Even though once some business systems were the backbone of operational efficiency, they now pose significant challenges to sustainability in an era defined by digital transformation. Gartner found that over 40% of systems lack support or have reached the limits of their capabilities, which is a key cause of technical debt and vulnerability today. As businesses grapple with the imperative to adapt and innovate, legacy system modernization emerges as a cornerstone of sustainable growth.
Modernization is about unifying data to create a foundation for future success. This article explores the vital role of modernizing legacy systems in propelling organizations towards business productivity.
Key Takeaways:
- Legacy modernization is a strategic process to fix outdated legacy systems and enable modern systems.
- Start modernization projects with a thorough assessment of existing systems and constraints.
- Data unification accelerates the modernization journey and strengthens modernization efforts.
- Choose how to approach legacy modernization based on application architecture, existing architecture, underlying infrastructure.
- With deep technical expertise, teams optimize existing code to leverage modern technologies, drive substantial cost savings, and remain competitive.
Legacy System Definition and Characteristics
A legacy system is outdated software or hardware still in use by an organization. These systems, once built with older technologies, often lack the flexibility, compatibility, and features of modern solutions.
Oleksandr Boiko
Delivery Director at SPD Technology
“Despite their age and limitations, legacy systems may still be critical to an organization’s operations, housing valuable data and supporting essential processes. However, they can also bring higher maintenance costs, security risks, and integration hurdles with newer technologies. Therefore, modernization is needed to accommodate evolving business needs.”
To better understand what systems are called legacy, let’s review their characteristics below.
- Outdated Technology Stack: The legacy system is built on outdated technologies and programming languages that may no longer be supported or widely used.
- Monolithic Architecture: The system has a monolithic architecture, making it difficult to scale, maintain, and modify without impacting other components.
- Lack of Documentation: The system’s documentation may be insufficient or outdated, creating obstacles for new developers to work with the codebase.
- Multiple Built-In Components: Numerous custom-built components and integrations tailored to specific business needs pose maintenance challenges.
- Proprietary Dependencies: The system relies on proprietary software, libraries, or hardware components that are no longer supported or difficult to replace, leading to dependency issues and vendor lock-in.
- Security Vulnerabilities: Outdated security protocols, lack of regular updates, and inadequate protection mechanisms make the system prone to security risks and data breaches.
- Inflexible User Interface: The user interface of the legacy system may be outdated, clunky, and difficult to navigate, resulting in poor user experience and decreased productivity.
- Data Silos: Data within the system may be stored in separate silos or databases, making it difficult to access, share, and analyze information across the organization.
Legacy System Common Challenges and Limitations
When the business system becomes outdated, organizations face a cascade of challenges that impede their ability to improve business operations, innovate, and be competitive. Next, we outline the challenges of legacy systems and the consequences of delaying modernization.
Limited Integration Capabilities
Old systems rarely integrate smoothly with new technology or third-party platforms because of incompatibility issues and non-standard interfaces. Many legacy applications simply don’t have APIs or don’t support modern integration standards. This blocks easy data sharing, teamwork across systems, and collective work. As a result, the whole organization cannot move with the adoption of new tech and business advancements.
For example, when a retail company with decades on the market uses eCommerce development services to create a new business platform, they may find that their outdated inventory management system lacks modern APIs and integration standards. With such an old setup, they can find it difficult to synchronize inventory data with the eCommerce website. Consequently, the company may face delays in updating product availability online and troubles with stockouts.
Limited Scalability
Outdated systems often lack scalable architectures, making it difficult to handle increased workloads or adapt to changing business demands. Scaling these applications usually requires extensive redevelopment due to monolithic or tightly coupled designs with limited scalability.
For instance, a financial institution’s legacy banking system may struggle to handle a surge in online transactions during peak hours. As a result, its customers will experience delays and timeouts, while accessing online banking services. To address this, the institution must invest in significant redevelopment efforts to refactor the system for improved scalability and performance.
