Hidden Costs of Legacy Tech: Why Postponing Modernization Can Be Expensive

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Hidden costs of legacy tech

Tough economic conditions can mean businesses defer updating their technology, but this can be a false economy, and this is something resellers need to be emphasise to customers. Nia Batten, head of cloud and platforms at esynergy, outlines the case to modernise.

As the economic turbulence of the past few years continues to send shockwaves across the global economy, business have markedly intensified their focus on cutting costs where possible. But some of these cost-minimising measures may have the opposite effect. 

Indeed, when it comes to relying on legacy tech, postponing a modernisation plan due to cost becomes, ironically, rather expensive. This reliance is more common than one might expect: more than 70% of software used by Fortune 5000 companies was developed 20 or more years ago, according to a report from Dell. Many of these large enterprises are concerned about the immediate financial and temporal costs of transitioning to a new digital architecture, and so continue to utilise their existing systems. 

In times of economic uncertainty, it is tempting for enterprises to think only in terms of the here and now. Moreover, in addition to the initial costs, digital architecture migration can be challenging and protracting and there can be pitfalls along the way. But the long-term potential gains make it more than worth the risk and there are drawbacks that can come with the ‘if it ain’t broke, don’t fix it’ approach.

Security risks

Legacy systems leave enterprises exposed to cybersecurity attacks. The financial risks associated with outmoded security cannot be overstated. The average total cost of remediation from a single ransomware attack more than doubled between 2019 and 2020, from $761,106 to $1.85 million (£1.53 million), according to Sophos’ State of Ransomware Report 2021. The more up to date a company’s security systems are, the less likely hackers are to be able to breach it. 

Poor integration

A lack of integration with more modern technology and automated systems can lead to valuable data being overlooked or siloed. The more modernised the data systems are, the better connected the data will be as a result. But organisations that rely on legacy technology lack the ability to meet the sophisticated data demands of these use cases. According to a recent esynergy survey, a third of business leaders at large enterprises reported that they were unable to make sound decisions based on data. Business-as-usual approaches (i.e. siloed data teams, centralised data warehouses) are too slow and fragmented. It can take months to deliver basic data capabilities and use cases.

Operational costs 

Maintaining legacy tech can prove to be every bit as expensive as a digital upgrade. This is because IT staff must spend time and money to keep the obsolete software functioning. A report from Dell estimates that organisations currently allocate 60-80% of their IT budget to maintaining existing on-site hardware and legacy apps, which leaves only 20-40% of the budget for everything else. 

Technical debt

When it comes to upgrading, time is of the essence. No company can defer upgrading its tech indefinitely: sooner or later, the business will fail as its rivals outpace it. Despite this, many business leaders mistakenly believe that they can afford to defer their tech improvements and rely on dated systems in the meantime. But this is a misapprehension and can lead to ‘technical debt.’ 

‘Technical debt’ describes the phenomenon in which using legacy systems defers short-term costs in favour of long-term losses that are incurred when reworking the systems later. This is because the longer the enterprise defers, the further ahead their competitors will become, making it even harder for them to accrue the profits necessary to fuel the innovations needed to catch up and the harder transitioning to a more modernised system becomes. 

Non-compliance 

As any data expert knows, laws and legislations for the use of technology do not remain immutable. Reliance on legacy systems means that a company’s outdated tech will be based around outdated financial and data protection legislation. Therefore, when an enterprise refuses to update their tech and software they risk becoming non-compliant and breaching the law. 

Creative stagnation and lost opportunities

Relying on dated technology limits the pace at which an enterprise can innovate. If a company does not have the best possible infrastructure to help it improve and iterate its products and services, these will fall short of the mark in comparison with competitors’ more cutting-edge offerings. Furthermore, businesses utilising older systems also miss out on certain features that improve the user and customer experience, exacerbating the negative impact on their business. For example, ecommerce merchants that rely on legacy systems might not be able to support handy additional utilities for potential consumers, such as one-click payments or smart data analytics.

Looking ahead

Making the jump from an outdated infrastructure to a more modern digital system cannot happen overnight. Creating the infrastructure that empowers a business to innovate at speed and scale involves a profound transformation across the levels of people, process and technology. 

Yet, some businesses, afraid that legacy systems are driving them towards obsolescence, attempt to suddenly pivot
to a new architecture. This can lead to the new system being rushed and poorly integrated. 

Transitioning away from legacy tech should and can be achieved in a safe and cost-effective manner. To reap the benefits of a more modernised digital infrastructure, companies should take a business agility approach to updating their tech stack. By taking incremental steps that lead from one goal to the next in a linear manner, businesses can gradually advance the long-term, sustainable tech objectives that will secure their place in the future.