Technology is progressing fast, with more groundbreaking use cases emerging that have involved Artificial Intelligence, Machine Learning, the Internet of Things, and Big Data solutions in some capacity. The term “Industry 4.0” was coined in 2011 — just imagine the change in the state of technology in the last decade! Who could imagine the necessity to migrate to the cloud or install smart sensors to improve predictive analytics capabilities?

We are on the verge of a technological revolution, and now it is crucial to implement the latest technologies in your business to stay ahead of the competition. In this article, we would like to dive deep into the subject of legacy systems’ modernization and the instant value it can bring to your business. Businesses’ interest toward legacy modernization has been stable over the last five years, peaking in February 2020. So, this topic is definitely hot for further discussion.

Don't have time to read?

Book a free meeting with our experts to discover how we can help you.

Book a Meeting

The Definition of a Legacy System

It’s not so easy to give an exact explanation of what a “legacy” system is, because it depends on many factors. In the real world, the majority of companies combine new technology with their existing infrastructure. They adopt cutting-edge software and then run it on their old machines. Some companies are replacing their infrastructure step by step, keeping their enterprise running on old technology in the bigger picture.

But still, there are plenty of those who are still running an obsolete infrastructure. In fact, you can find some over-the-top cases. How about the IRS that is still running in 2020 on a concept that was introduced in 1959? This system has become an antique, but it somehow continues to maintain almost 1 billion records. Dave Powner, GAO’s director, expressed his concerns, acknowledging that this is too risky for the U.S.’s government to rely on such an outdated system, constantly putting the task-fulfilling process at risk. This case is proving one important thing: while obsolete software could run for decades, it becomes a weak point of a company.

While legacy is often associated with the term old, in regard to software, it’s not always defined solely by its age. Software could easily be dubbed “legacy” due to a struggle to support it or its failure to meet the demands of an organization.

What is a Legacy System?

So, in IT you can call a system a legacy system if it’s way past its prime, but still in use. It could be an old piece of computer hardware, a computer program that is clearly too old, or maybe a process or a set of processes that could be replaced by much more effective ones in 2020. In some cases, it’s a combination of everything mentioned above.

A legacy system is an information system that may be based on obsolete technologies, but it is irreplaceable at the moment. Replacing such systems with new cutting-edge technology is a very complex challenge, so companies must ensure the compatibility of the new technologies with the old systems and data formats they currently use.

Why does that happen? Well, it is the “If it ain’t broke, don’t fix it” scenario. Unfortunately, the IRS is far from being the only example of such systems in major federal institutions. The U.S. GAO made a list of systems that are up to 50 years old, have survived for decades by being adjusted from time to time, and provide specific functions to the organizations, but eventually need to be replaced due to some major support issues and security risks.

AgencyAge of system, in yearsAge of the oldest hardware, in yearsSystem criticality (according to agency)Security risk (according to agency)
Department of Defense143Moderately highModerate
Department of Education463HighHigh
Department of Health and Human Services50UnknownHighHigh
Department of Homeland Security8-1111HighHigh
Department of Interior1818HighModerately high
Department of Treasury514HighModerately low
Department of Transportation357HighModerately high
Office of Personnel Management3414HighModerately low
Small Business Administration1710HighModerately high
Social Security Administration455HighModerate

Of course, there are some valid excuses to maintain operations just the way they are for years. For example, a software or hardware vendor goes bankrupt — making it next to impossible to change the operations. The experts who set up those systems could have left their jobs without leaving any applicable instructions. It could be simply too costly for an organization to move to a newer system, and, as a result, the organization must work with the old one for the time being.

Examples of Legacy Systems

Probably, the biggest problem of legacy systems is that they are expensive to maintain. Their parts become hard to find as the years go by. As long as there are voicemail systems from the ‘90s, manufacturing processes that are controlled by a computer running on MS-DOS, electronic microscopes that are running on Windows 95 computers, or sales terminals running on Intel 286s, there are problems businesses with those types of legacy systems face. Luckily, there is a solution to this, and we will talk about this right now.

What is Legacy System Modernization?

Simply put, it is upgrading or replacing some of your IT assets to better align with your business objectives. Every business should strive to bring innovation into their processes. To achieve that goal, one needs to implement proper technology, modernize legacy applications, leverage swift connectivity, and use modern platforms. Most legacy IT systems fail to deliver that, and that’s precisely why they have to be replaced.

Legacy system modernization is much more than simply updating software. Let’s get clear with the definitions here:

  • Using programs your organization has been operating on for a certain period of time, but which are outdated is using Legacy Software.
  • Determining, upgrading, or replacing obsolete systems, processes, or software — entirely or partially — is Legacy System Modernization.
  • Replacing the entire platform on which your system is operating, that is Replatforming.

