Legacy Software: hidden costs and lost opportunities

Discussions around the importance of software within a business would likely focus on finance and accounting, data and information, and customer relationship management.

In the same breath, one would find the same themes of compliance, security, and opportunity. However, we cannot lose sight of the frequently overlooked vulnerabilities, such as legacy systems. 

Simply, legacy software can be described as old or outdated software that is still in use. Often the software vendor no longer provides support or maintenance, yet it will continue to be used by a business to fulfil an intended function. The software is generally still essential to a business, and therefore the primary reason it has not been replaced. 

Critical to day-to-day operations, the migration and replacement of legacy software require careful assessment and detailed plans to reduce potential risks. The update or replacement of the software is often considered to be lengthy, disruptive, and costly. 

However, the cost, risks, and loss of opportunity an organisation could experience by not updating or replacing your legacy software could be far greater than you think. For instance, a Financial Times article revealed that 75 per cent of banks and insurance companies IT budget is dedicated to sustaining their legacy systems. Additionally, a separate study would estimate legacy modernization can help banks reduce IT costs by 70 per cent and cut typical transformation timelines in half. 

From maintenance and support to agility and security, we examine the hidden costs and lost opportunities that legacy software could have on your business. 

Maintenance and support 

As standard, operating current software versions ensures your business receives the latest features, performance fixes, changes, and enhancements - including improvements to how the vendor develops software. Additionally, remaining on an outdated version of the software can cause conflicts with the third-party components that may no longer be supported by the vendor. 

Keeping your software versions current not only helps ensure business continuity is maintained but ensures there are no unnecessary failures. Changes to software versions may be incremental and implemented slowly over time, but this grows with each release and eventually, an organisation could be left behind. 

"Supporting obsolete or end-of-life technology is one thing, but the cost of trying to retrospectively fit in the support for previous versions of a third-party component may become incredibly prohibitive,” explains Jon Jenkins, Head of Engineering at HPD Lendscape. “There's a lot to be said for just ensuring that you align your technology to the later versions for the third-party support.” 

Outside of functionality, legacy software can also present unique challenges concerning updates and changes. Codebases can be considerably large, and any changes could result in several conflicts that would require money, time, and effort to resolve. Jenkins adds, “The older the system, the greater the risk. There is also an increased likelihood of complications around documentation – or lack thereof!” “We make updates in our software continually, to make better use of performance and available efficiency gains,” reflects Jenkins. “How we operate as a team and how we document and deliver our solutions has also evolved and improved.” 

It is vital to also consider the impact of staff and training when it comes to legacy systems, and these often require specific sets of skills and expertise. Therefore, finding and retaining talent might become a costly exercise, particularly with more obscure or obsolete languages or technologies. 

In 2020, the COVID-19 pandemic revealed the vulnerabilities of many organisations’ outdated software where there had not been enough capacity, or the systems were not flexible enough to implement system changes quickly. In the US, the sizable increase in unemployment exposed the unemployment systems. 

An unprecedented amount of traffic and submissions (approximately 16.8 million claims between 15 March and 4 April alone), in tandem with 40-year-old COBOL systems and the lack of programmers to support maintenance combined for a perfect storm of legacy system issues. 

Ignoring the challenges of finding fluent coders in a time of crisis, outdated or obsolete software can have a negative impact on your employee experience. According to the G2’s State of Software Happiness Report 2019, 52% of employees are unhappy due to the software used at work, and 24% of employees noted they had considered looking for a new job because of the software they were using. 

Outdated or obsolete software could not only be making your employees less productive, but bad software decisions could be a compelling talent to join your competitors. 

Additionally, legacy software can also not compete with modern software when it comes to the reduction of support and infrastructure.  In the case of cloud or Hosted Managed Services (HMS), Jenkins notes there are significant benefits to not having local software installed for each user, and “There is a massive physical presence, cost, timing, organisational and logistic concern that are negated.” 

“You can have far greater control of your software if it is managed centrally. Specifically with regards to security, which removes concerns over unauthorised changes. Software support is far simpler because it is hosted in one place.”

Security, integration and compliance

As previously mentioned, all software versions fall out of support, and security is key to the constant improvements and updates made to later versions to ensure compliance. Over the last decade, software solutions have evolved from bulky, high-performing runtimes to leaner, modularized, micro-runtimes. Requirements have changed drastically, and modern software relies upon several different layers and capabilities. 

Compatibility becomes a sizable concern as custom code would be required to connect legacy technology to services. Integration on this level could take significant resources, and there could still be a chance it would not work. By default, the latest versions of software and technologies are integration ready. Older versions of software don’t offer the facility for a variety of APIs to be called by different technology stacks. 

“For example, later versions of software solutions allow for encrypted file transfers via APIs,” explains Jenkins. “Encryption within the software ensures that you have genuinely end-to-end encrypted files, whereas older versions of the software will more than likely not offer this facility.” 

“Naturally, these are important for integration, and more importantly, compliance. Now, more than ever, software providers are under increasing scrutiny to ensure that we are keeping up to date with the latest versions of the solutions, components, and frameworks we use.” 

