The true cost of maintaining legacy systems

Technology is the driving force behind many business operations today. The catch? Many of them are still likely disparate, complex legacy systems.

Although many enterprises still consider their long-standing legacy systems as business-critical workhorses, they may not realize the true (and high!) costs and risks involved in their upkeep.

The faltering reliability and utility of legacy systems in the face of shifting market demands and IT modernization are holding businesses back from being able to deliver true business value, cutting through their bottom line in more ways than one.

What are legacy systems?

Gartner defines a legacy system as “an information system that may be based on outdated technologies, but is critical to day-to-day operations.” The term “legacy” in this context refers not only to aged technologies but also to any computing software, programming language or hardware systems that will no longer receive vendor support.

Although most functioning legacy systems can perform as intended, they tend to be monolithic in structure and limited in their ability to scale and grow with your business needs. Enterprise leaders may remain reluctant to part with legacy systems due to cost considerations, operational significance, business continuity or simply because it still works.

Some businesses are approaching calls for system modernization with a, “if it isn’t broke, don’t fix it” mindset, without realizing that the high cost of maintaining their legacy systems will burn through their bottom line.

Alongside hefty maintenance and repair expenses, legacy systems require constant monitoring and custom patches to mitigate security risks, address operational inefficiencies and troubleshoot system issues — all of which are cost- and resource-intensive.

Although a system upgrade can be a long and complex process, the total cost of ownership (TCO) for outdated systems is significantly higher than the cost of modernization.

Instead of waiting for these long-serving systems to become unbearable (or worse, unusable), organizations should take a proactive stance and consider the hidden and explicit costs of maintaining legacy systems.

Switching to a modern solution isn’t just financially smart; it’s also future-focused, as it enables your organization to compete in its market with the agility and innovation required to meet the speed of business.

Understanding the costs of legacy systems

With legacy systems, organizations sink funds into something they will eventually need to replace. Business leaders are already under immense pressure to do more with less, and if left to languish, legacy systems can quickly turn into a demanding financial burden that will also impact business performance.

Below are a few of the explicit costs of depending on legacy systems:

Ongoing maintenance expenses

In this Deloitte study of 300 business leaders, respondents pinpointed the top three internal obstacles to reducing costs:

• Technology infrastructure

• Inability to rapidly adjust cost structure

• Inability to enable digital infrastructure

As legacy systems reach the end of their product life cycles, the cost of server maintenance and custom  fixes to keep things running smoothly soars exponentially. The exact cost of legacy infrastructure upkeep can be hard to quantify, which can lead to businesses underestimating the extent of these costs.

A non-exhaustive list of potential expenses could include licensing models, specialized IT resources, hardware upgrades, vendor contracts and tech support.

Security risks

Running aging systems leaves your organization vulnerable to exploits, data breaches and other cybersecurity risks, which can also lead to serious financial ramifications.

In 2023, the global average cost of a data breach was $4.45 million. High-profile data breach cases, such as the documented incidents of shipping giant Maersk and credit agency Equifax, have been attributed to outdated technology and poor data security measures.

Aside from the lack of consistent security patches, legacy systems are incompatible with security best practices, such as role-based access or data encryption rules. Many may not even have backup and recovery properties, risking the permanent loss of critical company data.

Technical debt

Technical debt comes part and parcel with legacy system maintenance, and the costs can quickly stack up if organizations are not careful.

Technical debt, also known as code debt, is the cost of cutting corners during the software development process — whether because of time, skill or project prioritization. By prioritizing speed over quality, developers may release poorly designed code, resulting in stop-gap solutions and system bugs that, eventually, will need resolution.

Although some technical debt is inevitable, it shouldn’t accumulate until your tech team’s entire workload is focused on putting out increasingly complex fires instead of building innovative solutions.

Dealing with technical debt isn’t just a burden on your IT resources; it’s also a burden on thinly stretched tech budgets.

Hidden costs are unforeseen or indirect expenses that are not immediately apparent, but they have a tangible impact on business performance or budgets. Clinging to legacy systems may cause organizations to incur the following hidden costs:

Productivity losses

Your employees were hired for a job; grappling with a frustrating legacy system day in and day out shouldn’t be part of it.

