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The Real Cost of Aging IT Systems, Part Two: The Top 4 Costs Holding Businesses Back

In our previous post, we discussed how outdated, core IT systems can impact budgets and hinder progress. We also learned that by some estimates legacy systems consume around 75% of federal and commercial IT budgets, a staggering number given the pace of technological advancement in recent years. In this article, the second of our two-part […]

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July 20, 2017

In our previous post, we discussed how outdated, core IT systems can impact budgets and hinder progress. We also learned that by some estimates legacy systems consume around 75% of federal and commercial IT budgets, a staggering number given the pace of technological advancement in recent years.

In this article, the second of our two-part series, “The Real Cost of Aging IT Systems,” we examine the top four costs incurred by organizations to keep their legacy systems alive – the hidden costs may surprise you.

1. System Maintenance Cost

 From infrastructure to licensing, ongoing legacy system maintenance comes at a high price. Worse, these costs tend to increase rapidly over time as technology changes and the system itself becomes more vulnerable with age.

Additionally, compatible hardware becomes hard to find, support contracts lapse or raise rates, and throughout you pay for server space you seldom use, aside from the few times a year you need to scale. These costs are money down the drain.

2. Knowledge Cost

Complex legacy systems require specialized skill-sets, which can lead to the unusually high labor costs of losing and retaining people.

When older programmers retire, organizations lose institutional knowledge of the system’s business logic that is difficult or costly to replace – e.g. the money spent on an in-demand COBOL programmer may mean less salary funds available for other positions; additionally, time and money may be lost while replacing a role or hiring a contractor.

Lastly, if people don’t find the work interesting, challenging or innovative, they may take their skills elsewhere.

3. Risk and Instability Cost

After years of modifications, fixes and workarounds, systems become increasingly complex and fragile. This instability introduces the potential for significant risk, including a higher probability of breaches and failures. A system’s patchwork history also makes it difficult to maintain or simply keep up with regulatory and policy requirements.

4. Opportunity Cost

The most overlooked cost may be the most devastating for the future of your business. Although older IT systems can continue to perform their original core functions with proper maintenance, these original functions may no longer meet the modern consumer’s expectations.

A system that works adequately for a few desktop users, for instance, may not cut it for thousands of mobile users. Is your business missing key opportunities to meet new demand? Does it lack flexibility? Can it respond to change?

Calculating Your Costs – To Modernize or Not To Modernize

As we’ve seen, legacy IT can burden budgets and present numerous costs. Some IT leaders may be willing to absorb these costs, while others may see greater value in modernization.

The sheer number of legacy systems in operation is a testament to their longevity and performance, but their inflexibility, complexity and high costs beg many questions. Are there processes in your business today which the legacy system can’t support? What about the business processes of tomorrow?

If your mission-critical systems can’t be updated without long development cycles, organizational agility will remain out of reach. Even if your processes don’t change, new technologies and usage patterns from customers force you to adopt new approaches.

While cost is an important motivator, modernization should not occur simply for the sake of change, or even just to reduce risk and cost. Instead, it should be a chance to create new value. As Excella Co-Founder, Jeff Gallimore, points out, modernization is above all “an opportunity to reexamine what you do and how you do it — and even why you do it.”

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