Lack of Vendor Support
As software or hardware vendors discontinue support for their legacy products, organizations using their systems may struggle to find technical assistance, receive updates and security fixes. In this manner, the whole business becomes more vulnerable to system malfunctions, performance issues, and security breaches.
An example of a similar challenge is a manufacturing company with legacy production planning software, no longer supported by the vendor, that experiences interoperability problems with newer operating systems. The company cannot reach the support team or install updates to fix it, and therefore faces increased service interruptions and higher maintenance costs to keep the system operational.
Compliance Concerns
Legacy systems may not meet current regulatory requirements, industry standards, or data privacy regulations. Non-compliance exposes organizations to legal liabilities, fines, and reputational harm, including costly penalties and loss of customer trust.
This challenge can be seen, for example, in a healthcare provider’s legacy electronic health records system that fails to meet the latest HIPAA regulatory requirements for data security and privacy. As a result, the organization faces potential fines and legal liabilities for non-compliance, as well as reputational damage due to concerns over patient data protection.
Cumbersome Processes
Business processes embedded in legacy systems are often inefficient and inflexible, reducing agility and responsiveness. These systems struggle to adopt automation and workflow optimization, leading to manual interventions and delays. Streamlining and modernizing processes is essential for operational efficiency and business growth.
An insurance company’s legacy claims processing system can be an example of a platform that relies on manual data entry and paper-based workflows, which causes delays in claims approval and processing. To streamline operations, the company must invest in modernizing legacy software with automation and digital document management.
Reasons for Legacy Modernization of Business Systems
In 2025, 46% of digital initiative budgets were allocated to digitizing data and platforms to improve various aspects of businesses. Organizations are keen to incorporate new security measures, enhance performance, implement automation, and introduce new functionality to unlock the business impact of AI and Big Data. Let’s closely examine why some of these motivations, as well as others mentioned by our clients, arise.
Enhancing Security and Adhering to Regulatory Requirements
Security is one of the major challenges in web application development, especially for legacy systems. These systems are highly vulnerable to threats such as malware, breaches, and unauthorized access, putting sensitive data and business operations at risk. Modernization, in turn, allows for implementing solid security measures, including encryption, multi-factor authentication, and secure coding. As a result, the company is protected from cyberattacks and regulatory issues.
Reducing Cost
Complex architectures and specialized management requirements make legacy software costly to maintain. However, thanks to modernization, businesses streamline processes, improve resource utilization, and reduce costs by migrating to cloud-based solutions. In this way, the company reduces infrastructure overhead, avoids vendor lock-in, and ensures cost-effectiveness throughout the system’s lifecycle.
Facilitating Integration with Modern Technologies and Platforms
Modernization solves the issue of interoperability with new technologies, which enables business agility and innovation. It is typically done through the integration with modern APIs, microservices, and cloud platforms. Thus, updated systems can support seamless data exchange and adoption of technologies such as IoT, AI, and blockchain to empower organizations to use data analytics, ML, and distributed ledgers.
Addressing Technological Obsolescence and Compatibility Issues
Reduced performance, increased security risks, and stalled innovation stem from legacy applications’ inability to evolve. Old systems often struggle to integrate with modern IT environments and face disruptions. For this reason, software improvements with refactoring code, adopting modern languages and frameworks, and updating dependencies are essential, as they ensure compatibility, extend system life, and introduce new technologies.
Improving System Performance, Scalability, and Reliability
When software faces performance bottlenecks, scalability limitations, and reliability issues, modernization addresses these challenges by optimizing code, adopting serverless architectures, and implementing DevOps practices. These improvements enable efficient handling of heavy workloads, adaptability to growing demands, and increased reliability, resulting in minimal downtime and a better user experience.
Thanks to leveraging AWS and serverless architecture for dynamic scalability, increasing processing speed, we achieved operational efficiency and substantial cost savings for one of the U.S.’s largest asset management companies. Thus, their low-performing legacy platform turned into a dynamic and scalable solution with advanced features for investors.
