How software modernization can help to save your money
Overview
Despite a flood of revolutionary digital trends and technological breakthroughs, many businesses continue to rely on legacy systems. At first glance, this may seem perplexing. Why would any modern business want to cling to obsolete legacy systems? Government agencies, national banks, and other financial institutions, for example, continue to use legacy systems today as their systems are quite efficient and allow continuity in business operations. One might even claim that maintaining legacy software is less expensive than updating to modern alternatives.
Unfortunately, maintenance costs are only a small portion of the total cost. A more detailed comparison of the costs of maintaining legacy systems versus updating the systems would reveal that the former is significantly more expensive.
Costs of legacy applications
Maintaining an outdated system incurs both direct and indirect costs.
- Direct Costs:
Previous research has demonstrated that organizations spend a substantial amount of money supporting, maintaining, and implementing legacy software. Statistics show that banks and insurance companies devote up to 75% of their IT budgets to maintaining legacy systems.
As a result, businesses should weigh the financial risk of maintaining legacy systems versus updating to modern solutions such as SaaS and PaaS. The primary visible costs of legacy systems include:
Continuous management resources
Legacy systems require constant monitoring and resources to ensure that the outdated solution does not cause major failures. With the flow of time, it will become increasingly difficult to find knowledgeable professionals capable of effectively managing the system.
The requirement for highly skilled technical support
For troubleshooting a legacy system, a high level of knowledge is a must. Furthermore, skilled tech support assistance may be required to use a newer tool and ensure compatibility with the legacy system.
Special licensing requirements
In some cases, using discontinued legacy solutions requires special licensing. For example, the US Navy pays millions of dollars to keep safely using Windows XP on their systems.
- Hidden Cost:
The workload of the IT department
Maintaining or working with obsolete legacy systems can be time-consuming for the IT departments and can reduce their productivity. As the system contains bugs, the entire workload will be devoted to finding and fixing these bugs instead of mission-critical projects. This may increase the number of dissatisfied employees and, as a result, may negatively influence performance levels in the long run.
Updating and maintaining the database
Every business operation is powered by data. A centralized data processing module is frequently missing in legacy systems. Even those who use data processing systems have a sloppy framework. As a result, most businesses must frequently spend significant funds on upgrading legacy system databases.
Data security
Legacy systems are insufficiently secure, which is particularly important given that every modern company relies on its users’ confidential information to function. These systems have several difficult-to-repair flaws that could lead to a data breach or total data loss.
Recurrent outages
Legacy systems may experience frequent outages, disrupting departments and resulting in financial losses for the company. For example, if you use legacy accounting software, downtime during business hours may cause cash inflow to freeze and your company to cease revenue generation.
Inadequate customer service
In a number of cases, underperforming legacy systems have resulted in dissatisfied customers and reduced cash inflow for the company. For example, in 2015, a Paris airport was forced to close due to inclement weather after a 23-year-old Windows 3.1 system crashed. Planes were grounded for several hours, stranding angry passengers.
Lost business opportunities
Recent software development trends place an emphasis on improved system integration and interconnectivity, as well as deeper process automation. If you don’t take advantage of them, you’ll waste a lot of resources that could have been saved and repurposed.
As the customer experience is critical to any company’s success in today’s competitive market, using legacy systems is detrimental to your business.
Cost of Modernizing Legacy Software
Decisions related to modernization for any given application typically come down to a question of cost. There is a cost to migrate to newer technologies and architectures and there is a cost to not moving. Exploring some of the benefits from a cost perspective is important to understand the impact of application modernization.
Reduced resource usage
Most enterprise applications run on virtual machines. Running the same applications in containers instead saves a lot of resources, especially memory. Additionally, container orchestration platforms, such as Kubernetes or OpenShift, can balance workloads much better than virtual machines.
Reduced license costs
Classic commercial software offerings come with license costs. Today many of these classic offerings can be replaced with open source software, which frequently includes commercial support. Many open source projects have strong communities that provide free help and fixes.
Reduced support costs
Sometimes legacy applications become very expensive, especially when the official support for the platforms or servers you’ve used has ended or when no developers can be found to maintain the code. In some cases, these legacy applications can be sunset. In other cases, it might be possible to replace them with SaaS offerings. For example, a 20-year-old vacation planner application can be replaced by several SaaS or open source offerings.
Reduced Development Costs
One of the most significant issues with supporting legacy applications for your business is the cost of development. For instance, you might have to spend a fortune to find a COBOL programmer for your legacy application. Similarly, if there are major changes coming up in your existing business say due to an instance of Merger & Acquisition making changes in a legacy system could prove very expensive.
Factors to consider while moving towards it.
Integration and compliance
Before you modernize legacy apps, you should consider two factors: integration and compliance. You may need to rely on third-party APIs for user verification, geolocation, and data transfer in legacy apps. Integration functionality is built into modernized apps. However, before you modernize legacy software, make sure your apps are compatible with third-party tools. You must also make sure that your modern apps do not violate any regulations.
Expenditure review
The modernization of legacy apps is a difficult task. As a result, an in-depth analysis of the expenditure is required. It will help you to determine whether your legacy app modernization process will be profitable for you in the future. You must evaluate the costs of modernizing your legacy applications and perform the following cost analysis:
Estimate infrastructure maintenance costs and calculate maintenance spending using the Constructive Cost Model (COCOMO).
ROI analysis: Determine the Return On Investment (ROI) for your company to assess its current situation and make appropriate decisions.
Infrastructure cost analysis: Assess and calculate the costs of IT infrastructure. It will assist you in determining how much money to spend on infrastructure.
Risk Elements
It is critical for your company to consider the risks associated with app modernization. When modernizing multiple legacy apps simultaneously, you should consider the time required to modernize each app individually. Also, when dealing with a large number of lines of code, you should apply extreme caution. Aside from all this, you must also consider the operational risks that arise during modernization.
Available budgetary resources
A well-thought-out financial plan is essential for successful app modernization. You must ask yourself, “What are the budgetary constraints that must be considered before modernizing legacy apps?” The bottom line is that your budget must include adequate funds for legacy app modernization.
Time management optimization
It takes time and patience to modernize legacy apps. The process of app modernization varies by organization, as does the time required for modernization. However, for any organization, having enough time to implement the modernization strategy is critical. Let’s admit. App modernization takes time. It’s a long journey. It has no set timeline. As a result, in order to reap the full benefits of app modernization, you should devote a significant amount of time to it.
Data management constraints
Since legacy apps contain a large amount of data, modernizing legacy apps is a difficult task. First of all, you need to examine the underlying data thoroughly before acting working with it. To improve data management, create tactical data governance rules. It will help you to remove data silos, making it easier to reorganize data and optimize storage space.
How software modernization can help to save your money
Let’s compare the cost of maintaining legacy systems and the cost of modernization
In 2019, the US Federal government spent 80 percent of the IT budget on Operations and Maintenance. This spending mainly included aging legacy systems, which posed efficiency, cybersecurity, and mission risk issues. To put that into context, only 20 percent of the IT funding was allocated to Development, Modernization, and Enhancement.
There are several sources of legacy software expenditure:
- Maintenance & Support: Maintenance costs can exceed the Original development budget in just 5 years after the product release.
- Integration & Compliance: Failure to comply with industry regulations could potentially lead to millions in penalties.
- Security: According to a report from IBM, the estimated average cost of a data breach is $4 million
- Lost Business Opportunities: The lack of innovation can impact the long-term profitability and competitiveness of your business.
- Organizational Agility and Efficiency: The average efficiency of some processes can increase up to 50% through automation and modernization.
