Did you know that before COVID, businesses had already started opting for modern technologies for more profitable, successful ventures? Most of these businesses choose cloud-driven tools.
For many businesses, leveraging cloud and other modern technologies means leaving behind legacy systems like outdated ERP systems.
However, legacy systems or mainframe applications are still in use, as indicated in the study of 211 CXOs and decision-makers.
In this blog, we’ll learn why are legacy systems still used and how they could hold back your growth.
Reduced Productivity
Legacy systems underperform and struggle to keep up with the demands of modern tech solutions.
Although they still apply to government institutions, banks, and businesses, they’ll eventually slow down and deliver below-par performances.
Downtime will lead to lost minutes, hours, and even weeks, diminishing the productivity of your workforce.
Second, frequent crashes interrupt projects and official correspondence, preventing employees from meeting their deliverables and, eventually, affecting results and revenue.
The idea is to opt for solutions offering little to no distractions. And without such tools and technologies, your workforce won’t be able to maximize its work ethic.
Outdated software hurts financial institutions
Suppose a financial institution uses outdated accounting software that requires manual data entry. This system is slow and frequently crashes, leading to significant downtime.
- Employees will spend excessive time on manual data entry, increasing the risk of errors.
- Frequent crashes will interrupt workflows, delaying transaction processing and causing missed revenue opportunities.
- Inefficient workflows and interfaces will make it difficult for employees to complete tasks efficiently.
Consequently, productivity declines, leading to longer processing times, missed deadlines and decreased customer satisfaction.
So why are legacy systems still used? More on that later!
Waste of Money
Maintaining legacy systems and hardware isn’t cheap. But money dumped into their optimization and repairs isn’t the only thing keeping those systems up and running.
The time taken into their maintenance and coordination support leaves little for your IT team to focus on other tasks.
In fact, a 2021 study on enterprise downtime states that when mission-driven systems and tools are offline for just an hour, the average cost of lost business reaches $300,000.
Moreover, you’ll always need an IT resource on the floor to troubleshoot and handle legacy system issues.
A costly burden for retail companies
This is one of the common industry references used for legacy systems examples.
Many retail companies allocate approximately 58% of their IT budget to maintaining legacy systems. This includes maintaining obsolete sales platforms and tools that cannot effectively integrate with newer technologies.
This dependency leads to inefficiencies and increased costs as companies struggle with slow transaction processing and poor customer experiences.
The fear of cybersecurity concerns further complicates modernization efforts, resulting in rising maintenance costs without adding performance improvements.
Poor Data Management
Legacy systems aren’t exactly popular in supporting data integrity or modern analytics tools.
Today, as we navigate endless streams of misinformation and disinformation online, finding reliable data that offers quality insights is non-negotiable.
Unlike their legacy counterparts, cloud-driven solutions allow companies to centralize information from various touchpoints easily.
In contrast, legacy systems often fail to align with state-of-the-art IT resources, leading to data silo issues.
In doing so, it becomes challenging for businesses to make timely decisions that are decisive for business outcomes.
In short, depending on legacy systems indicates your data isn’t used to its full potential.
A barrier to efficient healthcare data management
Many healthcare service providers still utilize legacy EHR systems that are incompatible with modern data analytics tools.
These outdated systems often create data silos, preventing seamless information sharing among departments.
In doing so, healthcare providers struggle to access comprehensive patient data promptly, leading to treatment delays and increased operational costs due to inefficient workflows.
A roadblock to retail efficiency and growth
Established retail chains often struggle with legacy POS systems that do not effectively integrate with modern inventory management or CRM tools.
This disconnect results in data silos and inefficiencies, as sales data may not be accurately reflected in inventory levels or customer insights.
Hence, retailers miss opportunities for timely promotions or stock adjustments, resulting in lost sales and enhanced operational costs.
Lost Competitive Advantage
All the above reasons translate into how business could lose their competitive advantage—one of the major disadvantages of legacy systems that could shake your business’s survival instincts.
