Feb 20, 2023

| By

Sreedhar Tatavarthi

7+ hidden costs of legacy software

If you're reading this, chances are you're dealing with legacy software that is causing you headaches. These systems are a real pain, with frequent technical issues, compatibility problems, and high maintenance costs. But don't worry, you're not alone.

Many tech managers, just like you, are in the same boat and are looking to reduce their operating costs while ensuring business continuity.

Let's focus on uncovering the hidden costs of legacy software, as they play a crucial role in solidifying the case for modernization and reducing overall costs for your business.

Let’s dive in!

Hidden Cost #1: Scaling

As your business evolves and grows, so do the demands on your system. Scaling costs refer to the resources and effort required to increase the capacity or capabilities of a legacy system to meet these demands.

Legacy systems, especially large monolithic applications, often require dedicated hardware to run, even during periods of low demand. This results in significant underutilization of resources and wasted expenses, with the hardware being used only 5-10% of the time.

For example, we were able to help one of our clients reduce their monthly hosting costs from $6,000 to $1,300, a 78% reduction, by modernizing their legacy system.

Today, software systems are built with scalability in mind, using technologies and architectures that are designed to handle variable demand.

  • They are normally cloud-based, which allows for easy scaling of compute resources both horizontally and vertically — using microservices architecture — which allows different parts of the system to scale independently.
  • They offer centralized monitoring and automation tools, which make it easier to identify and address any bottlenecks that might prevent the system from scaling smoothly.
  • Many modern systems have built-in scalability features such as auto-scaling and load balancing, which helps to automatically adjust based on demand.
  • Even if they aren’t cloud-native, they can be optimized for hosting in a cloud environment, allowing you to take advantage of the scalability and cost-efficiency of some cloud-based services.
  • They are designed to be more easily integrated with other systems and technologies, which helps to reduce the costs and complexity of scaling your system.

All of these factors contribute to making modernized systems more scalable than legacy systems, which may have been built with older technologies and architectures that are less suited for scaling.

Hidden Cost #2: Security

Keeping your legacy system secure is a real challenge, especially as technology and cyber threats continue to evolve. In fact, 48% of CISOs feel that their organization is at risk of suffering a material cyber attack in the next 12 months.

The age and technical limitations of a legacy system leave it vulnerable to security breaches, which often result in significant additional security costs. These costs could include the expense of hiring specialized cybersecurity talent, purchasing hardware or software to secure the system, and the time and resources required to perform regular security activities.

Buf of course, an actual security breach could result in even greater costs, such as loss of sensitive data, damage to the company's reputation, legal fees, or financial penalties for regulatory non-compliance.

By contrast, re-architected software systems are typically built with the latest security technologies and best practices in mind.

  • They typically include built-in security features such as data encryption and multi-factor authentication, which is difficult or costly to retrofit into legacy systems.
  • Legacy systems may be running out-of-date software components, which makes them vulnerable to security threats. It’s also much harder to apply updates, vendors may take longer to release updates, or the vendors may no longer offer updates at all.
  • There's also the ability to leverage cloud-based security solutions, which helps to protect against data breaches and other security threats.
  • Modernized systems are much more likely to comply with industry standards and regulations, such as GDPR, HIPAA, PCI-DSS, etc., because they are developed with current industry standards and regulations in mind. This in turn helps improve security and protect sensitive information that should be protected — such as medical data, financial data, and other personal information.
  • Conducting security checks and penetration tests can be done on both old and new systems, but fixing the problems they reveal is easier on modern systems.

By modernizing your system, you can potentially reduce or eliminate many of the costs associated with security complications and invest the savings into further security measures.

Hidden Cost #3: Integration

Connecting a legacy system with newer systems is a costly and time-consuming endeavor. In fact, according to a 2019 Market Report, poor integration costs businesses half a million dollars every year.

These costs are significant because legacy systems may not be able to easily integrate with newer technologies due to their age and technical limitations.

By contrast, there are many ways that modernized systems reduce your integration costs.

  • They have standardized APIs, which make it easier to connect and exchange data with other systems.
  • They are typically cloud-based, making it easy to integrate with other cloud-based systems and services.
  • They have more powerful and efficient processing capabilities, which allows for faster and smoother integration with other systems by reducing the load on the system and streamlining the integration process.
  • They may include pre-built connectors, which allow for easier and more cost-effective integration with other systems. These low-code/no-code connectors reduce or eliminate the need for custom integration work.
  • They have more flexible architectures, which makes it easier to integrate with other systems and technologies by allowing for customization and scalability in the integration process.
  • They have built-in automation capabilities, which streamlines integration processes by reducing the need for manual intervention, thus saving time and resources.

By upgrading to newer, integration-friendly technologies, you ensure your application can connect with other systems seamlessly, reducing the costs and efforts required for integration.

Hidden Cost #4:  Downtime

Downtime is a major headache for businesses, especially when it comes to legacy systems. These older systems are more prone to downtime due to their age and technical limitations, which leads to significant costs for an organization in terms of lost productivity and revenue.

Modernized systems have many advantages that help you reduce downtime costs.

  • Most modernized systems are built on cloud infrastructure, which provide automatic failover and disaster recovery capabilities, thereby reducing downtime.
  • Modernized systems are built for scalability, meaning they handle increased traffic and usage without experiencing downtime.
  • Modernized systems are often designed to be more fault-tolerant, meaning they continue to operate even if one or more components fail.
  • Modernized systems have advanced monitoring and alerting capabilities, which helps detect and address issues before they lead to downtime.
  • Modernized systems are designed to be more efficient in their use of resources, which helps reduce downtime caused by overloading the system.
  • They have a built-in continuous integration and continuous deployment (CICD) pipeline, which allows for regular releases of updates and reduces the likelihood of system failures and downtime.

