If you are not a digital native and an established mainstream company, you inevitably have a compelling need to modernizing legacy core systems.
In the onslaught of rising customer demand, competitive pressures, and the latest technologies, most legacy companies have tried many band-aid solutions to hide the burden of legacy systems. Sometimes, the façade worked, but it was akin to putting lipstick on a pig in many cases.
The corporate world is saddled with many legacy systems for mainly two reasons. One is how expensive and burdensome it is to replace the core systems, legacy or not. Second is the legacy systems primarily work. Thus companies have avoided taking a considerable risk. But, of course, when they do break, it is chaos all around. And the legacy systems are complex, hard to maintain, and the talent that understands what’s buried in that code is scarce.
Companies should consider modernizing legacy core systems after hurrying and scurrying accelerated transformation initiatives engendered by the pandemic.
Definition of Legacy Core System Modernization:
Legacy core system modernization involves re-platforming a legacy software created in antiquated technology and porting it to a modern programming language, frameworks, and protocols. The legacy modernization can be a one-to-one replica of functionality or, at times, includes decomposing the functionality into constituent parts and making it into a composable set of applications or services.
The need for Modernizing Legacy Core Systems:
Modernizing legacy core systems is a challenging and complex endeavor with high risks and potentially high rewards at the end of the journey. Nevertheless, here are some reasons why companies should modernize legacy systems.
- Risk of Failure: While most legacy systems are workhorses and perform their core transactional and recordkeeping functions admirably, all bets are off when they fail.
- Maintenance Cost: Upkeep of legacy systems is prohibitive, and keep the beast alive starves other areas of technology investments.
- Resource Scarcity: It is not easy to find programmers with the necessary skillset and the experience to work on these antiquated systems programmed in languages like FORTRAN or COBOL.
- Regulatory Compliance: Many legacy systems built decades ago do not comply with the latest regulations. Hence companies have to hire expensive consultants to take the data from the legacy systems and then repurpose it to fit the regulatory filing requirements.
- Timelines: Legacy systems often take months or years to modify. Today’s business needs to respond to changes in market conditions, competitor moves, and customer demands in a much shorter time frame.
- Integration and Extensibility: The legacy core systems are often not easy to integrate, and one cannot extend their functionality to the needs of a modern enterprise.
- Time is Now: Today, a slew of technologies are available to unlock the business rules, port legacy languages into new ones, low code applications that could help fill out functional gaps, in addition to leveraging the opportunity as companies migrate to the cloud and digitalize their business.
“For many organizations, legacy systems are seen as holding back the business initiatives and business processes that rely on them,” says Stefan Van Der Zijden, VP Analyst, Gartner. “When a tipping point is reached, application leaders must look to application modernization to help remove the obstacles.”
Legacy Core Modernization Options:
Enterprises can adopt several different approaches to legacy modernization. Here are some potential techniques and options.
Gartner ranks seven potential approaches to legacy core system modernization.
“Encapsulate. Leverage and extend the application features by encapsulating its data and functions, making them available as services via an API.
Rehost. Redeploy the application component to other infrastructure (physical, virtual, or cloud) without modifying its code, features, or functions.
Replatform. Migrate to a new runtime platform, making minimal changes to the code, but not the code structure, features, or functions.
Refactor. Restructure and optimize the existing code (although not external behavior) to remove technical debt and improve nonfunctional attributes.
Rearchitect. Materially alter the code to shift it to new application architecture and exploit new and better capabilities.
Rebuild. Redesign or rewrite the application component from scratch while preserving its scope and specifications.
Replace. Eliminate the former application component and replace it, considering new requirements and needs at the same time.”
Deloitte discusses their options for legacy core modernization.
- Replace: To improve business and/or technical value with a new solution.
- Retire: To reduce the number of solutions.
- Remain: No change to the current state environment.
- Retool: To improve business and/or technical value with an existing solution. A modification to the underlying application software, including languages and databases, technical architecture, or presentation layer of the application without a conversion
- Resource: To transfer responsibility and risk. Outsourcing or sale of the business to eliminate/reduce ongoing accountability for managing the future business and technical management of the solution.
In addition, sometimes, companies may also consider building a wrapper around the core system (a band-aid for sure). Finally, in extreme cases, divestiture or spin-off may also be options.
Benefits of Modernizing Legacy Core Systems:
The benefits from legacy modernization are almost self-evident, but just to reinforce:
- Lower Risk: Modern core systems reduce risk to the enterprise considerably.
- Increased Agility: After modernizing legacy systems, the responsiveness and agility of the firm to respond to dynamic market situations improve tremendously.
- New Opportunities: With an extensible architecture, modularity, and scalability, modern systems will allow companies to innovate and find new opportunities.
- Operational Efficiency: Due to reduction in friction in the overall landscape, avenues for operational optimization.
- Better Experience: Configurable systems allow for accounting for various personas and customer journeys and results in better user experience, thus a better NPS (Net Promoter Score)
- Capture Knowledge: Legacy modernization allows for knowledge capture from old systems and codifies them into a flexible new design that is more amenable to change.
- Lower Total Cost of Ownership: While amortizing the initial investment will take time, a combination of new revenue, lower costs, and minimal maintenance will lead to an overall reduction in TCO (Total Cost of Ownership)
- Staffing Flexibility: Companies no longer have to hire and retain hard-to-find talent but instead can recruit and onboard technologists proficient with modern methods, frameworks, and languages.
- Better Sleep at Night: A large contingent of IT leadership and operational staff can rest easy at night.
- Face the Future with Confidence: Without a burdensome backend, companies can look forward to future challenges and opportunities with renewed vigor. (It is like a mountain climber saddled with a 500-pound dead weight. Without it, they can be more nimble and have a chance at conquering the peak.)
Best Practices for Legacy System Modernization:
Considering the arduous task of modernizing legacy systems, here are some best practices to ensure success.
- Please do it for the Right Reasons: Considering how difficult, expensive, and time-consuming legacy core system modernization can be, do it for compelling business and technical reasons. Create a rock-solid business case.
- Get Leadership on Board: Solid executive sponsorship and support are essential for such a massive effort.
- Allocate Top Notch Resources: Assign your best talent to the legacy modernization endeavor.
- Fund it Appropriately: Core system modernization is a multi-year commitment, ensuring sufficient investment to achieve the goals.
- Hire the Right Partners: Most companies need help and onboard the right set of partners who have experience, possess a deep bench of talent and are a cultural fit.
- Don’t Forget Data Migration: Major legacy transformation projects fail because companies have not through the complexities of data migration and conversion.
- Rethink, not just Replicate: If there are convoluted processes and complex functionality, do not repeat them in the new system. Instead, rethink and, if needed, eliminate.