Eric Bernstein is CEO of Odessa.
Organizations running on legacy software are like owners of cars with 100,000 miles on them. The asset has depreciated over time, and the cost basis seems to have declined to nearly zero. Transitioning to a new car would introduce a significant upfront expense in the form of a down payment.
So, why not use the legacy software until it breaks down?
On the surface, this thinking may make sense to organizations using legacy tech stacks hosted in their four walls or their own internal cloud. To make the most financially advantageous decision about when to transition from legacy to modern, cloud-based software, it’s essential to consider both the hidden costs and the potential benefits of modernization.
The Phantom Costs Of Legacy Software
Driving an old car has hidden costs. Old cars are less fuel efficient, they break down and require costly repairs, and sometimes the parts needed aren’t available when something gives out. Similarly, enterprises running on legacy software typically spend a lot of money to maintain the outdated system.
The main cost of legacy software is the people required to maintain it. Old systems require specialized knowledge that the average professional on the market may not possess. As a result, organizations often maintain highly paid professionals just to work with older systems, not to mention the training required to get new employees up to date.
Another phantom cost comes from custom integrations. To continue with the car analogy, driving an older car typically means missing out on modern features that deliver a better driving experience and enhanced safety controls, like lane assist and adaptive cruise control. Outfitting an old car with these newer features might not be possible—and if it were, it would most certainly be cost-prohibitive. The same holds true for software.
Modern, cloud-based systems tend to be highly modular and API-based. By contrast, older systems require custom workarounds every time you need to integrate them with new applications.
So, organizations that still depend on legacy software often sit on a network of cans bound together by strings, which is a highly expensive and work-intensive system to maintain. Or, if the systems haven’t been patched together, they might be introducing unnecessary risks to the organization.
Finally, legacy systems tend to require manual workflows that their successors do not. In the days of legacy enterprise software, organizations would need to write code every time they wanted to make a change. This requires personnel hours—expensive, specialized mechanics, in a sense—that modern systems can eliminate.
So, while organizations using legacy software may assume modernization will put them in the red, adopting a newer system can actually save them money in short order just by reducing unnecessary costs.
As organizations look in the mirror, there are some telltale signs that will aid in determining that it is time to change. These systems (and their associated versions) are typically greater than 10 years old, which by technology standards is quite old. Here are some questions to ask yourself to help discover signs that your systems are getting old:
• How many staffers does it take to maintain the systems, and what skills are needed?
• How quickly can change be deployed, and what are the risks?
• How automated is the test suite?
The Benefits Of Modernization
In addition to capital and time savings as well as reduced risk of human error, modernization comes with a few key benefits that organizations considering a switch should factor into their decision making.
One is custom reporting and self-serve functionality. With legacy software, organizations generally need a representative from the software company to perform certain tasks, especially custom changes. With modern software, you can do custom reporting yourself—just as a Marriott visitor can book a hotel room right on their phone instead of calling a reservation manager to do it for them. This self-serve functionality introduces considerable efficiencies when multiplied across thousands of employees performing dozens of tasks per week.
Another benefit is adaptation. Consider regulations. Governing bodies often issue new guidance and require enterprises to comply within 12 months. If an organization is running on a 17-year-old platform, that adaptation to new regulations can become a giant headache (to say nothing of the expenses tied to custom workarounds). By contrast, modern, cloud-based platforms are easy to modify and automatically update. So, it’s possible that with cloud-based software, organizations will be able to adapt to new regulations with little to no custom work on their end, whereas legacy systems often necessitate a scramble and a drawn-out process of custom adaptation.
Finally, modern, cloud-based systems can help position enterprises to capitalize on the next big technology on every CEO’s mind: AI. Automation drastically reduces monotonous tasks, saving organizations a great deal of personnel hours and eliminating human error. For example, if data reconciliation is a big part of a business, 90% of it is likely repetitive and can be automated. Those with modern infrastructure will be at the forefront of innovation, delivering a competitive edge and efficiencies that will, in many cases, more than pay for the cost of a switch.
Prioritize The “Why”: Aligning Processes With Desired Outcomes
Additionally, I am asking organizations to focus more on the why than the what. Oftentimes, organizations have workflows and processes that are legacy and the result of prior systems (this is the what), and I strongly recommend focusing on desired outcomes and what is needed for the business to gain efficiency and scale.
It’s understandable that many organizations are hesitant to modernize their tech stack in the same way that people hesitate to upgrade their vehicles once they’ve paid them off.
Just as cars are integral to our daily lives, software touches just about everything a business does. Overhauling it is no small feat. But in most cases, I believe the sticker price of modernization shouldn’t incentivize inertia for those running on legacy systems.
The phantom costs of legacy software and the gains to be made from modernization usually more than cover the costs of sticking with an outdated status quo.
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