Every year, the U.S. government spends over $100 billion on information technology, and a significant part of this money goes toward maintaining existing systems, many of which are already outdated. These systems are not only becoming expensive to maintain, but also much more vulnerable to hackers. Legacy systems are a major issue since some of them may rely on outdated languages, have unsupported software, or be costly to maintain because components are no longer available on the market. Dependence on outdated software systems can hinder organizational growth, reduce efficiency, and undermine operational resilience.
The case for legacy system modernization
Modernizing software is an essential step for businesses aiming to remain competitive and secure in today's digital environment. For example, the World Retail Banking Report as early as 2022 raised the issue of the modernization of legacy systems in banks. The World Retail Banking Report 2022 found that 95% of executives think that their current systems and technology can't fully optimize their data for customer-centric growth strategies. Customers are switching to competitors that offer a more personal experience.
5 Key benefits of modernizing legacy systems
Many enterprises still use outdated systems; however, modernization is no longer a trend but a necessity that brings prosperity and, surprisingly, resource savings to the company. According to a Deloitte 2023 report, 44.6% of executives implementing Zero Trust models face compatibility issues related to legacy systems. By the end of 2024, retail banks worldwide will face an uncertain landscape: navigating this complex terrain will be challenging and require intelligent solutions to help maintain profitability while delivering superior customer experience. This article will explore the 5 key arguments why modernize legacy systems, supported by real-world examples.
Enhanced security and compliance
One of the most critical reasons for modernizing legacy systems is security. Old systems do not meet modern security standards, making them vulnerable to data breaches.
Legacy systems often do not support modern cybersecurity mechanisms, creating attack vulnerabilities. In 2023 alone, the cost of these threats reached $4.45 million. Modernizing software will strengthen your digital security, enabling you to eliminate vulnerabilities and stay updated on the latest security features.
Software modernization ensures:
Multi-factor authentication and modern encryption protocols that effectively protect against cyberattacks.
Automated compliance monitoring with regulatory requirements, such as GDPR or ISO 27001.
For example, let's take a bank that can modernization of legacy systems and an outdated transaction accounting system by investing in protection based on artificial intelligence, which will avoid fraud for $2 million.
Improved system performance and scalability
Legacy modernisation enables faster data processing, improved efficiency, and scalability. This is particularly important for companies experiencing growth or operating in high-demand environments. For instance, an outdated CRM system may struggle to handle increased user loads or adapt to new business requirements. As a result, as your business grows, relying on outdated systems can lead to inefficiencies and potentially disrupt business continuity. Similarly, if a logistics company modernizes its cargo tracking system, it could serve 50% more customers without interruptions.
Better integration with modern technologies
Many outdated programs complicate user access from mobile phones or modern tablets, limiting not only sales but also remote work opportunities. If you run an online store, employees need to handle critical situations on the go or from home. Modernization helps you to support business operations during various unpredictable circumstances, such as pandemics or natural disasters, by facilitating remote work and secure data access. For instance, updating and scaling CRM systems can significantly improve business processes. Research suggests that 65% of salespeople in firms with mobile-enabled CRMs achieve their quotas, compared to just 22% in companies without them.
Additionally, modernization allows you to integrate with third-party services, such as APIs or CRM systems, and adapt quickly to new technologies. For example, a textile factory could implement an IoT system to automatically monitor production equipment, reducing downtime.
Enhanced user experience and productivity
Outdated interfaces make work more challenging for everyone — employees and clients alike. Resources new modern system simplify user interactions with intuitive design and accelerate workflows through automation.
New modern systems offer:
Intuitive design that enhances user interaction.
Streamlined processes that save time and effort.
For example, an airline may need to modernize its IT infrastructure to improve the customer experience. Outdated reservation and booking systems, built on legacy technology, can hinder innovation, leaving the organization unable to meet current industry and client demands. A common modernization approach is to develop a mobile commerce app that allows clients to place and pay for orders from their devices, reducing service time by 40%.
Increased ROI and competitive advantage
Modernization can significantly drive increased ROI, which may be measured through operational efficiency, reduced maintenance costs of outdated systems, increased sales, and improved customer satisfaction. Upgraded solutions are more energy-efficient and require less technical maintenance. Additionally, integrating new features enables the launch of innovative products or services. For instance, a cosmetics store might deploy state-of-the-art cloud-based POS systems with real-time inventory tracking, personalized customer service, and online ordering. This approach is projected to increase profits and attract at least 30% more customers.
Real-world success stories: how companies transformed through modernization
In 2017, Nike made a huge decision to abandon wholesale trade—which accounted for 80% of their profits—in favor of building direct relationships with their customers. This move enabled the company to develop digital channels and leverage new business technologies, such as the Nike Run Club and Nike Training Club mobile apps, both available for download on mobile devices. By the end of 2022, Nike's e-commerce sales accounted for 43% of its revenue. By May 2024, the company’s global revenue had reached approximately $51.36 billion (up from $46.61 billion in 2022). Today, Nike is perceived by its customers as a brand that champions a healthy lifestyle, creating ideal apparel and footwear to support it.
Starbucks, the well-known coffee shop chain with 32,000 stores across 80 countries, embraced digital transformation in 2017. Recognizing its potential, the company focused on enhancing rewards, personalization, payments, and ordering systems, driven by customer feedback. Cloud platforms improved Starbucks' ability to manage tipping, food ordering, inventory, and production processes. In addition to leveraging technology, Starbucks integrated artificial intelligence into its mobile app, allowing the company to personalize product offerings and deliver rewards tailored to individual consumer preferences.
Netflix, a globally recognized company now valued at $149 billion, exemplifies the transformative power of modernization. By replacing its offline rental service with an online viewing platform, Netflix not only eliminated late fees for customers but also introduced new value through digital transformation. This innovation fundamentally changed customer buying habits and revolutionized how audiences consume movies and television.
Final thoughts on legacy system modernization
Modernizing legacy systems has become critically important for companies ready to grow and succeed. It minimizes risks, enhances efficiency, creates additional value for clients and partners, and opens new horizons for innovation, scalability, and seamless integration with advanced technologies. Investing in modernization today creates a strong foundation for stable and successful growth in the future.
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