What is the true cost of legacy applications on your business?

Published 2/14/2019 by Tim Jones, Managing Director, Application Modernisation

Many organisations rely on an assortment of legacy systems to keep their business operating. However, this dependence on an ageing infrastructure is becoming ever more expensive. There are plenty of statistics suggesting that maintaining and operating legacy applications consumes anywhere from 60 to 80 per cent of corporate IT budgets – money that could be redirected to digital innovations that would bring greater competitive advantage.

There are a number of reasons for these increasingly high costs:

Legacy skills shortage
Staff with legacy skills are retiring, taking years of experience and vital knowledge with them. Businesses are struggling to replace this dwindling pool of mainframe workers. There has been talk for many years about the impending retirement wave of legacy skilled Baby Boomers, and in that time there have been calls for training younger programmers in mainframe and other legacy skills – but this hasn’t happened. IT leaders are now struggling with resourcing issues, either failing to find employees with the necessary abilities, or paying higher costs for those that have them. This expense is only set to increase further as developers with the necessary skills become even harder to find.

Lack of interoperability
Many organisations are now creating digital transformation strategies, developing new systems of engagement, and providing mobile, Cloud-based applications for customers, business partners and employees. There is also a focus on IoT (Internet of Things), which means an explosion of Cloud-connected devices streaming data back to an organisation. Often these new digital applications and devices are required to integrate with legacy, mainframe-based systems of record – and this is where the problem lies.

This need for interoperability between new Cloud platforms and old legacy applications has created a requirement for middleware to connect the two. In some cases, there are no easy and standard ways to integrate the legacy applications and data. This issue at a minimum creates complexity and additional cost in your IT landscape. At its worst, the lack of interoperability becomes a real blocker to digital transformation initiatives. The need for layers of interoperability software, to bridge newer applications with the older legacy systems creates additional costs that wouldn’t be required if the applications were a more homogenous technical architecture.

Technical Debt
Numerous companies have been left maintaining old, out-of-date coding to support specific key functionality in crucial legacy applications. This carries not only the classic potential cost of redevelopment you see with Technical Debt, but also an ongoing operational cost because the coding can be so old and complex that programmers shy away from it and the code becomes a ‘no go zone’.

This slows down enhancements and significantly affects an IT department’s ability to respond to the needs of the business and requirements of the customers. This has huge implications for the agility of an organisation and its ability to react to market demands with pace. Remediating old code may not be a cost you wish to incur, but avoiding this spend will likely increase the time and cost of future development projects.

Software Entropy
This can be summed up by two key factors – a computer program that is used will be modified, and when it is modified its complexity will increase provided one does not actively work against this. This is not good news for legacy applications. Many have been around for decades and been modified numerous times by a variety of programmers. As a result, these applications have become ‘brittle’ – they are more difficult to enhance and it is more likely that any changes will cause unknown errors or problems elsewhere in the application – adding to time delays and costs.

The cumulative effect of these four issues is an increasing cost of ownership for organisations with legacy applications. On top of this are the additional licensing and operational costs of legacy software and hardware. Many mainframe applications make use of old databases and utility software that is disproportionately expensive, and they carry considerable operating costs compared to commodity computer platforms or the Cloud. Legacy applications and infrastructures create a cost drag on an enterprise, diverting valuable funds that could be better spent on market-changing innovations.

However, with the right approach, modernised legacy systems, with specialised functionality and data that often differentiates an organisation’s operations, can become the foundation for a business to thrive in the data-driven digital era. According to Forrester, “Real digital transformation requires fast, sweeping modernisation of old systems into new Cloud-based systems that are agile, mobile and able to deliver disruptive, real-time intelligence.”*1 Such legacy modernisation may well be complex and disruptive, requiring specialised skills, methodologies and tools. However, the question remains – can your business afford not to address the barriers preventing these critical systems from becoming an integral part of your organisation’s response to evolving market needs?

*1  Forrester: ‘Your Digital Transformation Is Not Bold Enough – Five Signs Of Trouble And Key Fixes’ - May 2017