11 Red Flags Signaling You Need Legacy System Modernization

Once the backbone of your operations, legacy systems built on outdated code may now be holding your business back. Old-schoolers say: “If it works, don’t touch it” but today this mindset is no longer relevant. According to the Kyndryl Readiness Report, 64% of organizations still rely on outdated IT infrastructure for at least a quarter of their systems, applications, and networks. Critically, 75% of those legacy environments are incompatible with generative AI solutions, making integration nearly impossible.

Organizations that rely on outdated IT systems often struggle to achieve the digital maturity necessary to implement advanced technologies such as OpenAI, neural networks, and computer vision. Without a modern architecture and scalable data infrastructure, it becomes a significant challenge to meet the demands of AI-driven customer experiences.

So, why even with all the known risks are many companies still very cautious about replacing their outdated software? Instead, they simply update some parts or patch their legacy systems that may take up to US$ 2.7 million from the organizations’ budgets. For many reasons, such critical industries like healthcare, banking, and manufacturing, for example, cannot tolerate any downtime and need such legacy systems to be in operation to support critical processes or they use them for managing historical data. However, with the right planning and approaches to legacy software modernization, new robust systems and platforms can fill in their places risk-free.

In turn, stagnation and lost opportunities will be at the top of the iceberg of technical debt, threatening overall business continuity. In this post, we will focus on specific signs that indicate your core tech stack has already become a liability.

11 Alarming Signs You Need System Modernization

Now, you may ask – how do I know that my system is already due for a complete upgrade or even replacement?

The Kyndryl Readiness Report surveyed 3,200 business executives, of whom 90% said they were fully confident in their IT infrastructure and only 39% said it was fit to address potential risks. Let’s study this list of red flags you should monitor to stay positive about your IT infrastructure.

1. Growing Exposure to Security Vulnerabilities and Compliance Risks

Security, reliability, and scalability – three essential aspects that most companies expect to boost after modernization.

Rated as number one priority, security often bears the brunt of poor legacy systems management. The results are ominous – data leakage, compromised operational systems, huge reputational damage, and financial losses. Here’s the latest example of the company Pure Incubation unknowingly revealing 132.8 million records of business people to hackers through their retired system.

Many companies, enterprises specifically, often fail to monitor and secure their legacy apps or systems. Even if software, hardware, or networks are no longer in active use or have been inherited after mergers, for instance, they are still a part of the entire IT infrastructure. Keeping them unattended often reveals hidden vulnerabilities that may soon be exploited by malicious actors.

Moreover, the negative impact of legacy systems on business often lies in their inability to comply with the latest standards, policies, and industry regulations like HIPAA, GDPR, PCI DSS, SOX, etc.

Legacy software isn’t simply designed to support MFA, end-to-end encryption, identity and access management controls, real-time threat detection, etc. At the same time, the speed and frequency of changes in the regulatory landscape also adds to the amount of challenges companies face still relying on obsolete IT assets.

2. Performance Issues and Repeated Operational Disruptions

One of the red flags of aging systems are repeated and hardly predictable system failures and outages. The latter often go along with longer downtime and recovery, visible lag in transactions and queries processing, and as a result, slower response times. Overall, the system performance may be inconsistent, hardly adaptable or ready to support high-traffic loads.

Even global enterprises are still heavily reliant on legacy technologies – 96% of their systems, apps, and networks use such dated technology. The latter is often the catalyst of performance issues or worse – a system collapse.

A case in point: Barclays suffered the major outage that lasted for a couple of days attributed by to the core platform failure. And since such traditional banks like Barclays still mostly rely on old code and legacy infrastructure, the routine update may lead to a major disruption. To modernize enterprise systems of such long-established businesses like Barclays often suggests technical complexities and operational risks. However, reputational damages outweigh those in the long run.

There’s also operational dysfunction that overburdens IT teams, making them patch and restore what’s broken instead of experimenting with new features. Such incidents often discourage teams who realize that befriending old code with new technologies may again lead to unexpected system failures.

3. High Maintenance and Support Costs

Apart from increasing time needed (up to 25 hours per week) for fixing glitches of legacy systems, companies also face inevitable expenditure overruns. The cost of maintaining legacy software for IT departments amounts to $40,000 annually. Sure, incidents and outages may happen even with a modern system, but it may take less than an hour to get it back on track, which is more budget-friendly.

The labour costs for maintenance and support are also increasing, as across industries, IT departments spend 17 hours weekly on the recurring tasks related to legacy software. Their volume often drains out the team’s effort that could be directed to high-value tasks. More importantly, obsolete systems exhaust budgets of companies willing to move forward with innovations, but unfortunately, are still not ready to say “adieu” to them. By now, 65% of businesses each year allocate over $2 million for the legacy infrastructure maintenance and support.

