The modernization of legacy systems, as a cornerstone of digital transformation, has gained substantial traction from a peripheral concern to a primary focus for businesses, and rightly so, primarily since legacy applications have presented significant hurdles, making it daunting for many organizations to achieve scalability, agility, and growth.
Surprisingly, just 10% of organizations have executed complete modernization of their legacy systems. Meanwhile, around 65% of businesses have initiated the journey towards modernization, with over 50% of CTOs dedicating a significant portion of their time to managing outdated legacy systems.
So, how can CTOs effectively propel their digital transformation initiatives into action? The answer lies in pinpointing reasons for modernization, challenges faced by CTOs, and bridging gaps within a comprehensive modernization roadmap and industry best-practices, ultimately achieving desired business objectives.
The Imperative of Modernization
Why Modernize?
While numerous CTOs recognize the imperative of modernizing their legacy systems and have commenced the journey, research indicates their tactful motivations are chiefly driven by the following factors:
- Maintenance & Support: With time, the cost of maintenance surpasses the initial development budget, impacting financial resources.
- Integration & Compliance: Neglecting product updates in light of evolving industry regulations can lead to significant financial penalties.
- Security Concerns: Outdated software carries security risks, potentially resulting in data breaches that can incur significant costs for software development companies.
- Missed Business Opportunities: The long-term profitability and competitiveness of the business is likely to be compromised by a lack of innovation.
- Enhancing Organizational Agility & Efficiency: Modern PaaS platforms featuring automation tools and pre-assembled components have the potential to boost efficiency by as much as 80%.
Legacy System Modernization: The Challenges Faced By CTOs
1. Skills gaps and Organizational Change Management
Addressing skills gaps and managing organizational change during legacy system modernization is complex. Niche skills are vital to deciphering old systems and their business logic, especially when documentation is lacking.
Simultaneously, the journey will require experts in new technologies, with a significant focus on change management, and to achieve this, it is necessary to establish new positions, introduce reskilling initiatives, and inform teams about upcoming modifications. Success in future technological advancements relies on the effectiveness of current efforts.
2. Cultural Resistance and Low Levels of Digital Literacy
As per research conducted by McKinsey & Company, approximately 70% of modernization projects for legacy systems encounter challenges stemming from cultural resistance. This resistance often arises from employees’ reluctance to adapt to change, reluctance to acquire new system knowledge, and concerns that the modernization effort may disrupt their workflow and complicate their tasks.
Moreover, in most instances, limited stakeholder and end-user involvement can be attributed to relatively low levels of digital literacy within organizations. According to the Deloitte Digital Maturity Index for 2023, companies have, on average, boosted their digital maturity by 16 percentage points over the past five years, with only 44% successfully cultivating a digital mindset among their workforce.
Therefore, every modernization program must encompass the aspect of ‘human transformation.’ As a CTO, collaboration with the COO and HR executives is essential to define the extent of necessary digital skills and staffing requirements.
3. The Cost of Modernization
The cost of modernizing legacy systems can vary based on size, complexity, and approach chosen. These systems often come with unknown dependencies, a difficult timeline to estimate, and elusive ROI numbers.
Yet, interestingly enough, some large enterprises allocate up to 80% of their budgets to uphold these outdated systems, incurring hefty maintenance and overhead costs while missing out on growth opportunities and potential revenue due to a limited IT innovation budget. Thus, convincing stakeholders of the double cost of not modernizing is essential.
4. Balancing Cyber Security and Modernization
Legacy systems that are outdated and nearing their end-of-support date or have exceeded their practicality can pose a considerable security threat. Migrating and upgrading existing systems to either a hybrid or cloud environment can significantly increase diversity and widen the defense perimeter, thereby improving overall system security.
Hence, it is vital to adopt advanced cybersecurity approaches to achieve long-term and effective digital transformations.
5. Coexisting of Systems
In any business transformation journey, it is necessary to minimize disruption and downtime during the final migration. It can be challenging for businesses to swiftly migrate data or deploy new applications in a quick lift-and-shift approach or in a single attempt within a short timeframe.
Hence, as part of the transition phase, CTOs are required to ensure all aspects of the business are covered while addressing additional issues like overlapping functionality, preventing data duplication and loss, introducing new systems with batch user migration, and setting up interim IT solutions to bridge the legacy and new systems.
Tips for Successful Legacy System Modernization
If the existing legacy system is causing obstacles in daily operations and impacting digital transformation goals, consider these comprehensive steps to cut costs and enhance agility:
1. Evaluate the architecture of the legacy system
Before initiating a strategy for modernizing legacy systems, evaluate the system’s architecture, assessing its capabilities and flexibility while considering future business needs.
Determine which parts of the system have remained effective over time to determine whether a complete system overhaul is necessary or if specific components can be updated.
2. Access Available Legacy System Modernization Options
Identify the issue, evaluate modernization options, choose the option that offers simplicity and lower risk, and assess its impact on the existing system.
3. Select a Modernization Approach That Will Drive Maximum Value
Assess each available option to determine how they can produce the maximum positive impact by considering their effect on the legacy architecture, technology, functionalities, expenses, and risks, and then select the appropriate modernization approach.
Strategies For Legacy System Modernization
Building new tech stacks from scratch to modernize the existing systems isn’t necessary. Staying relevant and competitive involves making essential system updates while adopting a pragmatic, transparent, and phased approach.
However, modernization success also depends on the specific problem being addressed. To ensure successful legacy system modernization, follow the best practices cited below:
1. Transform the Perspective on Modernization
Consider software as a strategic business tool, not just an IT concern. Transitioning from traditional IT-centric thinking to a business-system perspective helps evaluate how these systems contribute to the organization while identifying critical applications and assessing their impact on revenue.
2. Identify the Modernization Transformation Journey
Many organizations can undertake several application or software modernization transformation journeys, and these include:
3. Constructing a Modernization Timeline
Constructing a modernization timeline involves thorough consideration of several key factors:
A systematic and comprehensive assessment of the questions will enable businesses to establish a timeline aligned with requirements.
4. Document the Changes
It is essential to document all changes made during the process of modernizing. It is crucial to remember that documentation should continue even after the modernization has begun. Keeping track of all modifications made will assist in preparing for possible future expansion and any technical revisions that may arise later.
Conclusion
To modernize legacy systems successfully, CTOs must carefully balance meticulous planning, a skilled team, and the right IT technology stack. By achieving this balance, an organization can revolutionize its operations.
CTOs can begin by conducting thorough assessments of their current inventory to identify priorities and needs. Implementing non-disruptive approaches first can yield tangible ROI in a shorter time frame. This approach can also generate stakeholder support for more complex transformations.
At AppsTek Corp, our expert consultation and strategy services can help CTOs chart a strategic course for their legacy modernization journey, ensuring a seamless and efficient experience. Contact us now.