Enhancing User Experience and Productivity
Outdated interfaces and workflows reduce user experience and productivity. Companies need to modernize their platforms to prioritize intuitive interfaces, responsive designs, and tailored experiences. Modernized systems increase user satisfaction and efficiency by allowing users to navigate the platform with ease and complete tasks with speed. Integration with collaboration tools and mobile platforms further increases accessibility and productivity for end-users, allowing them to work effectively from any location and device.
Reducing Maintenance Costs and Technical Debt
Legacy systems often accumulate technical debt due to outdated code, poor documentation, and patchwork fixes. Modernization strategies and efforts address these issues by refactoring code, improving documentation, and applying best practices like test-driven development and continuous integration. These efforts reduce maintenance costs and simplify ongoing support for modernized systems.
Approaches to Legacy Application Modernization
Modernizing legacy applications means heading toward big changes in business processes. If organizations do not want to initiate custom software development from scratch to create a new product equipped with enhanced functionality, then improving the existing system is the working option. There are five primary methods businesses can use to initiate this transformation.
Rehosting
Rehosting is recommended when a legacy system operates on outdated or unsupported infrastructure. The main objective is to migrate to a modern, scalable environment without significant changes to the legacy code.
Imagine a business is currently operating a legacy enterprise resource planning (ERP) system on on-premises servers. However, the hardware and operating systems supporting the ERP system are outdated and no longer supported by the vendor. The organization faces performance issues, security vulnerabilities, and challenges in maintaining the system due to the obsolete infrastructure.
Modernization in this case involves cloud migration, rehosting the ERP system to a cloud platform such as AWS or Microsoft Azure. This process lifts and shifts the system to the cloud, ensuring compatibility and optimizing performance.
Refactoring
When legacy code is outdated, monolithic, or poorly structured, refactoring is deemed necessary. Its goal is to improve maintainability, scalability, and performance by restructuring and optimizing the code.
For instance, a business may have a legacy CRM system with a monolithic architecture built on outdated languages and frameworks. This makes maintenance, scaling, and adaptation painful and tiresome.
Refactoring in this scenario involves dividing the monolithic codebase into modular components, adopting microservices architecture, and rewriting key sections with modern languages and frameworks.
Replatforming
Replatforming is appropriate when the technology stack is obsolete or incompatible with modern infrastructure. The main goal is to migrate to a new platform or architecture while preserving current functionality.
For example, a business may use a proprietary CMS for its eCommerce platform that lacks modern features, integrations, and scalability. This limits adaptability and competitiveness, making replatforming to a modern CMS necessary.
Replatforming to a modern CMS such as Adobe Commerce or Shopify involves migrating content, data, and workflows, and customizing the platform to meet specific business requirements.
Rebuilding
Rebuilding is required when the architecture, design, or technology stack is fundamentally flawed or obsolete. The goal is to redesign and reimplement the system from scratch using modern technology and best practices.
For example, a business may depend on a legacy HRM system built with outdated technologies and a monolithic architecture. Modernizing the HRM application by rebuilding is essential to upgrading its architecture, adopting contemporary technologies, and improving functionality and scalability. This process involves redesigning and reimplementing the system using modern development practices.
Replacement
Organizations must opt for replacement when maintaining a legacy system is no longer viable or cost-effective. The goal is to implement a commercially available solution or a custom-built application that meets organizational requirements.
An example here can be a business that uses legacy billing software developed in-house that lacks support for modern accounting standards, tax regulations, and reporting. Maintenance has become costly and difficult, resulting in inefficiencies and compliance risks.
In this case, modernization involves replacing the legacy system with a cloud-based solution such as QuickBooks or Xero. This requires data migration and configuring the new software to match accounting processes. Alternatively, the company may develop a custom solution tailored to current business needs.
