Legacy Systems – to replace or modernise?

Legacy Systems – to replace or modernise?

Nick Denning   |   January 2022

As CIOs consider the future of their mission-critical applications, Nick Denning, CIO of Diegesis, offers an alternative view to the lure of new technologies and the consequential risky business of replacing tried and tested technology.


In February, 2021 a survey by Tata Consultancy Services and AWS found that 70% of CxOs at global companies consider mainframe or legacy modernisation a strategic business priority for the next three years. Of the 211 CxOs and senior decision-maker respondents, 60% use mainframe or legacy applications for customer-facing functions. Additionally, over two-thirds use them for core business operations.

The drivers for legacy systems modernisations include (respondents could state multiple reasons):

  • Greater agility to respond to market needs (45% of survey respondents)
  • Improving application performance/responsiveness (41%)
  • Improving availability (38%)
  • Disaster recovery (38%)
  • Improving compliance (38%)
  • Improving security (38%)

How can legacy modernisation best be delivered? Organisations have built immense value in their legacy systems over the years. Before considering ‘ripping and replacing’ systems to deliver the promise of digital transformation this should be considered.

Why invest a large part of often limited budgets to replace systems that aren’t really broken? Such a move could introduce substantial risks for the business. Digitally ‘wrapping’ these systems can rapidly bring many of the benefits without the risks involved from replacement projects.


Systems of Engagement v Systems of Record

Making the distinction between an organisation’s systems of engagement and systems of record can help drive modernisation priorities. The most common systems of record include accounting, receivables, payables, management reporting, sales and HR. An organisation’s systems of record, often referred to as back-office systems, were in many cases not designed with usability at the forefront. The focus was on processing and the integrity of the data which embodies the key metrics of the business.

To keep such systems serving the business they don’t necessarily need replacing. Systems of record can be digitally ‘wrapped’ with the latest IT innovations. This will facilitate CI/CD (Continuous Integration & Continuous Delivery), rather than pulling them out and replacing them. This approach can also help address regulatory and security needs which did not exist when the systems were created. Code can be applied incrementally around the base system processes.

For example, to deliver an up-to-date user interface or to introduce mobile elements, systems of record can be ‘wrapped’ as new technologies become available. For instance, the core functions of accounting systems have changed little over the years.

However, the way we interact with them has moved from punched cards and tape, through green screen, client-server, web browser and mobile. The wrapping concept is all about safeguarding the tried and tested logic and processes. But it keeps pace with user needs, security requirements and regulatory changes.


When to replace, not modernise?

In contrast, systems of engagement are the programs and applications that frontline workers interact with in their daily working lives. It might include service management applications, customer service call centre solutions, clinical systems and retail functionality. In many cases systems of engagement give frontline workers control over the processes used to interact directly with the public including customers and patients. As such, these public-facing applications need to be slick, responsive and help deliver a competitive edge and efficiency.

This is where an organisation may need to apply the very latest technological innovations to stay ahead. A system replacement strategy may be more appropriate here.

Legacy systems of record are usually cost-efficient in managing business processes that rarely change. They are already paid for and often require little additional cost outlay beyond current support costs and occasional upgrades. They are often very reliable and familiar to the business. This can enable the organisation to focus on other more turbulent or competitive business areas.

Such legacy systems are likely to be fully integrated with the rest of the application architecture and business functions it ensures all supporting processes will be tried and tested.


Legacy Systems – Top 3 Challenges

The Tata Consultancy Services survey identified the top three challenges with legacy systems. They are:

  1. Integration with new applications (61%)
  2. Lack of business agility (57%)
  3. Security exposure (55%)

To address these issues, it is important to keep a stable, trusted, integrated infrastructure for the systems of record. It ensures the focus is on enabling new systems of engagement to be ‘plugged in’ more rapidly as needed. It delivers the required business agility in areas of competitive differentiation. Relevant security wrappers can be placed around the systems of record as threats evolve.

Throwing everything up in the air at the same time may result in ‘the perfect system’ at some stage in the future. But it is a high-risk strategy as the business environment or technology might have changed during the years of implementation needed to get there. The 2020 Global Application Modernization Business Barometer report highlighted that 74% of organisations that started a legacy system modernisation project failed to complete it.


Conclusion

The decision to replace or modernise legacy IT systems is not easy. The frustration with legacy systems can often come from outdated user interfaces and a feeling of not being on ‘the cutting edge’. However, ‘rip and replace’ is not always the answer.

It is often lower risk, cheaper and faster to add a new ‘wrapper’ to older systems to make the diamond at the core shine again, than it is to discard these “battle-hardened” operational systems of record. It just takes imagination and experience.


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