Application Modernisation

Battling high IT costs and rigidity

21 May 2019
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Reading time: 5 minutes

Legacy systems are a major challenge for many businesses. It’s important to avoid making mistakes when updating these applications.

Many companies are finding it increasingly difficult to earn money from their core business. Margins are under pressure, increasing regulatory requirements are making processes more complex and, at the same time, staff and customers are becoming steadily more demanding. It’s a massive challenge! Businesses and their managers therefore want to become more efficient, develop new revenue streams and business models, and strengthen customer focus.

They usually have ideas about how to do this, too. And IT almost always has a crucial role to play if changes are to be implemented as quickly as possible, because existing systems are often unable to support a speedy implementation. The question then facing decision-makers is: ‘Do we need to completely replace our old systems with new technology?’ In many cases, the answer to this is : ‘We can’t do that because it will take too long and we’ve already invested too much in the existing system.’

Overcoming historic issues and dilemmas

Legacy systems are also always an asset. They are reliable, stable and a mine of valuable content and data (even if a business isn’t always making the most of it). They also often represent part of the history of a company and its employees and are perceived as a USP. However, legacy systems can also be a burden. It is not easy to replace them and doing so is usually a very complex matter. Such projects often fail because they are approached in the wrong way. Companies may not be ready to face up to the reality of their situation, or they choose an option that is a little too easy.

The decision-makers often find themselves confronted with a dilemma. The more money has already been spent on a system, the harder it is to convince management or the Board to make further investments to adapt the solution to meet future needs or even replace it altogether. Moreover, this may give senior management the impression that mistakes were made in the past and that the wrong technologies or solutions were implemented.

However, that is generally not the case. Managers can often move forward in good conscience. This is because technology has evolved rapidly in recent years. And so have business software, architectures and systems. Since the introduction of what are now legacy systems, customer needs have also changed and the competition has evolved, too. Decisions that now seem inappropriate, or even appear wrong, probably made a lot of sense just a few years ago.

Reducing hidden costs and dependencies

Another question that arises in this scenario is how investment protection, new investments and the risk of a full system replacement relate to one another. After all, the system is still operating, there are no issues with supplier relations, and staff know how to operate and use it. In this situation, it can help to view things from a different perspective. What are the risks involved in clinging to outdated technology? How well-protected is the current application environment against cyber attacks? Is there a risk that innovation will stagnate?

Even the cost issue is often not as clear-cut as it first appears. It is becoming increasingly expensive to run outdated systems, leading to dependence on individual employees or external service providers. Furthermore, it is impossible to achieve potential cost savings because, for example, the existing solution is not cloud-enabled.

Waiting is not a solution

Waiting does not reduce risks or costs over time. So, if there is no way around updating an existing system, it brings us back to one of our original questions: does innovation mean completely replacing old technologies with new ones? Is it better to throw everything away and buy or build something new – or upgrade the existing system?

Technology develops at a rapid pace, and it can be tempting to replace everything. Yet, for many organisations, existing legacy systems are business-critical for day-to-day operations. The entire organisation and its processes are often aligned with the existing system, and new applications are built upon it. In many cases, replacing the entire ecosystem would be counter-productive and highly risky.

But there is another way: a combined approach, in which the benefits of the existing system continue to be used (at least temporarily) and adapted to the new circumstances.

In the vast majority of cases, it does not make sense to replace everything at once. It is better to break the seemingly huge problem down into manageable parts and approach each of them one at a time, prioritising tasks according to business needs. With this approach, it is also important to keep the overall business architecture in mind and make decisions that benefit the whole company.

An external opinion can help

It can be extremely helpful to involve an external partner in this process – one with experience in such projects and the ability to lead it. The first step is to evaluate the system or the system environment. This will clarify the situation for individual applications or even the entire application environment, including in the context of corporate goals.

The next step is to define how the application(s) can be adapted to best meet future business and customer needs. From the very outset, high priority should be given to the business case – this is the only way to achieve sustainable success.

Managing Director Business Development

Sibylle Kammer

Senior Business Solution Manager

Regina Dietiker

Senior Business Solution Manager

Stefan Novoszel

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