Many CIOs today deal with rising costs of maintenance of legacy systems, yet are unsure of where to start with their judgment of the business value of the system, including the rising costs and competitive vulnerabilities they pose. As digital innovation and disruption begins to take hold across industries, leaders decide between continuing to invest in maintenance, completing a full replacement or pursuing modernization. The foundation for this decision lies in a comprehensive and thorough assessment of the current system and its ability to meet current and anticipated future needs.
The key is to conduct a thorough assessment of the business value of the legacy system and the needs of the business to determine the appropriate path for the business.
Businesses choose to undergo periods of maintenance and modernization to upgrade the system to meet the business’ needs. When a significant gap opens up between the functionality of the legacy system and the business’ needs, companies pursue replacement with a new system. Determining how large their gap is (and projecting how large it will quickly become) is a major challenge for CIOs.
Option 1: Replace Legacy Systems
Full replacement of the system represents the most arduous and resource-intensive option, and one that companies are often forced into or feel extremely pressured to pursue. These business drivers include new regulations that require new system capabilities, technology no longer receiving support from the supplier, or mergers and acquisitions creating the need for a consolidated system or common platform.
Investing in a full replacement—a massive undertaking—generates serious business impact. The functionality of modern systems causes significant productivity gains and more powerful business intelligence reporting. The extraction process replacement that projects require can also have ramifications beyond the system; by dusting off and exposing the processes and business logic, new opportunities for efficiency and innovation can reveal themselves.
That payoff represents the best case for replacement, but for some companies, the costs and risk may overcome the benefits. The arduous process of moving everything over is extremely resource-intensive. Firms who are not able to pursue a “big bang” implementation where everything is switched over at once also need to develop APIs for the legacy and replacement systems to work side-by-side. Even downtime for a few hours can add significantly to the bottom line of these projects. The technical side is only half the battle. As companies try to realize some of the value in productivity and efficiency gains, CIOs need to develop a robust plan for addressing the cultural changes and providing the training employees need as their workflows adjust.
CIOs also lose out on ROI when they rely on traditional software vendors, for replacements, such as SAP and Oracle for ERP systems, whose interfaces limit the possibilities for interaction design and user experience. User adoption issues are a key factor in why many software development projects fail, because users will make mistakes, develop workarounds, or abandon the system completely.
Option 2: Maintain Legacy Systems
If it’s not broken, why fix it? IT leaders can project the resources and time needed for maintaining these systems, and are also comfortable with their supplier for continuing updates. Without an injection of funds to the IT budget, maintenance appears as the only option.
Continuing to invest in the maintenance of these systems is the safe short-term and risky long-term choice. Maintenance costs will only increase as the competitive advantage evaporates. As the market undergoes major changes with digital and mobile innovations, the impact and applicability of the competitive advantage of the business logic comes into question. The unseen costs of maintaining a legacy system come through when a competitor emerges who places more demand and urgency on IT resources. With so much tied up in maintaining the legacy system, is the business still able to respond?
Option 3: Modernize Legacy Systems
Modernization of a legacy system is often presented as a middle road between replacement and maintenance, but it all depends on the modernization path pursued. Modernization efforts typically fall into two categories: white-box and black-box.
- White-box modernization involves reverse-engineering the internal operations of the system and developing an abstract model of the system in order to restructure it into a more modern architecture.
- Black-box modernization heavily focuses on “wrapping,” and therefore is only concerned with the inputs and outputs. Generally, companies pursuing this effort will have an end goal of developing another layer of software to conceal the old system through a modern interface.
White-box modernization, because of the difficult abstraction and reverse engineering approach, requires a significant amount of time and effort. Black-box efforts are not without their own resource costs, but pale in comparison to the white-box route, which is the only option for dealing with the issues in the underlying code.
For some companies, improving the user experience with a black-box modernization effort can generate significant financial gains on its own. As the workforce demands more mobile technology, especially for 24/7 operations, delivering key data points of business intelligence or making it easier to log data from a mobile device saves employees’ time and frees them up to pursue more analytical or creative tasks.
Modernized legacy systems allow for new possibilities with data, logic and usability without the arduous process of replacement. Their systems also grant more latitude to the IT department to pursue other ventures.