There is definitely a huge difference between Legacy System Modernization approaches and Replatforming. The extent to which you need to change your operations depends solely on your situation. Complete replacement is not an option in many cases. Thus, you need to clearly understand the problem and the way you can solve it without any additional losses. Let’s start to figure out what you should do in your case by determining why you need Legacy System Modernization to begin with.

Top 5 Reasons to Update Your Legacy Infrastructure Right Now

Leaving working machinery or programs alone and letting them do the job seems like a no-brainer. However, the times are changing as well as the situation on the market. The following list is intended to prove why you need to let the past go and improve your organization by whatever means necessary and as soon as possible.

The Real Cost of Outdated Technologies

In theory, your operations may seem to be running smoothly, you may be getting impeccable results. Everything may seem to be fine. So, why bother changing the old pieces of equipment and software? Because there is something that is always linked to Legacy Systems — this is called “the lost opportunity costs.” How can you calculate this? It is quite simple — when your business is coming up short on taking advantage of innovations and your competitors cash in on the opportunities, every cent they earn from this could be considered your loss.

The truth is the companies that rely on modernization get the chance to reduce their production costs up to 500%, depending on the way they do it. Usually, companies waste over half of their IT budget on supporting old systems, dealing with archaic pieces of code, and managing support tickets. If you haven’t transferred your data centers to the cloud as yet, you are probably still losing money on maintaining data centers, not to mention the loss of opportunities related to system scalability and ease of problem detection. This is especially important for small businesses — because the longer you use old systems, the more of your budget is invested in keeping them alive. This takes you to the point where the maintenance will be more expensive than the required upgrade.

You can’t measure what’s hidden, but there are quite obvious factors like the happiness of your employees and the image of your organization that is closely connected with customer loyalty and customer satisfaction. There is some research that claims over 90% of clients will more likely switch to another company instead of continuing to trust one with technologies way past their prime. You don’t want to become part of that statistic!

Security Issues

The risks in this area are fairly obvious, but we can’t stress them enough —legacy systems just can’t meet modern security standards. There have been plenty of reports on malware attacks and data breaches, and those situations could have been easily avoided if companies had gotten rid of their old equipment. It is impossible to rely on the systems from the early 2000s to detect viruses and hacker attacks. Just a couple of years could make a huge difference here.

The truth is when manufacturers cut off their support of a system, that makes this system vulnerable to the latest threats because regular patches and updates are basically what is keeping your system alive and well. Without the vendor’s support, your system becomes an easy target for criminals, and it is only a matter of time before your whole organization could be in danger.

Integration and Compatibility

You can put complete modernization on hold, but there is always a need to add something new to your processes; it may be something minor, but here is where legacy issues turn into a bottleneck.

Let’s say your clients are well aware of Machine Learning in Banking innovations. They notice that some of your competitors have already switched to chatbots running on Artificial Intelligence for basic inquiries that require human experts only when necessary. You make a decision to get rid of your call center and switch to AI-powered chats too — but legacy programs tie you up, making it impossible to switch quickly without breaking up the process.

Of, course, such integration is possible, but it requires additional time and effort, a large amount of custom coding, and the purchase of new equipment to make it work. It wouldn’t be such a hassle if your technologies had been already updated before. Additionally, no one really knows what the next big thing in technology will be, so that is a solid reason to modernize your operations as much as you can.

Rapidly Increasing Maintenance Costs

Not only do legacy systems fail to meet your business strategy goals, but they also become more expensive to support year out. The percentage could be as high as 85% of your IT budget, spent on partial upgrades, updates, and training for your employees to handle old technology.

The numbers speak for themselves. As reported by Microsoft, the cost of a PC running on Windows 10 is approximately $168 per year, while if you stick to Windows XP it could be as high as $780 per year — and that’s just for one single unit! You can reasonably expect that the more than $600 price gap will only become bigger with time.

But it is not only the cost of the maintenance that is a problem, but also the frequency of breakdowns and the time required to get things working again. Robotic Process Automation that is driven by Artificial Intelligence takes over routine and repetitive tasks from humans and connects your software solutions into one cohesive ecosystem. If something goes wrong, an integrated RPA will detect the problem instantly, while a legacy system simply can’t do this quickly and efficiently. Businesses lose almost $400,000 for every minute of downtime worldwide, so every instant counts!

Limits for the Overall Efficiency of the Business

Years ago, when your business was founded (or since the date of the most recent modernization), everything seemed to be working efficiently. But is it now? What is the reason for putting the future of your company in danger by settling with the old? Your business should have enough flexibility in order to adjust your business model, scale your processes, and adapt to the constantly changing market.

