Blog Post

Jun 01, 2022

Legacy Systems In Digital Transformation: Risks and Challenges

What Are Legacy Systems?

A legacy system in a business is a computer system, software solution, or similar technology that is outdated and difficult to manage. Legacy systems, however, can be vital to workflow processes within an organization. A legacy system is also known as a legacy platform or legacy technology.

Legacy systems can be a barrier to efficient operations, particularly if data sets and other information aren’t being used to the extent modern cloud systems can allow.

Often, legacy systems cannot be integrated with new platforms. Their data remains isolated and incompatible with other data processing systems. This is why a legacy system is an example of a disparate system. A system that functions independently of others, may not be as effective or productive for your company.

Related Blog: The State of Data Analytics Adoption

SMBs are rushing to implement digital strategies in the wake of the pandemic. It’s not a great surprise that worldwide spending on DX is forecast to reach $1.8 trillion in 2022.

Unfortunately, despite the large amount of investment from SMBs, success can often be elusive—70% of businesses fail to see through their digital transformation plans to a satisfactory conclusion.

One of the reasons transformation can be difficult is the upgrading of legacy systems. They can be cumbersome, unruly, and challenging to update. That’s not to mention pushback from end users who are comfortable with old system and reluctant to move to another platform.

Common examples of legacy systems include: 

Operating systems
ERPs
CRMs
Hardware
Network infrastructure

Today, we’ll take a look at why decision makers are getting rid of their legacy systems, why upgrading IT systems in an organization is important, and what obstacles can appear with digital transformation.

Issues with Legacy Systems

Maintenance

The cost of maintaining legacy systems is one of the most obvious issues. Updates might be sporadic or discontinued. These systems often contain large amounts of data, so it can be a daunting consideration to migrate to a new platform.

Legacy hardware is another difficult issue to handle. Outdated infrastructure can struggle to keep up with the demands of modern solutions, creating a bottleneck for your processes and operating capacity.

The staff using these legacy systems might have reservations as well. Workers who are used to legacy systems may be reluctant to change or to see the overall value in learning a new system. Conversely, you may be having problems when onboarding new staff, due to unfamiliarity with an old system.

Of course, new systems require onboarding too. Their modernity means there will be more support from vendors in getting everybody up to speed. If your organization relies on a few people to onboard new recruits for your systems, you can run into issues if those employees leave.

Integration

Integrating legacy systems and modern solutions can be a huge hassle for SMBs seeking to improve their work processes.

Those who are comfortable with, for example, their current legacy ERP, may want to keep their system and integrate it with more modern solutions. However, many modern cloud and other SaaS solutions can be incompatible with older legacy systems. This means that to incorporate new tools and programs, extensive custom code is required to make it work.

This is a time-consuming and expensive exercise, particularly for SMBs looking to cut costs.

(96%) of enterprises utilize at least one cloud service for their organization. Therefore, it makes sense to look for solutions that have APIs which can be easily integrated.

A typical result of this lack of integration is the emergence of data silos, which is when different departments across a company cannot freely access the data they need.

Using a modern ERP helps eliminate data silos and legacy systems. It also allows businesses to use their data in creative ways. For example, using your supply chain data to make more informed decisions.

Data-driven organizations are 23 times more likely to acquire customers, six times as likely to retain customers, and 19 times as likely to be profitable as a result.

Cybersecurity

Outdated systems are a prime target for cybercriminals. Malicious actors seek out weak points in solutions in order to gain access. Organizations that neglect their security expose themselves to attack.

Developers work tirelessly to shut down these loopholes and prevent cybercriminals from taking advantage. Yet with a legacy system, there may no one keeping it up-to-date, leading to a system that is practically asking to be breached.

Cyberattacks are on the rise and extremely costly to businesses, particularly SMBs. The average ransomware attack costs a business $5 million. If sticking with legacy systems in business, decision makers should take extra care that they have taken the appropriate measures to ensure they stand the best possible chance against an attack.