Technically, data produced by legacy systems lacks flexibility. This restricts companies from staying agile and making prompt decisions depending on changing market conditions, consumer behavior, and other variables.
Whereas agile systems and platforms enable businesses to stay relevant and align with market and customer behavior trends.
Legacy ERP systems affect manufacturing competitiveness
Consider a manufacturing firm using a legacy ERP platform. The challenges preventing the company from acquiring a competitive edge in the market include everything we’ve discussed above, including stifled innovation and a talent shortage.
However, the firm can acquire an edge by implementing AI and ML solutions to process vast amounts of production data, identify patterns, optimize supply chain logistics, and enhance demand forecasting.
Moreover, integrate robotics into the production line to improve efficiency and precision.
Third, incorporate cloud computing for centralized data management, besides opting for technologies like the Internet of Things and big data analytics.
Why are Legacy Systems Still Used?
Despite the challenges and limitations associated with legacy systems we’ve discussed above, you might question why are legacy systems still used.
Making the most of high initial investments
Legacy systems often require significant upfront investments in hardware, software, and maintenance. This is not something companies, especially mid-sized businesses, can easily let go of.
Related content: What’s Holding Back Your Digital Transformation Initiatives?
While businesses may not be confident enough to abandon these systems, the ongoing maintenance costs, security patches, and workarounds often exceed the initial investment.
Ensuring smooth operation of critical systems
Legacy systems often handle critical operations tailored to a business’s specific needs. Replacing is easier said than done and is risky due to the potential for downtime.
However, with careful planning and cloud migration, these systems can be transitioned without disrupting vital operations.
Overcoming expertise gaps in IT teams
Many organizations lack the expertise to manage modern technologies. And replacing legacy systems requires retraining staff or hiring new employees, which can be expensive for the mid-market segment.
On the other hand, cloud migration services can help manage the transition, allowing businesses to focus on their core functions.
Breaking free from vendor dependence
Businesses may be locked into long-term commitments with specific vendors, making migration challenging.
However, modern cloud solutions are more flexible and integrate various platforms, reducing vendor dependency.
Addressing concerns around data security and loss
Instances of data loss and security breaches during migration are not uncommon. Hence, it is more of a reason to stick to legacy systems, particularly for data-driven businesses.
While legacy systems may seem secure, they are often more vulnerable to threats. Cloud solutions offer enhanced security, including real-time monitoring and frequent updates, improving overall protection.
Navigating industry compliance requirements
Some legacy systems are still in use because they meet strict regulatory requirements.
However, modern cloud systems are designed with compliance considerations in mind, offering robust security and regulatory features without sacrificing scalability or security.
Managing extensive customizations in legacy systems
Legacy systems are often heavily customized for specific business needs, making them difficult to replace.
Cloud platforms now offer robust customization options, allowing businesses to repeat legacy system functionality alongside improved performance.
Minimizing risks of downtime during transitions
The risk of downtime during migration is a significant concern, especially for businesses that depend on continuous operations, like ecommerce platforms, financial institutions, healthcare services, etc.
However, with advanced planning and cloud migration solutions, businesses can minimize disruption and ensure continuity of operations.
Prioritizing IT upgrades within budget constraints
Limited budgets often make migrating from legacy systems seem financially unfeasible for most businesses.
Yet, the long-term savings in maintenance and hardware costs, along with the scalability element, make cloud solutions a cost-effective alternative over time.
Takeaways!
Businesses have their fair share of reasons why are legacy systems still used. However, the repercussions are often severe, forcing organizations to rethink their IT and data strategy in the long run.
Hence, constructing the right cloud strategy or pursuing legacy modernization solutions are wise options for future-proofing operations, enhancing efficiency, and reducing long-term costs.
Handpicked content: The Role of Technology Modernization in Digital Transformation
So, where does this bring us to the legacy systems vs modern systems debate? By leveraging modern technologies, businesses can achieve better scalability, stronger security, and improved performance, ensuring they stay competitive.
The key lies in careful planning, choosing the right partners, and aligning modernization efforts with business goals to ensure a seamless transition that minimizes risks and maximizes returns.
