The hidden cost of legacy systems: How they hinder ROI and digital transformation

At this point in time, it is essential for one’s company to transform digitally in order to stay competitive and work efficiently. Most organizations will pour money into new modern technologies to heavily improve ROI and operational performance while ensuring they stay relevant in the new digital world. However, there is a barrier that stands in the way of achieving the maximum benefits: legacy systems.

Outdated and old software, hardware, and technologies continue to slow down any organization's positive transformation. To make matters worse, legacy systems tend to derail digital transformation initiatives, leading to additional expenses, hidden costs, and delays.

Take, for example, the sunsetting of support for Microsoft Office 2016 and Office 2019 later this year. Using these tools for productivity quickly becomes very expensive as they fall behind current technologies and systems. This process leads to poor feature updates, security gaps, and glaring incompatibility with new technologies.

If firms fail to plan, their attempts at modernizing their systems might also fail, leading to disruptions in the organization’s processes. This reality requires firms to increase the pace at which they undergo digital transformation. Relying too heavily on unsupported software because of outdated automation systems can be detrimental to productivity and make the company vulnerable to cybersecurity threats.

In the current digital world, organizations need to evaluate modern business technology and IT infrastructure systems. It is important to understand the return on investment brought by aging systems, the impact of ever-evolving corporate digital transformation, the issues associated with the shift, and the ways in which the tech stack can be improved.

The Impact of Legacy Systems on Digital Transformation

Businesses around the world have become victims of their older automation systems. This discourages and impedes the goal of digital transformation. Organizations strive to achieve flexibility and efficiency and compete with others for scalability, but older systems serve only to slow everything down. These machines may be very outdated, but they are often very complex and embedded in the organization’s systems, making them hard to eliminate or enhance without major operational limitations.

Ongoing Costs

Surveys suggest that even the most stricken firms waste money on obsolete technology (in fact, most often), as they don’t know how much they are spending without proper numbers to measure it. Almost $2 million a year gets spent and over 60 percent of businesses are tracking this in the tech graveyard. The cost of maintaining legacy systems is very high, but they tend to be the system of choice because moving up or switching out for modern counterparts can sometimes come with a very high perceived and real price tag.

Integration Issues

Outdated systems obstruct the integration of new technologies, and with this comes digital transformation. For instance, organizations struggle to incorporate the cloud, AI, and data analytics tools needed to remain relevant. Not being able to innovate due to low infrastructure can create a stagnant technology stack, which is a loss for many businesses.

Impact on Innovation

In addition, legacy systems are known to stifle innovations by bottlenecking the organization’s responsiveness to market or customer reactions. They never met the required growth nor were flexible enough, making these systems rigid. Thus, failing to modernize results in a competitive disadvantage that makes it impossible to innovate or change direction.

What Companies Must Account for When Transitioning from Legacy Systems

Shifting from legacy systems to cloud-based solutions isn't effortless; it's intricate and requires prior strategizing. Organizations must consider many factors to ensure minimal disruption and smoother transitions.

Data Migration and Integrity

Moving data from older technologies to cloud-based systems is an important part of digital transformation. One such transformation is moving the data over to a new system, which can be particularly challenging. Correct data mapping, or aligning the information within the legacy systems with the cloud-based structure, is critical.

Prior to the cleansing step, data can contain errors, unnecessary duplicates, or outdated information, resulting in redundancy. Companies need to perform mapping to clean up the data or else risk transferring faulty information which could cause bottlenecks once the new system is activated.

Equally important as cleansing is validation. Migrating users should always run what are known as post-migration tests, where they check if data is accessible, accurate and devoid of any damage. Issues are more often than not subtle, which is why continuous monitoring during and after migration is favorable, as it attempts to mitigate the risk of corruption and data loss.

Mitigating Loss of Information

During the cleansing step, attempt to reduce the complexity and volume of transforming data into small portions. Doing so ensures that businesses can freely retrieve data during each stage. Adopting the backup strategy enables organizations to test if portions are repaired and allows for handling problems faster during the migration step.

Challenges With Integration

Bringing together outdated systems and new cloud solutions can be difficult for businesses because it often requires custom coding and specialized middleware, which can be costly and time-consuming. Companies may deal with additional compatibility headaches since older systems may not be cloud-ready. They also need to consider the direction and tempo of data movement and integration in order to remain constantly operational during the integration process.

Common Migration Pitfalls

Adopting cloud solutions for businesses that operate with legacy systems is not as straightforward. The difficulties that arise can directly influence the availability of resources, scalability, and overall operations of the business.

Underestimating Downtime

A more unsung yet remarkable cost of migrating legacy systems is the extended downtime. Businesses often fail to take into account how long migration processes will take, resulting in unanticipated delays. Core business functions, such as customer interaction, sales, and even inventory management, can become coreless, which leads to monetary distress and unsatisfied customers.

Resource Requirements

Shifting from legacy to cloud systems is easily resource-demanding. It necessitates reallocating skilled employees from various departments and may involve hiring external consultants, which subsequently disrupts normal operations and increases expenses.

Practical Approaches For Handling Legacy System Difficulties

Modernizing legacy systems comes with many challenges; however, having an action plan and a roadmap for investing in the appropriate technology will help reap benefits.

Adopting Scalable Cloud-Based Options

Considerable attention should be paid to selecting flexible and scalable cloud-based solutions. Modern cloud solutions facilitate growth within an organization and can be easier to implement, making it much simpler to adopt new technologies such as artificial intelligence and machine learning in the future.

Safeguarding Data

As migrating processes commence, security and compliance issues should always take precedence. Organizations need to integrate strong security frameworks in the early stages of a project to avoid data breaches while still complying with relevant industry regulations.

Truly Innovative Strategies

A detailed and organized migration strategy will lower risks while increasing ROI. Working with migration professionals will enable the business to plan the change in a manner that minimizes operational disruptions. Automated processes and advanced migration tools enhance efficiency by simplifying the data transfer process.

Transformation Starts Now

The legacy systems businesses rely on come with hidden expenses that can be quite damaging. In the digital era, businesses that stick to using outdated technologies become less innovative. Nonetheless, organizations can set themselves up for long-term success by modernizing and dealing head-on with the complexities of data migration, integration, and security. Proactive investment in strategic scalable solutions in the cloud ensures business operational efficiency, maximized ROI, and staying competitive with the market’s ever-changing dynamics.

Image credit: iQoncept/ Shutterstock

Aaron Wadsworth, General Manager at BitTitan, is a seasoned leader with nearly two decades of experience in high-tech sales and executive management. His expertise lies in company management, team empowerment, and customer success. Aaron has successfully spearheaded client relationship management initiatives, resulting in improved customer retention and exponential business growth. His career highlights include significant revenue growth and successful M&A support, making him a prominent figure in the corporate arena.