Modernizing is one of the most surefire ways to reduce downtime and all of the associated costs and headaches that go with it.

Hidden Cost #5: Customization

As your business and industry evolve, so do your requirements and those of your customers. That's where customization comes in. Customization costs refer to the resources and effort required to modify a legacy system to meet changing business requirements.

Unfortunately, customizing a legacy system is often expensive, time-consuming, and complex. It may require specialized knowledge, resources and tools to make the necessary changes and those changes have unintended (and potentially disastrous) impacts on other parts of the system.

Modernized systems are built with more flexible, modular architecture, which allows for easier customization.

  • They allow you to customize parts of the system without impacting the entire system.
  • They are built with more configurable options and settings, which allows you to make changes to the system without needing to write custom code.
  • They often use open-source technologies, which are less expensive to use and customize than proprietary solutions.
  • They normally include more robust APIs (Application Programming Interfaces) and other integration capabilities, making it simple to connect third-party solutions rather than having to build new, native features. This reduces both initial development costs and customization costs down the line.

All of these factors make it less costly, less complex, and less time consuming to customize a modernized system compared to a legacy one.

Hidden Cost #6: Technical Debt

Maintaining and supporting a legacy system is a costly and time-sucking endeavor. Legacy systems often require specialized knowledge and resources, as they are based on increasingly rare technologies or platforms.

For example, we had one client who came to us for a modernization project and their legacy system was already almost four versions behind on a crucial Microsoft framework.

Everything was working fine, and because they didn’t need the new functionality in the updated versions, they didn’t worry about upgrading.

But then, Microsoft announced that the old framework would soon reach end-of-life — meaning they had only 6 months to jump four versions. If they didn’t, they would be facing serious security risks as well as lack of support from Microsoft.

They had to endure unexpected labor costs to make the upgrades, which were much higher than they should have been because it’s harder to upgrade four versions at once versus just one at a time.

Modernized systems have many advantages over legacy systems in this regard.

  • Modern systems are equipped with advanced monitoring and diagnostic capabilities, helping to avoid the build-up of technical debt by quickly identifying and resolving issues.
  • The automation features in modern systems minimize the need for manual intervention, reducing the likelihood of costly mistakes and increasing the efficiency of maintenance and support activities.
  • The technologies used in modern systems allow for easier maintenance and lower support costs, avoiding the accrual of technical debt. This is achieved through factors such as modular architecture, automation, and access to a larger pool of skilled developers familiar with the newer technologies.
  • Newer technologies typically have better documentation and a wider variety of resources, such as online forums and support communities. This prevents the accrual of technical debt by making it easier and more cost-effective to troubleshoot and resolve issues.

By staying on top of upgrades and investing in modern tools and technologies, you avoid unexpected labor costs and security issues. And by modernizing the system, you reduce maintenance and support costs by making it easier to address issues and provide assistance.

Hidden Cost #7: User Training Costs

Users come in two types depending on the type of software you’re responsible for — customers or internal staff. Either way, the costs of training have an impact on your bottom line.

If your customers struggle to use the software, that’s going to result in a higher number of customer support requests, longer turnaround time to resolve those requests, and a lower customer retention rate. In fact, across all industries, an average of 45% of consumers canceled after having a bad experience.

Likewise, training your staff on how to use and support a legacy system is a real pain, especially when the system has complex or outdated features. These additional training costs really add up, making it hard to keep your staff up-to-date and your operations running smoothly.

By modernizing your legacy system, you greatly reduce or even eliminate the need for additional training for your customers and your staff.

  • They have a more intuitive user interface that is designed to be easy to navigate, understand, and use.
  • They use standard technologies and protocols, which makes it easier for employees to understand and use the system.
  • They come with built-in help, tutorials and guides that can be accessed by the users as and when required.
  • They have better integration with common tools and technologies, which makes it easier for employees to work with them, as they will be familiar with the interface and the tools.
  • They tend to be more consistent in their design, with less customization that leads to confusion and lack of understanding.

Modernizing your system greatly reduces your costs associated with training and makes it faster to onboard new employees.

Hidden Cost #8: Missed Opportunities

Opportunity costs refer to the potential benefits and efficiencies that are lost by maintaining a legacy system instead of modernizing it. By maintaining a legacy system, you may be missing out on the benefits of new business models and approaches that could improve your organization's efficiency and effectiveness.

Modern systems have many advantages over their legacy counterparts.

  • They provide improved analytics capabilities, which helps you to better understand your customers and market, and identify new opportunities for growth.
  • They are more flexible and adaptable, allowing you to take advantage of new business opportunities that might be difficult or impossible with a legacy system.
  • They can be automated, leading to increased efficiency and productivity. This frees up time and resources that can be used to pursue new business opportunities. In fact, some companies find that actively managing their tech debt frees up engineers to spend up to 50% more of their time on work that supports business goals.
  • They allow for quick implementation of new and in-demand features, improving your organization's competitiveness.
  • You get to work with vendors who constantly update and improve their products, which gives you the opportunity to take advantage of new features and functionality as they are released.

Don't let legacy systems hold you back any longer. Take control of your tech landscape by reaching out to our experts today to get started on the path to modernizing your systems and realizing the benefits of more efficient and effective technologies.

About the Author

Sreedhar Tatavarthi

Sreedhar is a seasoned IT leader with over 17 years of experience spearheading technology strategy, creating business value for customers and business stakeholders.

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