Organizations today face a challenging task when deciding to modernize legacy systems. They need a strategic, phased approach that minimizes disruption to business operations. Legacy systems pose a significant challenge as they are difficult and costly to scale, lack agility, and fail to provide the operational ease that modern businesses require.

Legacy systems 

Legacy technology significantly impacts organizations’ agility and profitability. These systems present major obstacles due to their inability to adapt quickly to changing internal dynamics. A Deloitte survey involving 300 industry leaders highlights that technology infrastructure challenges are the primary hurdle in controlling costs for 50% of businesses. This marks a notable increase from the previous year, indicating a growing concern over legacy systems and their cumbersome nature.

Modernizing legacy systems

IT leaders must thoroughly assess their legacy infrastructure to create an effective plan for updates, integration, or complete replacement. A meticulous evaluation of the current setup and a structured approach to modernization are essential to avoid costly mistakes and ensure a smooth transition to more efficient systems.

Practical advice on system overhaul

Howard Weale, the vice president at Cockroach Labs, recommends a detailed examination of the current application stack. Identifying areas for improvement is the first step in a gradual overhaul process. Weale advises against comprehensive, sweeping changes, which can lead to significant operational disruptions. Instead, he advocates for breaking the modernization process into smaller, manageable steps. This approach fosters continuous progress and maintains operational stability.

Successful IT modernization requires buy-in from the entire team and complete support from senior-level stakeholders. IT leaders must communicate clearly and manage the risks associated with these investments. Direct collaboration with the entire C-suite, in addition to the CEO, is essential to align the right IT strategy with the organization’s overall goals. Transparent and frequent discussions can make sure that all stakeholders are on the same page and understand the strategic importance of modernization efforts.

Cost evaluation and technology replacement

Scott Wheeler, the cloud practice lead at Asperitas Consulting, covers the importance of identifying modern technology replacements and calculating the total costs associated with migrating to these new systems, including ongoing maintenance. Organizations must evaluate replacement technology by considering several key factors:

  • Business Opportunity and Risk: Assessing the business opportunity and the risk associated with not replacing legacy technology helps in understanding the potential benefits and pitfalls of modernization.
  • Cost Differential: Analyzing the cost differential between maintaining legacy systems and adopting modern technology is crucial. This analysis should include both labor and software costs to provide a comprehensive view of potential savings.
  • Migration Cost Estimate: Estimating the total cost of migrating away from legacy systems is a critical step. This includes direct migration costs and any ancillary expenses related to the transition.

Aligning IT with business goals

Modernization within an organization is not merely a technical upgrade but a strategic investment aimed at sustainable business growth. Introducing new technologies can cause disruptions, yet maintaining that these disruptions are manageable and necessary for achieving long-term benefits.

The team does not treat technology investments as isolated incidents but as part of a continuous cycle of strategic planning and execution. These investments undergo rigorous review alongside other business growth initiatives to guarantee that they align with the company’s long-term goals.

To track the effectiveness of these strategic investments, organizations must monitor at an enterprise level. Such tracking confirms that the organization is achieving the expected benefits from its investments in technology, allowing for adjustments as needed to optimize value capture.

AI in Modernization

A recent Deloitte survey indicates that 80% of enterprises now use generative AI and machine learning. These technologies focus on improving operational efficiencies and improving the experiences of both customers and employees. The widespread adoption of AI and machine learning demonstrates the industry’s acknowledgment of their potential to transform key business processes and operations.

AI helps pinpoint where expenditures are highest and establishes operational guardrails, which contributes to more controlled and predictable spending. Furthermore, AI reduces the complexity of data infrastructure by automating tasks that traditionally require extensive manual effort. These automations lead to reduced operational costs and improved efficiency.

Organizations should prioritize AI initiatives based on their potential value to the business and their implementation feasibility. Considering the cost, technical complexity, and availability of necessary data and skills when evaluating potential AI projects must be a priority.

Alexander Procter

May 10, 2024

4 Min