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The Importance of Data Unification for Legacy System Modernization & Digital Transformation
When a business relies on specific systems over an extended period, it naturally accumulates a significant volume of data. Data unification helps to effectively manage this data.
Oleksandr Boiko
Delivery Director at SPD Technology
“Data unification brings together different types of information from various sources. This helps businesses use modern IT tools and achieve digital transformation. It is important to extract and organize data from many sources and to remove duplicate entries”.
But when a company needs to update old systems, it also has to collect and keep all its data safe. This process can be complicated.
The Complications of Data Unification
- Data Fragmentation: Legacy applications often store data in disparate formats, structures, and locations, leading to fragmentation across multiple databases, file systems, and applications. Unifying fragmented data requires identifying and consolidating data from diverse sources, which can be time-consuming and resource-intensive.
- Data Inconsistencies: Inaccuracies, redundancies, and inconsistencies plague data within legacy systems due to outdated data entry methods, manual errors, and inadequate data governance. Achieving successful data unification mandates cleaning and standardizing data to ensure consistency and quality. However, this process is challenging without robust data governance policies and automated data cleansing tools.
- Legacy System Complexity: Unraveling the intricacies of legacy systems, renowned for their complexity and tight integration, presents a delicate challenge in extracting, transforming, and migrating data. Success hinges on a profound understanding of their architecture, data dependencies, and business logic. Meticulous planning is paramount to mitigate risks, preserve data integrity, and ensure a seamless transition without disrupting ongoing business operations.
- Lack of Documentation: Comprehensive documentation is often lacking in legacy systems, posing a significant challenge in understanding data schemas, relationships, and semantics. The absence of documentation complicates the data unification process, necessitating developers to resort to reverse engineering methods and manual exploration to decipher data structures and mappings.
- Data Volume and Scale: Within legacy systems lie vast troves of historical data amassed over years or even decades of operation. Consolidating these extensive datasets demands scalable and efficient data processing methodologies, bolstered by ample storage capacity and computational resources. This robust infrastructure enables seamless management of data migration, transformation, and consolidation processes.
Handling extensive and diverse datasets can be demanding in terms of both time and resources. However, with the appropriate approach, unifying such data is attainable. In our collaboration with BlackHawk Network Inc., a prominent provider of branded payment technology solutions, we showcased the possibility of consolidating 8 eCommerce websites into a unified enterprise platform.
By efficiently managing data migration and restructuring crucial business systems, we effectively replaced the legacy system. This resulted in the creation of a unified platform, leading to monthly savings of $200,000 in server, database, and technical staff support expenses.
Legacy System Modernization – The Latest Trends
As digital technologies continue to evolve, software product development companies must embrace advanced methods for legacy modernization. We can say from our experience that the following approaches have the potential to revolutionize businesses. When clients seek our advice on improving their systems, we offer them the following approaches.
Cloud Adoption and Migration
Cloud infrastructure benefits are game-changers when legacy systems require scalability, flexibility, and cost efficiency. Modernizing applications with the cloud allows improving their infrastructure, data layers, codebase, integrations, and more. Migrating applications and data to platforms like AWS, Azure, or Google Cloud enables organizations to scale with demand, adapt to changing needs, and reduce costs by eliminating on-premises infrastructure maintenance.
Microservices Architecture
Microservices architecture is effective for modernizing monolithic applications that limit agility, scalability, and independent deployment. Breaking down complex systems into smaller, decoupled services enables easier management and innovation. This approach increases development agility, scalability, and allows independent updates, supporting faster adaptation to market changes.
Containerization and Orchestration
Companies must pay particular attention to containerization and orchestration when they seek to improve portability, scalability, and resource utilization for legacy systems. Containerizing applications with technologies like Docker enables consistent deployment across environments, while orchestration platforms such as Kubernetes automate deployment, scaling, and management, enhancing scalability and resource optimization.