When reviewing the security concerns supporting legacy software it becomes clear risk cannot be uncoupled from service management. Outdated software is ripe to have any vulnerabilities exposed and would be less resilient against malware, harmful programs, and cyberattacks. The latest versions of software benefit from the multiple different penetration tests commissioned against the solution. 

“Whether medium risk, critical or severe, it’s important to consider the implications of each issue,” suggests Jenkins. “Modern software allows for far simpler patching of any impacted versions, and we can do this incrementally.” 

Older operating systems, hardware, database structures, and software are unwelcome dependencies that could have a significant impact on security. “Any of these could no longer be supported by the vendor or service provider, and there could be no further patches to keep your software compliant with the latest security requirements. You could find yourself running legacy software with known exploits that have not been reported” 

In May of 2017, cybercriminals took advantage of a weakness in the Microsoft Windows operating system to encrypt corrupted device data and demand payment of a ransom for its return. 

The WannaCry ransomware exploited a hack known as EternalBlue that had supposedly been developed by the National Security Agency in the US. The hack had been made public, and two months before the WannaCry ransomware attack began Microsoft released a security patch to protect users’ systems. Within a matter of hours, around 200,000 computers at banks, health service providers, car manufacturers, telecom providers, and electronics makers had been attacked in 150 countries. 

Anyone who had not applied the update to their operating system was vulnerable to attack. As of now, cybersecurity company Kaspersky estimate the WannaCry ransomware has caused $4 billion in losses across the globe. 

“While many of our clients have a complicated matrix or technology, hardware and software, the question is not whether you upgrade or not, but rather what level of risk you are willing to accept,” observes Jenkins. 

Organisational agility, efficiency, and lost business opportunities

In the first section of this article, we covered how legacy software not only increases the burden of maintenance and support but the impact on a business can easily be overlooked. Instead of innovating with new technology, experimenting with business models or solutions, and enhancing your customer experience, a business could be losing valuable opportunities which its competitors could be capitalising upon. Keeping your software up to date can not only avoid unnecessary delays and decreased productivity but can reduce costs tremendously and offer greater efficiency. 

Updates and newer releases of software can offer significant improvements to the products and solutions you offer. Legacy software can be clunky and difficult to navigate while newer releases or solutions can scale with your business and offer incredible insight into your customers' behaviour. Ultimately, helping you to evolve your services and solutions. 

“If you have an application that you are supplying to customers that is fully responsive, fluid, and intuitive, it will be a clear winner,” states Jenkins. “Regardless of sector or market, today's end users have become increasingly sophisticated. We have to meet their expectations on a functional and usability level, while always keeping their goals and success in mind.” 

In a McKinsey Global Survey, 80% of respondents noted they had undertaken digital transformations. Interestingly, when digital tools were implemented across an organisation to make information more accessible and when self-serve digital technology had been implemented for employees and/or business partners use, they were seen as two of the most important factors to successful digital transformations. 

The benefits of driving higher levels of efficiency and agility are clear, and digital transformation will continue to headline the modernisation of business initiatives with continuous delivery integrating product development with digital or IT operations in the spotlight. 

Consider that modernisation is grounded in agility, and as organisational capabilities change, so should your technology and software capabilities. Marketplace realities will continue to evolve yet control and stability can be found when keeping your software and technology up to date and poised to capitalise on an opportunity.  

Legacy software creates complex and challenging environments where innovation is stifled, hindering businesses that cannot keep pace with modern demands. In turn, these issues seriously hamper efficiency and harm employee productivity. 

“From a different perspective, it might be worth considering whether your software is still relevant, or is keeping your business relevant in the market,” considers Jenkins. “If you are not using the latest version of your software, it is not just the improvements to features and functionality or the cost savings which should be your concern. Your competitors could be benefitting from the integration and efficiency gains, slicker products with more favourable customer engagement, or far greater employee engagement.”

An increase in cost, while losing opportunities

Upon reflection, the risks in not upgrading your legacy systems are almost immeasurable, and it is almost impossible to calculate the true cost. While upgrading legacy software can be extremely slow and expensive, can you ignore the significantly improved price vs performance ratio or the benefits of a far more predictable cost profile? 

Can you put a cost on reliable uptime, ensuring your systems and processes run effectively – removing volatility from your costs and keeping your talent happy? Are you able to deliver innovative, customer-centric solutions that embrace cloud mobility, automation, and big data? 

In an increasingly competitive world, it is crucial to stay ahead of the game. Today's customer expects to have similar features and services they receive from businesses on the cutting edge of digital innovation. While progressive organisations take advantage of new technology and software, creating ever flexible and innovative competition, remaining idle could take your organisation down a cumbersome and lonely path of lost opportunities. 

Is your organisation in need of professional assistance to elevate and enhance your working capital finance technology? To learn more about we can help you with technology solutions for factoring, invoice discounting, asset-based lending, supply chain finance and a range of other secured lending products, please visit our solutions pages. 

Alternatively, feel free to get in touch with our experts to understand how we can help you seize the opportunities of tomorrow. 

Article written by:

Iain Gomersall