The first important block to getting maximum efficiency is a lack of agility. It is a common trait among legacy systems, and they just can’t keep up with the speed of the innovation and changes in industries. Agile methodologies are capable of improving the speed of IT processes by 50%, as reported by McKinsey.

The second obstacle is the mobile functionality that your business is failing to deliver. According to a survey by Red Hat, almost 90% of businesses have already implemented mobile functionality into their processes.

It makes perfect sense because if your business is inaccessible from mobile devices, you are not just falling short in keeping up with your competitors – your overall performance is limited. To improve performance and achieve additional flexibility, it is super important in order to migrate your operations to the cloud and get the full advantages of mobile app development outsourcing.

The Benefits of Legacy System Modernization

There are some tangible risks regarding old pieces of software and machinery. However, some companies are still hesitating to launch the modernization process. Unfortunately, the vast majority of businesses will only turn to innovation in cases of an emergency or the threat of downtime. Even before the technological shift, the mindset of business leaders should have been changed, and here are some reasons in favor of legacy modernization.

Getting an advantage over competitors

While your competitors are still hesitating, you can start legacy application modernization and cash in on the current as well as potential business opportunities. With the modern technology stack, your company will have more flexibility to launch new products and services that have a real chance to succeed in your marketplace.

Improving customer support

Paper-based legacy information infrastructure is not just a real hassle for companies, costing them tons of money, but also a big disadvantage in a customer support area. Turning your business digital will enable you to save time and take advantage of simpler compliance, improved tracking, and sophisticated encryption algorithms. This will improve your brand image and customer satisfaction.

Leveraging Artificial Intelligence, Machine Learning, and Big Data

“Big Data” means literally “Big Opportunity” in 2020. The ability to connect all possible information from multiple data points is a crucial factor in the efficiency of almost every business. Legacy transformation will enable you to get the most value out of this concept, especially if you take the power of Artificial Intelligence into account. This term seems to be everywhere right now, but there is real substance behind this hype. Artificial Intelligence along with its subdivision Machine Learning are introducing once-inconceivable opportunities for data analytics, including predictive and preventive analytics. Just take a look at how Artificial Intelligence is changing Finance — such growth and innovation would be impossible if those financial institutions were running legacy platforms.

Performance and revenue boost

Spending money on technology definitely makes sense in terms of efficiency. Let’s look at cloud computing for instance. According to IBM, updating your legacy system will improve the productivity of your developers by almost 50%, thanks to modern tools and the much more effective cloud technology. After the digital transformation, you can satisfy the needs of each department, providing exactly what is needed (e.g. more storage space or processing speed), because modern systems are making progress in flexibility as compared to the oldies.

Legacy Systems Modernization Statistics

Future-Proof Enterprise

Two years ago, the United States government invested only 20% of its IT budget in modernization, leaving 80% to keep legacy systems alive. How about that growth model? Like it or not, you are constantly investing in your business and it is your choice where to put your funds. You can choose data migration to the cloud and later adopt a Machine Learning algorithm that will help to extract the value out of Big Data, or you can waste precious resources on an uphill battle with your legacy system. The ever-changing market demands action, and the key to staying relevant is constant improvement. Let’s examine how you can achieve that!

Legacy Systems Modernization Approaches

So, you’ve decided to get into modernizing your legacy system, that means you are heading toward big changes in your business processes. This is actually a sort of crossroads and you have basically two ways to go about it: starting from scratch with a revolutionary method or following a more subtle, but no less effective evolutionary approach. They both have their advantages and disadvantages, and you can pick the best one for you.

The revolutionary method

Also known as the “rebuild and replace” approach. This one involves taking out the legacy system for good and replacing it with a new one. Sounds like too much? Well, because it is. However, there are cases when it is necessary. For example, when you realize that some heavy damage is unavoidable, like potential security breaches when your system just can’t deal with hacker attacks anymore. There are other good reasons to take the rebuilding route. Perhaps your system can no longer provide a solution for your business goals; since that type of legacy system is useless, replacing it makes the most sense.

The evolutionary method

This is the opposite of radical disruption and a safer way for companies to embrace innovation. It includes modernization divided by stages, which keeps your business running without any downtime or serious risks. But when this approach is used for a long period of time, it could turn into fixing separate problems rather than eliminating the root cause — with the speed of technological progress, this is inevitable.

Businesses that choose this approach have been experiencing some difficulty making new systems work with existing ones. The biggest challenges are simultaneously making them compatible with each other, as well as secure.

