In our previous post, we discussed how outdated, core IT systems can impact budgets and hinder progress.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.
- Hidden Cost: Sunsetting software and applications. Your system may depend on external applications, software or other frameworks. Companies can choose to ‘sunset’ or cease supporting these tools at any time. When this happens, you must either accept the risk of using an un-supported tool or scramble to replace it with little planning.
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.
- Hidden Cost: Internal knowledge dependencies. Systems with intricate business logic going back years or decades often rely on the support of a few individuals who still possess this critical knowledge. Organizational dependency on these people not only creates a bottleneck effect when they are the only people with the answer, it prevents them from doing other valuable activities.
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.
- Hidden Cost: Business stability is under constant threat. If your system fails, will you have the hardware components needed to bring it back online? How much revenue will be lost while the system is down? How many customers will you lose?
- Hidden Cost: Poor documentation, design and code quality. Faced with a confusing code base, well-meaning developers are forced to make haphazard changes which only leave the system more incomprehensible. Introducing additional complexity increases the likelihood of other parts of the system breaking, which also increases the cost of any future changes and ongoing support.
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?
- Hidden Cost: Digital disruption. Will you be the disruptor or the disrupted? Slow-moving legacy IT can hold back even the greatest companies from innovating and meeting their customers’ demands.
- Hidden Cost: Time-to-market. Modern systems are lean and agile, giving them a first-to-market advantage.
- Hidden Cost: Attracting talent. Younger talent is often drawn to modern systems and innovative new approaches; many are unwilling to train in old language and systems when their newer skill-set is in high demand.
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.”