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The Cost of Maintaining Legacy Systems: How Much You Overpay

Despite the onslaught of revolutionary digital trends and technological advances, many companies still use legacy systems. This may sound puzzling at first glance. Why would any modern company want to stick to outdated legacy systems? 

For instance, government agencies, national banks, and other financial institutions still use legacy systems today. Most companies who choose to maintain their legacy systems do so for presumably good reasons. These systems are quite efficient and allow continuity in business operations. Some may even argue that the cost of legacy software maintenance is cheaper than updating to modern alternatives.

Unfortunately, maintenance expenses represent only a tiny piece of the entire cost. A more in-depth analysis of the cost of maintaining legacy systems vs. updating the systems would show that the former is considerably more expensive. 

In this article, we will discuss the hidden cost of maintaining legacy systems and how much you overpay to keep them running.

How Much You Overpay to Maintain Your Legacy Software

Although it may seem like you’re saving costs when you don’t spend resources updating your software it costs more in the long run. According to a study on the cost of maintaining legacy systems in the United States, ten of the government’s legacy systems cost about $337 million a year to operate and maintain. 

Legacy systems can cost any organization up to a 15% budget increase every year for maintenance. As a result, modernizing your legacy software might be a better alternative due to the risks and cost implications of maintaining outdated software. However, it still needs to be done right, as there are some common mistakes in legacy software modernization you need to avoid to succeed.

Worldwide IT spending on modernizing legacy software | ModLogix

At this point, an obvious question would be: why are legacy system maintenance costs so high? Well, it’s quite straightforward — keeping an outdated system, you cover both main and hidden costs.

The Main Costs of Legacy Systems

Previous studies have shown that organizations have been spending large sums of money supporting, maintaining, and implementing legacy software. Statistics have also revealed that banks and insurance companies dedicate up to 75% of their IT budgets to preserving their legacy systems.

As a result, companies should evaluate the financial risk factor of maintaining their legacy systems compared to updating to modern solutions like SaaS and PaaS.

The main on-the-surface costs of legacy systems include:

Resources for ongoing management

Legacy systems require constant attention and resources so that the outdated solution does not cause any major failures. With time, it will also be harder and harder to find knowledgeable professionals able to manage the system effectively.

The need for highly skilled tech support

Troubleshooting a legacy system requires a high level of expertise. Moreover, skilled tech support help might be needed to employ a newer tool to ensure compatibility with the legacy system.

Requirements for special licensing

In some cases, discontinued legacy solutions require special licensing to be used. For example, the US Navy pays millions of dollars to keep safely using Windows XP on their systems.

6 Hidden Costs of Maintaining Legacy Systems

Generally, using and maintaining legacy systems come with a significant decrease in performance and profitability. However, there are several other hidden costs submerged under the general umbrella of stunted performance.

These costs appear in various business areas, including data security, customer experience, employee experience, skill acquisition, performance, and productivity.

Despite being ‘hidden’ from plain sight, these costs can hinder business operations or even grind them to a halt. Let’s go ahead and discuss the hidden costs in detail.

Hidden cocts of maintaining legacy software | ModLogix

The burden on the IT department

Maintaining or working with outdated legacy systems can put a considerable strain on the IT department and impair productivity. Since the system contains bugs, the entire workload will focus on finding and fixing these bugs instead of mission-oriented projects. In the long run, this could lead to an increase in the number of dissatisfied employees and a corresponding decrease in performance levels. 

Maintaining or upgrading the database

Data is the driving force for any operation within the company. Legacy systems often lack a centralized data processing module. Even those with data processing systems have a disorganized framework. As a result, most companies often have to spend a sizable fortune on upgrading legacy system databases.

Besides, legacy databases like Microsoft Access or SQL Server are a challenge to turn into a competitive advantage albeit easy to set up. And failure to configure them may lead to significant data loss and damage your brand’s reputation beyond repair.

Ensuring security for data

Legacy systems are not secure enough, which is especially critical as long as every modern company handles users’ confidential information to operate. These systems come with several hard-to-fix vulnerabilities, which could lead to a data breach or total loss of data. 

The most notable example is the BlueKeep security vulnerability that affected NT-based Microsoft OS. Although Microsoft released patches later, the damage had already been done. Eventually, the affected companies still needed to pay extra fees to upgrade the security protocols and replace the lost data.

This necessitates constant security upgrades and maintenance checks. An easy solution to these problems associated with legacy systems would be to migrate your software from desktop to web or provide cloud migration. This way, your company can perform efficiently and productively. Maintaining outdated legacy software will require your IT staff to undergo special training to equip themselves with the necessary skills.

Frequent downtimes

Legacy systems may frequently experience downtime, which could wreak havoc on departments or cause financial losses to the company. For instance, if you are running an accounting legacy software, downtime during work hours could freeze cash inflow and prevent your business from generating revenue.

Poor customer experience

In several instances, low-performing legacy systems have led to dissatisfied customers and reduced cash inflow for the company involved. For instance, in 2015, a Paris airport was shut down after a 23-year old Windows 3.1 system crashed in bad weather. Planes were grounded for several hours, with disgruntled customers left stranded. 

The customer experience is vital to any company’s success in today’s competitive market, and as such, using legacy systems is detrimental to your business.

Missed business opportunities

Up-to-date software empowers your business growth as it includes new features that boost process optimization, better data flow, and analysis, or even overall productivity which results in revenue growth.

The newest software development trends focus on better integration and interconnectivity between parts of the system and deeper processes automation. If you miss out on them, you will lose many resources you might’ve saved and repurposed.

The Benefits of Transforming Legacy IT: Our Experience

One of our clients decided to improve the performance of its enterprise system that was running on AngularJS. He spent astonishing sums on the maintenance until the migration to the newer version. AngularJS to Angular migration is also an important issue due to the end of support of AngularJS, Angular’s compared ease of use and speed, and many more.

We have helped several clients migrate successfully from AngularJS to Angular in just two phases that span between 8 to 11 months. To ensure client satisfaction and project success, we take several strategic steps.

First, we begin by analyzing and establishing the full scope of the project. Then, we assess the risks, map out detailed mitigation strategies, and ensure continuous communication with clients every step of the way. 

In the past, most client companies had to spend significant sums on multiple third-party tools and developers. However, after migrating from Angular JS to Angular, they discovered that they now spend less on third-party tools since Angular has a Command Line Interface (CLI).

This migration process also helped clients pay lower fees as it makes maintenance and debugging easier. Furthermore, it helps to accommodate the rise in numbers of consumers and overall better react to the changes in market needs. If you decide to resolve the same issue, you will need to hire experts to map out strategies for implementing the migration plan

Total cost of ownership: legacy vs modern software | ModLogix

Conclusion

Maintaining legacy systems only leads to far too many overheads and hidden costs that may be detrimental to the company’s success. And most importantly, they can bankrupt the company in cases of data loss or software malfunction.

By choosing the right modernization strategy, you can easily cut down the high legacy application maintenance cost by half and increase productivity.

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