Working with outdated systems that are slow, buggy and unintuitive hinders your staff’s ability to deliver good work.

When employee efficiency and productivity take a nosedive, it triggers a chain reaction to other critical parts of your business operations, leading to poor customer service quality, slow development cycles and disrupted projects, all of which will cut into your bottom line.

Disengaged employees

A legacy tech stack can also impact your organization’s ability to retain and engage employees.

Working with legacy systems is a slow and inefficient process, making tech accessibility a problem for staff working remotely to perform their roles effectively.

Employees who feel unsupported in their roles will soon leave for forward-thinking organizations that provide them with the resources to work and innovate effectively.

Employee churn is a costly concern for organizations: It takes time and resources to recruit, hire and train replacements, and losing an employee can cost companies up to two times that worker’s annual salary to replace them.

Integration challenges

Older systems were not designed with today’s interconnected and interoperable technology landscape in mind. How could they be? Many of today’s integral applications only became mainstream in the past few years.

Getting first-generation technology systems to communicate effectively with newer, modern applications or features such as mobile access, cross-platform compatibility or cloud deployment is near impossible, or requires extensive custom-developed interfaces or middleware to bridge these gaps.

On top of these development demands, the need for bespoke integration solutions also requires specialized skills for ongoing maintenance and troubleshooting, further inflating operational costs.

Missed opportunities

Forgoing opportunities for innovation in favor of legacy upkeep can diminish your market share in the industry, curtailing your opportunities to scale, adapt and compete effectively.

By delaying the implementation of newer technologies such as cloud services, artificial intelligence (AI) and process automation, enterprises miss out on powerful, yet cost-effective levers of modernization for your enterprise.

Consider if and how your competitors are deploying more modern tools to automate mission-critical workflows, elevate productivity and create new avenues for revenue generation. Agile, effective tech utilization is a critical differentiator that sets successful, thriving businesses apart.

The notion of modernizing enterprise content management (ECM) solutions is a daunting prospect for many organizations, as most of their critical business content is scattered and siloed across the enterprise. Given the amount of effort and planning required in the migration process, it’s easy to understand why businesses simply opt to retain their legacy ECM systems until the very last minute.

But modernizing ECM isn’t just about moving content from one system to another. The goal here is to maximize the value of your business content by making it easier to find and manage.

Additionally, the inherent limitations of legacy ECM infrastructure can severely undermine an organization’s business resilience, as it impedes its ability to adapt to shifting market demands rapidly and effectively.

Before making a switch, ensure your selected ECM provider has the following features:

• Built natively for the cloud, with an architecture that’s tailored for content

• Provides end-to-end intelligent content management solutions on a centralized platform

• Leverages business-specific AI to capture, enrich and optimize content

• Secures data governance to maximize compliance and safeguard your content against data loss

• Is highly configurable and scalable, so it can deploy solutions tailored to your needs

Liberty Mutual Insurance's Global Specialty unit faced significant challenges with its legacy content management systems, which were siloed and outdated.

By leveraging Alfresco Content Services on AWS to modernize its ECM capabilities, Liberty Mutual gained $21 million in direct cost savings. The solution enabled paperless operations by automating everything from document retrieval to records management, successfully enhancing collaboration and productivity across 18 global markets.

Liberty Mutual’s success story highlights the operational and financial advantages afforded by modern ECM solutions. The switch empowered the global insurer with a competitive edge they otherwise would not have gotten if they remained with their legacy infrastructure.

When it comes to technology, the cost of stagnation is far greater than the cost of change. Making the business case for modernization goes beyond the fiscal aspects, as legacy systems pull businesses away from critical opportunities to grow and innovate.

Modernizing legacy systems, especially for content management, is more than just a standard IT upgrade. Aging infrastructure and new compliance challenges will impact your organization’s ability to harness your content to the fullest.

Learn how Hyland’s intelligent content solutions can be a strategic investment that can digitize your enterprise to be more efficient, innovative and prepared for the future.