API-First Approach
An API-first approach to modernization efforts exposes legacy functionalities as RESTful APIs and makes data accessible to modern applications through standardized interfaces. This makes seamless data integration and interoperability possible across the entire organization. APIs enable data exchange between legacy systems and modern technologies, unlocking the power of data integration without direct access to underlying databases. This modernization approach promotes flexibility, reusability, and scalability when integrating legacy data with new applications.
AI and Machine Learning Integration
With 89% of large companies already running a digital and AI transformation, AI-driven modernization is becoming a priority. Integrating AI and machine learning adds intelligence and value to existing applications by enhancing automation, decision-making, and predictive analytics.
AI and machine learning empower legacy modernization by providing advanced capabilities such as natural language processing, sentiment analysis, and predictive maintenance. These technologies improve automation, decision-making, and predictive insights, which are especially valuable for large, complex enterprise applications.
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Legacy Application Modernization Journey at SPD Technology – Client’s Story
Businesses pursue legacy software modernization instead of going through the software product development process from scratch to enhance technical solutions, strengthen brand image, attract investors, and expand service reach.
With this objective in mind, our client, a legal tech startup, enlisted our expertise to overhaul a previously developed mission-critical web-based application for their remote notary service. Their product is a web service that facilitates online notary assistance and matches users with legal experts.
Our primary task was to identify components requiring modernization. We focused on redesigning the legacy website and rewriting modules that no longer met business requirements or modern standards. Throughout the project, we ensured the new code maintained the functionality of the legacy system.Through legacy application modernization, we delivered a fully cloud-based solution with improved user experience on desktop and mobile platforms. This reduced paperwork, provided document preparation tools, and streamlined legal processes. As a result, the client expanded service coverage to 20 US states by supporting all state-specific requirements.
Conclusion
Legacy modernization is urgent because outdated systems create problems in the modern tech context. Systems that were once efficient now lack flexibility and compatibility, often using old technology, monolithic designs, poor documentation, proprietary parts, security risks, rigid interfaces, and data silos.
These systems have problems like limited integration, scalability issues, no vendor support, compliance risks, and inefficient processes. Organizations solve these by rehosting, refactoring, replatforming, rebuilding, or replacing systems. These steps improve security, cut costs, boost integration, fix outdated technology, and enhance performance and user experience.
Data unification is also key for successful legacy application modernization, but it can be complicated by fragmented data, inconsistencies, complex systems, poor documentation, and large datasets. Even with these challenges, unifying data is possible and important for enhancing system capabilities.
SPD Technology’s experience shows that legacy application modernization brings benefits like cloud adoption, microservices, containerization, API-first strategies, and AI integration. These methods help businesses transform and succeed in digital transitions.
FAQ
What Is Legacy System Modernization?
Legacy systems modernization refers to the process of updating or transforming outdated software systems to align them with current business needs, technological standards, and industry practices.
What Are Legacy System Modernization Approaches?
There are two ways for replacing legacy systems: starting from scratch with a revolutionary method or following an evolutionary approach.
The revolutionary method involves removing the legacy applications permanently and replacing them with new ones. The evolutionary method includes modernization in stages, keeping your business running without downtime or serious risks.
What Are the Main Legacy System Modernization Strategies?
When tackling a modernization process for your existing systems, you’ll run into integration challenges and decisions about the entire system or its architecture. The key is picking a strategy that aligns with your business goals, whether you’re pushing for cloud migration to a new environment or aiming for a cloud native architecture overhaul in the software architecture.
- Rehosting simply means moving existing apps to fresh infrastructure without touching the codebase.
- Refactoring digs into restructuring and optimizing that code for better maintainability, scalability, and performance.
- Replatforming shifts apps to a new platform with just minor tweaks to boost how they run.
- Rebuilding tears it down and starts over with modern tech and patterns.
- Replacement swaps out the old for off-the-shelf or custom solutions that actually fit today’s needs.