In the fast-paced world of business, standing still is not an option. While change is inevitable, many companies still hold onto their old processes and legacy systems, rather than adapting or exploring new opportunities. 

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For enterprises that have custom-built applications, it’s common to face challenges with change management, since many believe they are saving time and money by sticking with the old systems that they know. Similarly, many companies often reject new updates and rely on outdated systems due to the fear of perceived complexities. However, the reality is that doing so often incurs additional costs for their businesses in the long run.

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This article will explore the immediate and long-term effects and hidden costs of maintaining legacy systems. 

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• Hidden Costs of Running Legacy Systems 
• Legacy Transformation: A Cost-Effective Solution

Hidden Costs of Running Legacy Systems

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Legacy systems are outdated computer systems, software applications, and technologies. Designed to perform specific tasks in a specific way, these systems use obsolete programming languages and hardware components that are often difficult to maintain and scale, as the underlying technology can be difficult to update. Here are the hidden costs of maintaining legacy systems:

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Limited Functionality

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One thing is sure about legacy systems: they have different and inferior capabilities than newer systems, which can ultimately compromise an enterprise's ability to explore new business opportunities. As technology advances and new features are developed, older systems may be unable to take advantage of them, inhibiting an organization from improving its processes, reducing costs, and staying competitive. 

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Legacy systems can limit production and management capabilities, like tracking real-time inventory levels, generating accurate reports, or integrating with other systems and software; this can result in increased inefficiencies and errors. A great example is the recent Southwest Airlines crisis. On Dec 27, 2022, Southwest Airlines delayed 680 flights and canceled nearly 2,600 flights, accounting for around 63% of the total number of flights canceled across the United States. The leading cause of these canceled flights was the airline's outdated systems, followed by a lack of crew assignments. Flight attendants could not get in touch with schedulers to confirm their assignments and were left waiting at hotels until they received further information. As a result, thousands of Southwest passengers were stranded across the country.

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Similarly, when marketing, using an outdated Customer Relationship Management (CRM) system may limit access to newer features such as personalized marketing, social media integration, or data analytics tools that allow businesses to relate directly with consumers. This could lead to difficulty in effectively managing customer relationships and making informed business decisions.

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Since limited functionality can prevent an organization from taking advantage of new business opportunities, staying current with the latest technologies is critical. 

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Increasing Costs of Maintenance

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The decision to continue maintaining a legacy system can be tempting for enterprises, as it may seem like a cost-effective way to keep critical processes running without the need for disruptive changes. However, the costs of maintaining a legacy system go beyond the initial investment and can quickly add up, ultimately outweighing any short-term benefits. 

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The costs of maintaining legacy systems can be classified as either fixed or non-fixed. Fixed costs, such as license fees, software development expenses, subscription fees, and support are generally stable and predictable to a certain extent, but they may increase over time as fewer companies use the specific legacy system. Non-fixed costs, on the other hand, are more unpredictable and can often rise unexpectedly. These costs may include downtime maintenance, training new employees on outdated systems, creating and implementing new processes, researching security issues, and integrating different systems. 

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As these systems age, they may require more frequent repairs and updates, which can be costly, especially for legacy systems 20 years or older. In addition, as the pool of skilled professionals who can work on legacy systems decreases, it may become more difficult and expensive to find specialists who can fix issues that arise.

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Security Vulnerabilities

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Legacy systems can be vulnerable to cyber attacks, due to the lack of modern security features in outdated software and hardware. As technology advances and newer cybersecurity measures become available, the gap between cutting-edge technology and legacy systems grows wider, making it more expensive to use internal resources to protect against the latest exploits. 

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Security patches are a significant cost associated with maintaining legacy systems. This cost is particularly noteworthy, because it combines the immediately apparent costs with those that have the potential to occur in the future. With legacy systems, the expenses related to creating and implementing security patches increase over time. Additionally, you don't have as much control over rapidly deploying a security update to the end-user, because they have to take specific actions to install it, making it more challenging to protect against data breaches and other security threats.

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Furthermore, older systems are prime targets for cyberattacks, because of the inadequacy of their software and hardware systems. Modern websites can quickly deliver security updates with the click of a button. However, with legacy systems, getting end-users to install each update can incur additional costs.

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Flexibility Limitations

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As mentioned earlier, legacy systems are typically incompatible with new technologies and updates, limiting an organization's ability to pivot or adapt to new opportunities and making it more challenging to stay competitive in a rapidly-evolving market. This lack of flexibility can be a significant drawback for organizations that rely on legacy systems, due to the difficulty of integrating changes into an organization's overall system architecture.

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Just like legacy code can hold you back from being agile, legacy systems can also stand in the way of business growth and flexibility. With your IT team constantly having to deal with system maintenance tasks, they won't have time to develop new ideas or products that could benefit your end-users. As tech innovations are constantly emerging, better, faster, and cheaper, it’s challenging to keep up, even if your competitors are also using legacy systems.

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Legacy Transformation: A Cost-Effective Solution

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The process of transforming legacy systems can be complex and may involve upfront costs and some disruption. However, the benefits of modernizing systems and taking advantage of new technologies will likely outweigh the short-term challenges. The financial burden of legacy systems can be significant, from license fees and software development costs, to the time and resources required to fix and maintain the system, all of which can become overwhelming. 

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Nonetheless, the decision to undertake a legacy transformation will depend on your business needs and goals. It is essential to carefully consider all relevant factors before making a decision. Some key considerations for organizations thinking about legacy transformation include the costs and benefits of upgrading, the impact on current processes and employees, and the potential for long-term growth and competitiveness.

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If your organization struggles with the costs and challenges of maintaining legacy systems, it's time to consider upgrading to newer technologies. At Outliant, we specialize in helping businesses and enterprises transition to modern systems that are more flexible, scalable, and cost-effective. Contact us to learn about how we can help bring your business up-to-speed to achieve your goals.

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