What is legacy system: quick guide

Legacy systems are the key players of many businesses, powering essential operations behind the scenes. Yet, as industries race toward digitization, these systems are at odds with modern demands.

From banking software built decades ago to early ERP platforms still in use, legacy systems remain critical, even as their age introduces challenges like high costs, security vulnerabilities, and integration roadblocks.

Companies need to understand the role and potential of legacy systems in a time when reliance on a web application and cloud technology is taking the lead. It becomes the first step in crafting a sustainable IT strategy.

This article will explore what a legacy system is and why companies still rely on outdated infrastructures. We will also discuss the pros and cons of these systems and look at some key strategies to modernize them.

Read along to understand the importance of legacy systems in your businesses and explore ways to modernize them suitably.

A legacy system is an older software application, hardware infrastructure, or technology platform considered outdated or less efficient than modern alternatives. These often include operating systems that are crucial for daily business operations.

While these computer systems are critical business components, they can pose maintenance, security, and integration challenges with newer technologies.

Since legacy systems are, by definition, outdated but still in use due to their essential role in businesses, let’s explore some key types of legacy systems that are still in use.

Examples of legacy systems in use

Some prominent examples that rely on legacy systems are as follows.

Banking systems

Banks rely on decades-old legacy systems, like those built on COBOL, for key tasks like managing accounts, processing transactions, and detecting fraud.

Despite their age, these systems are incredibly stable, so major players like JPMorgan, Chase, and Bank of America still use them, even hiring COBOL experts to keep things running smoothly.

Enterprise resource planning (ERP) platforms

Older ERP systems, like early versions of SAP R/3 or Oracle E-Business Suite, are still standard in industries like manufacturing and retail. They manage tasks like inventory, supply chains, and finances.

These systems persist because they’re deeply tied to business workflows, and upgrading often involves costly disruptions. Companies like Ford and Boeing continue to rely on these legacy platforms for their stability and functionality.

Thus, legacy systems offer businesses robust software and hardware, enabling them to meet the needs of their market and adapt to the demands of the modern digital world.

Despite their challenges and being part of outdated technologies, legacy systems remain the backbone of many businesses. Why?

One reason is the complexity of updating legacy systems. Let’s explore the main reasons companies hold onto these aging systems.

Cost of replacement

Replacing legacy systems comes at a cost. It is an expensive process, and companies must account for the price of migrating data, training employees, and potential downtime. These systems often support millions of transactions or records for large enterprises daily, so even a short disruption can be financially and reputationally disastrous.

In many cases, businesses continue to use outdated software because of the steep prices of creating new systems.

Critical business functions

Reliability is essential for critical business functions where legacy systems are still reliable. These outdated systems have stood the test of time, making them a core reliance component for complex business processes.

Companies are wary of switching to new software technologies or newer systems that may introduce bugs or instability, jeopardizing essential operations.

Regulatory and compliance requirements

Surprisingly, legacy systems excel at meeting compliance regulations. These systems were built when businesses had fewer options, so they were designed to conform meticulously to industry regulations.

While more advanced, new systems may require customization to meet the exact requirements. Legacy systems are sometimes safer and more dependable in healthcare, banking, and government industries, where compliance is non-negotiable.

Hence, sticking with legacy systems isn’t always about resisting change. It is linked to carefully weighing costs, risks, and the irreplaceable value these systems bring.

While businesses use legacy systems for robust operations, they come with many challenges that can slow growth, increase costs, and create headaches for IT teams.

Here’s a closer look at companies' hurdles when opting to keep this outdated technology.

High maintenance and operational costs

Legacy systems are costly to maintain, primarily because they rely on outdated hardware that’s hard to find and expensive to replace. They also need specialized skills, like COBOL programming, which is rare and pricey. For many organizations, maintaining these legacy systems feels like throwing good money.

Security risks and vulnerabilities

This challenge arises from legacy systems not being built with today’s cyber threats in mind. Unlike newer technology, these systems do not have regular updates or patches, making them an easy target for hackers.

A vulnerability in a legacy system can jeopardize sensitive data, disrupt operations, and damage a company’s reputation. In today’s cybersecurity landscape, running unpatched systems is like locking your front door but leaving open windows.

Limited scalability

As businesses grow, their technology needs to scale with them. Since outdated systems can’t keep up, updating legacy systems designed for a specific time and purpose becomes necessary.

Their rigid architectures make accommodating increased users, transactions, or integrations difficult. This lack of scalability can limit growth and force businesses into expensive workarounds.

Compatibility issues with modern systems

Integrating legacy systems with modern software and technologies is a whole new challenge. APIs, cloud platforms, and advanced tools don’t play nicely with legacy systems, leading to inefficiencies, manual processes, and data migration headaches.

Lack of vendor support

When vendors stop supporting older systems, businesses are left to fend for themselves. They end up with a system without updates, patches, or a help desk to call. Thus, keeping these unsupported systems running at an increased risk is challenging.

