more room for growth in the future. If you’re investing in an established cloud service like Microsoft Azure for your business, you can be confident that you won’t be left behind. Keeping pace with the latest tech and software developments gives you a competitive edge. It also puts you in a great position to further expand the services you offer.
Big Data Analytics: A major issue posed by legacy systems that digital transformation attempts to remediate is the silos that emerge from disparate systems within an organization. DX (Digital Transformation) seeks to remove these barriers and allow users to make use of the vast amounts of big data that organizations possess to help support your decisions.
Security and Performance: Upgrading from an on-premise solution to a cloud solution has long been an area of concern for decision-makers, primarily because of the perceived risks of hosting company data on cloud servers. Tier IV data centers offer more security than on-premise servers, meaning your data is most secure when hosted on the cloud.
Challenges of Upgrading Legacy Systems
Despite the benefits that stem from a successful digital transformation, these initiatives are often accompanied by some growing pains and can require a substantial investment in terms of time and money.
By preparing yourself ahead of time, you can properly allocate resources and rest assured that other initiatives won’t fall off.
Time
As with any digital transformation effort, modernizing your legacy systems will require time and patience. Executives may not understand that these processes often take years to fully realize.
Cost
DX can be a costly exercise and it’s important not to get wrapped up in a mindset of measuring success with an immediate ROI. Remember the goal is to bring your organization up to speed to stay competitive.
Change management
A DX strategy for transition should be fully endorsed and envisioned by key executives and decision makers in the organization. It’s one of the reasons we at Impact emphasize ensuring a smooth shift with our change management consulting services.
Best Practices for Upgrading a Legacy System
To set yourself up for a successful digital transformation, you’re going to want to adhere to some industry best practices. For instance, you should start your transformation with initiatives that are easy to update and modernize. Additionally, it’s important to keep in mind that your digital transformation should always improve and strengthen processes, never weaken them.
Let’s explore these suggestions just a touch further.
Choosing Initiatives for Digital Transformation
It’s easy for a business to fall into the trap of wanting fast legacy IT transformation to modernize. We recommend not doing this, but to focus on aspects of your organization that can be upgraded to give you the most bang for your buck.
For example, migrating your email server to a cloud-hosted solution is a common initial strategy that provides a quick return and is relatively painless. Small wins like this can help give confidence while still doing the job of removing legacy systems in the business.
Strengthen Your Processes
No solution introduced for the purposes of DX should ever weaken a work process. If you find that your investments are not conducive to improving productivity or efficiency, then it either wasn’t an appropriate solution for you or wasn’t implemented as well as it should have been.
Make sure you’re targeting processes that need transformation, rather than digitizing for the sake of it.
Wrapping Up on the Risk of Relying on Legacy Technology
Many businesses, in their eagerness to modernize, enact strategies for digital transformation which are not suitable and undeliverable. This often means installing too many systems, too quickly, and without a plan to implement them thoroughly.
It’s one of the reasons a concerning amount of DX plans are considered failures—not because the idea was bad, but because the strategy backing it up was poor.
This is why so many businesses partner with a seasoned MSP to build their plans for digital transformation, as these organizations have experts with years of experience who can guide you through the process from start to finish.
A full-scale digital transformation is much easier to launch and complete when it’s built on a foundation of success. To get your digital journey started, check out Impact’s webinar, How to Identify High-Value Opportunities for Innovation.