4. Complicated Compliance with the Newest Regulations

Such costs commonly surge when a new regulation comes into force and IT teams have to prepare for and mitigate possible incidents and disruptions. There are many on the surface today – DORA (Digital Operational Resilience Act), NIS2 (Network and Information Security Directive), AI Act, PSD3 + PSR, etc.

Let’s take DORA, for example, which has become obligatory to comply with for financial companies, banks, investment and insurance firms since January 17. It requires organizations to ensure continuous monitoring, observability, incident reporting, and detailed IT risks documentation. Traceability of such incidents will be almost impossible to achieve with legacy platforms as they lack centralized logging, also complicating further IT audits. The team will need to almost rework the legacy tech stack to allow the legacy system to comply with regulatory updates like introduction of a new reporting duty or risk classification. For 92% of organizations, regulatory compliance is one of the reasons they venture into modernization of their legacy mainframe workloads.

5. More Resources and Rare Talents Needed

Reworking and overall support of such fragile systems will consume more resources, resulting in longer development times even for minor changes. Many mainframe applications are now considered legacy, relying on already obsolete languages like COBOL, PL/1, FORTRAN, Assembler, SPSS that fewer rare experts know. They have tightly coupled structure, lack agility, and do not integrate well with APIs, cloud-native apps, or automation tools. Mainframes are still critical for business operations of 89% of enterprises, being deeply ingrained in banking (accounting, credit scoring, batch processing), insurance (policy administration, claims processing), government (tax systems, customs, border control), retail (inventory and warehouse), etc.

Transitioning from mainframes to the cloud or on-premises is still less popular among organizations (only 36% of workloads are moved from mainframe to modern tech stacks). However, the good news is that more and more organizations are planning to use mainframes as part of their hybrid infrastructure, either modernizing them (refactoring to Java or C#) or integrating them with cloud solutions.

6. Complicated Integration with a Variety of Modern Solutions

The latter option of integrating legacy systems like mainframes with current modern cloud platforms, AI solutions, automation tools, analytics, or cybersecurity tools may open an array of complexities. Most dated systems (mainframe or on-prem) do not expose APIs or support modern two-way communication protocols for secure data access like RESTful APIs, OAuth2, JSON, WebSockets, etc. Not to mention such systems’ dependency on outdated protocols no longer supported by most modern apps. In this case, integration will need custom-built connectors that would incur more costs and may also create hidden vulnerabilities.

7. Poor data management and limited data analytics options

The most overwhelming challenge legacy systems pose are their data silos. Having different formats and being kept in heterogeneous sources, operated with different logic, and having unstructured logs make access to such data elaborate, while data mapping would be labour-intensive and frequently prone to errors. Many traditional enterprises are almost terrified to retire their mainframe systems that may cause the loss of essential data for their operations.

Besides, some may not even know how to do so due to the intricacy of their old software and code while staggering 79% of IT decision makers say they cannot update some undocumented data pipelines as it may lead to major disruptions.

Many legacy applications utilize batch processing and are incapable of coping with real-time data processing, having disparate data storages and lacking the ability to analyze big volumes of data rapidly.

Other Signs and Challenges to Be Aware of

There are many other liabilities associated with legacy systems and if you decide not to modernize them, at least you should always mind possible dangers and prepare to mitigate major incidents:

• Absence of software vendor support: when there are no updates from an official vendor, you may soon face compliance and security hurdles, as the system is now open to exploits. To safeguard it, you will need custom patches, fixes and still it may not work smoothly with modern apps.
• Inability to scale on demand and respond to market changes: the volatility of today’s markets make legacy systems absolutely unprepared – they are commonly incapable of elastic scaling, require manual handling of traffic spikes and hardware provisioning.
• Longer time-to-market: Rolling out new features with legacy systems is often complicated due to their outdated codebases, as well as non-modular structure, and often manual testing since many automated tests cannot be applied to them. Dependencies often suggest risks not only to one module if it crashes but also to other ones.
• Aggravation of user experience: legacy systems were built to last and not to adjust to customer’s demands. Their UX/UI interfaces lack responsiveness, personalization, mobile optimization and cross-platform compatibility.

To Sum Up

Clinging to the legacy systems would impose even more challenges, draining your resources, exposing you to vulnerabilities and risks that often impede growth and lead to business disruptions. If any red flags sound familiar, it’s time to retire your legacy system and reap modern IT infrastructure benefits. To achieve those, consult with Svitla Systems as an experienced digital transformation partner for businesses aiming for resilience, agility, and innovation. Contact us to start that journey light and easy with us.