Reduced business agility

Examples of legacy systems as robust components make sense, but they are not the stars regarding agility. They are slow to adapt to new features, technologies, or market demands, leaving businesses stuck in the past while competitors leap ahead with system modernization.

Data silos

Many legacy systems operate in data silos, making it difficult to access, share, or analyze information across the organization. These silos hinder collaboration and make it challenging for businesses to gain a comprehensive view of operations, slowing down decision-making and strategic planning.

Limited user experience

User interfaces created long ago were not designed with today’s standards in mind. Compared to modern systems, this makes legacy systems clunky, slow, and frustrating. This limited user experience does not offer a seamless interaction, as is expected nowadays.

Thus, it is essential to understand these challenges as you plan a path for your business’s modernization.

The existence of legacy systems today, despite these challenges, is proof of how beneficial they can be. Let’s examine the reasons why businesses use legacy systems today.

Stability and reliability

Legacy systems have been running critical processes for years with consistent performance. Their proven stability comforts businesses that cannot afford downtime or unexpected glitches.

Tailored business processes

Many legacy system examples were custom-built to align with a company’s unique needs perfectly. Businesses have optimized these systems for specific workflows and applications over time, making them indispensable in day-to-day operations and difficult to replace.

Compliance with regulations

Legacy systems often meet regulatory requirements because they were designed to do so from the start. Industries like healthcare, banking, and government trust these systems to handle sensitive data and ensure compliance with long-established standards.

Cost avoidance

Legacy system modernization is a costly process that involves new systems, migration costs, and potential downtime. Hence, businesses tend to stick with legacy applications to avoid these expenses.

Familiarity for employees

Employees who have worked with legacy software for years are comfortable using it. Switching to a new platform would require extensive training and adaptation, disrupting workflows and lowering productivity in the short term.

Longevity of investment

Legacy systems represent years, sometimes decades, of investment in development, upgrades, and optimization. Their continued use maximizes this investment, giving companies a strong return.

Integration with existing processes

Over the years, legacy systems have become deeply embedded in any business’s processes. They function with existing workflows and tools, reducing the need for costly integration efforts or operational overhauls.

Avoidance of risks associated with new technologies

Adopting a new system comes with risks, like bugs, compatibility issues, or instability. However, it gives more meaning to legacy systems in a business infrastructure, making them safer bets for organizations.

Hence, legacy systems are crucial for enterprises due to their stability, familiarity, and reliability. When choosing to keep or let go of legacy systems, you must weigh the benefits against challenges to make an informed decision.

Modernizing legacy systems is one way to keep these infrastructures relevant in your businesses. Some key strategies can update all types of legacy systems. Let’s examine these methods and how they ensure hardware and software modernization.

Rehosting

This strategy, also known as lift-and-shift, involves moving legacy systems to the cloud without significantly changing their architecture. It assists businesses in cutting costs, improving scalability, and enhancing accessibility.

It is a low-risk and effective process to modernize legacy IT systems without downtime. For example, moving an on-premise database to a cloud provider like AWS or Azure can reduce maintenance overhead while boosting performance.

Refactoring

It involves rewriting or restructuring parts of the system’s code to improve performance, scalability, and maintainability without altering its core functionality. Refactoring suits organizations that intend to modernize their systems while retaining key features.

An example of refactoring can be updating a COBOL-based application with modern programming frameworks. It can make it compatible with today’s technologies and easier to manage.

Replacing with new systems

Yet another strategy on the list is to start from scratch and fresh. This means replacing a legacy system with a modern solution to meet your business needs.

It is costly, but it ensures that your system aligns technology with current industry standards. For instance, adopting a new ERP platform like SAP S/4HANA or Oracle Cloud ERP can provide advanced features and better integration capabilities.

Integration with modern platforms

Some businesses want to opt for the best of both systems. They can retain their legacy systems while embracing modern technologies by using APIs and microservices. This enables them to connect their legacy systems to new platforms without completely changing the infrastructure.

This hybrid approach allows companies to benefit from modern features like real-time analytics, mobile accessibility, or AI-driven tools while maintaining the stability of their legacy systems. For example, integrating a legacy CRM with a modern marketing automation tool can improve customer engagement without disrupting core operations.

When choosing the appropriate modernization strategy from this list, you must consider your organization’s goals, budget, and challenges. It is an investment that determines the future of your business, you must ensure that your system is robust and meets the needs of your enterprise.

Legacy systems are more than just aging technology. They are the backbone of countless businesses, balancing stability with the weight of modernization challenges.

Whether you’re struggling with high maintenance costs, exploring modernization strategies, or leveraging legacy systems for compliance and reliability, aligning your IT infrastructure with your business goals is key.

If you are navigating legacy system modernization, connect with a trusted web app development firm to explore innovative solutions that preserve what works while preparing your systems for the future. Your next move could play a key role in meeting your business needs.