Moving to the cloud has become an attractive option for organizations in recent years because of the cloud’s strong security capabilities—stronger than most on-premise systems.

Business Opportunities

One of the biggest consequences of continuing to use a legacy system is the inability to modernize and improve your organization. Evolving to remain competitive is a central goal in digital transformation strategy. Yet legacy systems in business are notoriously inflexible, an obstacle for most organizations operating in today’s digital environment.

Customers expect organizations to be digitized, and executives see digital transformation as a means to be competitive. By not investing in new technology and sticking with a legacy system, you’re hampering your own ability to compete and giving ground to your competitors.

From Legacy Systems to Digital Transformation

5 Reasons To Modernize Legacy Systems in Business

Here are five of the advantages of modernizing your systems and making the leap to the cloud:

Competitive advantage: Modernizing a legacy system, whether it’s an ERP, CRM, or your data center, can bring a plethora of advantages to your business. This allows you to become more capable, agile, and give you an upper hand over your competitors.
More content employees: User interfaces have evolved significantly over time, and most employees will be accustomed to the UIs that they are familiar with on their phones or laptops at home. Giving them a modern UI at work can improve satisfaction and performance over an older-style system that’s not as user-friendly. 
Opportunities for growth: Modernizing your legacy system gives you much more room for growth in the future. If you’re investing in an established cloud service like Microsoft Azure for your business, you can be confident that you won’t be left behind. Keeping pace with the latest tech and software developments gives you a competitive edge. It also puts you in a great position to further expand the services you offer.
Make use of big data: A major issue posed by legacy systems that digital transformation attempts to remediate is the silos that emerge from disparate systems within an organization. DX (Digital Transformation) seeks to remove these barriers and allow users to make use of the vast amounts of data (big data) that SMBs possess to help support your business decisions.
Security and performance: Upgrading from an on-premise solution to a cloud solution has long been an area of concern for decision makers, primarily because of the perceived risks of hosting company data on cloud servers. Advances in cloud services has led to a far higher level of security in 2019 than in previous years. For example, Tier IV data centers offer more security than on-premise servers, meaning your data is most secure when hosted on the cloud.

Challenges of Upgrading Legacy Systems

Time

As with any digital transformation effort, modernizing your legacy systems will require time and patience. Executives may not understand that these processes often take years to fully realize.

Cost

DX can be a costly exercise and it’s important not to get wrapped up in a mindset of measuring success with an immediate ROI. Remember the goal is to bring your organization up to speed to stay competitive.

Change management

A DX strategy for transition should be fully endorsed and envisioned by key executives and decision makers in the organization. It’s one of the reasons we at Impact emphasize ensuring a smooth shift with our change management consulting services.

Best Practices for Upgrading a Legacy System

Choose Wisely

It’s easy for a business to fall into the trap of wanting fast legacy IT transformation to modernize. We recommend not doing this, but to focus on aspects of your organization that can be upgraded to give you the most bang for your buck.

For example, migrating your email server to a cloud-hosted solution is a common initial strategy that provides a quick return and is relatively painless. Small wins like this can help give confidence while still doing the job of removing legacy systems in the business.

Strengthen Your Processes

No solution introduced for the purposes of DX should ever weaken a work process. If you find that your investments are not conducive to improving productivity or efficiency, then it either wasn’t an appropriate solution for you or wasn’t implemented as well as it should have been.

Make sure you’re targeting processes that need transformation, rather than digitizing for the sake of it.

Have a Strategy to Implement Your Solutions

Many businesses, in their eagerness to modernize, enact strategies for digital transformation which are not suitable and undeliverable. This often means installing too many systems, too quickly, and without a plan to implement them thoroughly.

It’s one of the reasons a concerning amount of DX plans are considered failures—not because the idea was bad, but because the strategy backing it up was poor.

This is why so many SMBs partner with a seasoned MSP to build their plans for digital transformation, as these organizations have experts with years of experience. Experts have put together many successful DX strategies hundreds of times.

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