To pick the best way to go, you need to determine the exact bottlenecks your legacy system is causing and how effectively each approach will eliminate them. Of course, there are other classifications and they could be called different names, but for now, we will stick with the following approaches:

  • Legacy Migration and Enhancements
  • Technology Correction and Growth
  • Total Software Modernization and Reengineering

The easiest and least disruptive of the three is the approach where you migrate your system or parts of your system to the cloud while adding some minor adjustments. This is quite popular due to its non-disruptive nature. This approach could include overall optimization and various upgrades. Of course, it has some vulnerabilities, the most obvious being the fact that business processes generally stay the same, and you can’t change the core architecture using this method.

In the case when the technology your business operates doesn’t limit the potential for the future, the modernization process could simply consist of some corrections and enhancements, made as they are needed. Once again, while keeping the main business processes the same, this legacy system modernization approach could involve improving the architecture, making minor adjustments, or, sometimes, code refactoring. After the upgrade, you can include additional features, some new modules, or third-party integrations. You can divide this approach into two real-world scenarios: improvement of your existing systems and the duct tape approach. While the first one means fixing what is already operating well, the other focuses on introducing additional applications that will connect with the legacy system to provide the necessary functionality.

When we are talking about Total Software Reengineering, we are talking about a major change. It starts with identifying what features are vital to your business and what could be removed because they don’t matter anyway. When the list of features is clear and the development team understands what needs to be done, the new modern system is built from scratch. All the required features are in place, but now this system provides more impressive performance and is stacked with modern technologies. Now, it is scalable and future-proof!

The Importance of Data Unification

Modern businesses no longer have a problem with the availability of the information. There are enormous amounts of it and numerous tools to collect and analyze it. The real question is how to manage it and, most importantly, how to extract valuable and actionable insights. Now that you can learn everything about the online activity of your customers, their preferences, age, or demographics, making sense of those parameters can just make things more complicated instead of giving an advantage. So, what do we do now with this burden of information, called the “data lake”, and how do we make sense of it?

The definition of data unification

The data unification process means connecting and merging information of different types from multiple sources, allowing your business to benefit from your IT modernization strategy. To achieve this goal, the information should be exported from a variety of data sources and sorted. Any duplications should be removed by both human experts and advanced Machine Learning algorithms.

The programs with the instructions for Artificial Intelligence to gather, match, and unify data are created by data scientist experts. Developing the code to complete this task could take months. But when that is done, automated systems can convert all streams of data into one unified data set.

Why is it a challenge?

The main factor here is the amount of data. Companies that are unifying thousands of data points from a couple of sources could handle it a bit more easily. But what about the giants? It took GE years to successfully complete this task for procurement systems, because it meant unifying data from 80 separate systems. But as a result, the corporation saves $1 billion a year! These impressive savings are achieved only by GE improving the awareness of its own processes inside the organization. The interest in data unification in different industries is rapidly growing, and it will increase in the coming years as the opportunities to obtain more information about the processes inside organizations increase. You can learn more about this in The Power of Data Integration Strategy for Your Business article.

Platform Development and Data Migration Experience from SPD Technology

One of the biggest challenges for businesses is a Merger & Acquisition (M&A) occurring during the Digital Transformation process. To make the platform consolidation process easier, it is good to have an Integrated and Unified Digital Platform that helps remove the complexity from business processes, making your processes more agile and letting you focus on improving customer experience (all of which will ultimately increase your revenue).

SPD Technology provides custom software development for businesses on their way to legacy systems’ modernization using cutting edge technologies like Machine Learning and the Internet of Things. We help businesses solve the problem of legacy systems and make sense of their fragmented data. As well as optimizing the infrastructure and maintenance costs, implementing such projects reduces the operational and capital expenses.

We have experience in delivering complex outsourced software development projects. Along with effective approaches, our experts use a set of modern tools to deliver products and services according to plan. Metucat is one of those tools. This is an Integrated Framework for data-centric web and mobile application development, maintenance, and improvement. It allows our distributed teams to work on different parts of a product independently. System architects, software developers, and business analysts can use Metucat. It helps to save up to 50% of the time spent on planning, analysis, and design.

Related Article: How to Set Up Your Own Offshore Development Center in 2023


Whatever approach or scale of transformation you choose, it will inevitably take time and effort, but the actual value is definitely worth it. Digital transformation is set to change the global economy — more than 50% of the world’s enterprises will have digitized their processes by 2023, according to the IDC. To survive in the modern world, businesses must embrace transformation as a continuous process rather than just one or a few separate projects. SPD Technology is here to take off with you on the journey of digital transformation. We would be eager to provide offshore development services to your company, feel free to contact us any time!

Further Reading

  1. Modernization of Legacy IT Systems

Ready to speed up your Software Development?

Explore the solutions we offer to see how we can assist you!

Schedule a Call