Does your organization use legacy systems for some (or all) of your business functions? If so, they may be costing you more than you think.
Today, we’re discussing the cost of maintaining legacy systems. We’ll outline all the costs you should consider when deciding whether to replace these systems with more modern enterprise software, like an ERP system, CRM system, or supply chain management system.
What is a Legacy System?
Before analyzing the cost of legacy systems to your business, you must understand exactly what a legacy system is. The term “legacy system” refers to any piece of hardware, software, or other technology that is still functional but no longer as effective as it once was.
In other words, a legacy system is software or a tool that your business has relied on but is no longer considered modern. These outdated systems can limit your ability to work efficiently, especially when these systems are “integrated” with newer systems.
These integrations are typically not full integrations as legacy systems often do not play well with newer systems. As a result, your company has probably been using roundabout and costly ways to automate processes that would be more straightforward with newer technology, like one of the systems on our top 10 ERP software list.
The 2024 Top 10 ERP Systems Report
What vendors are considering for your ERP implementation? This list is a helpful starting point.
What is the Real Issue with Legacy Systems?
Regarding legacy systems in your business, there is really only one crucial question: Is it more expensive to keep the system or replace it?
The main issue that companies run into when dealing with legacy code is that it can be challenging to quantify how much they are spending to maintain it. This is because, alongside the surface costs of maintaining old code, there are many hidden costs that companies may not immediately associate with their legacy systems. (According to the Government Accountability Office, ten of the federal government‘s legacy systems cost around $337 million of taxpayer money every year to operate and maintain.)
To determine the actual cost of maintaining legacy systems, you need to consider all the expenses associated with the systems, not just the easy-to-identify ones. To help you do so, we have outlined the surface and hidden costs of legacy systems below. You can use this list to help you decide whether maintaining your current legacy systems is worth your resources and efforts.
The Surface Costs of Legacy Systems
There are a few costs that are obviously associated with maintaining legacy systems. Your team is probably already considering these costs when looking at the overall cost of maintaining your legacy systems.
1. Technical Debt
The first and most obvious cost of maintaining legacy systems is the technical debt that they create. As you continue to pile new resources and code into a system that is outdated, you are bound to incur many glitches, bugs, and other issues that will cost time and money to address.
2. Ongoing Maintenance
The next cost of maintaining legacy systems is simply the number of resources that you need for general maintenance. Legacy systems tend to be much more prone to failure. This means you need to spend more time and energy performing upkeep and ensuring the system does not fail.
3. Tech Support
When you are using an older system, you need to find professionals who can effectively operate that system. This means that you either must spend more time and energy training tech support professionals to use your system or hire very particular tech support professionals who have experience with your legacy system. This can get very expensive, especially as your legacy system continues to become more obsolete.
4. Special Licensing
Another surface cost of legacy systems is the need for special licensing. When a system is outdated, the vendor that created it may simply discontinue it. Unfortunately, this means licensing for that particular system is no longer readily available to the public. If you are using a legacy system that has been discontinued, you are probably paying extra to continue using it.
The Hidden Costs of Legacy Systems
As mentioned above, surface costs are not the only area where your business could lose money while maintaining legacy systems. Numerous hidden costs also come with maintaining these systems.
1. Employee Burnout
The first hidden cost is related to employee retention. If your employees are continuously dealing with issues that come with outdated systems, they are much more likely to experience burnout and look for different jobs.
2. Data Security
Another hidden cost of legacy systems is their lack of security. The simple truth is that technology evolves to become more secure. Unfortunately, this means outdated systems and tools are less secure than newer ones. Since your business almost definitely handles some form of confidential information, security is critical. Even with a plethora of resources put into improving cybersecurity, an outdated system can be challenging to secure, putting you at risk of losing your data.
3. Frequent Downtime
System crashes happen when you use technology that is prone to glitches and errors. Legacy systems are much more prone these errors than newer systems, and they experience more bugs than updated systems do. This increases the likelihood that you will experience periods of downtime.
4. Missed Opportunities
A lot of growth for businesses today is correlated to their ability to work well with other systems, whether these be internal systems or systems of a supplier or other partner. As noted, legacy systems may not effectively integrate with more advanced systems. This means you are limiting your company’s ability to grow.
5. Lackluster Customer Experience
If your employees are frustrated with your legacy systems, your customers may feel similarly. Businesses today cannot afford to sacrifice customer satisfaction because if customers are unhappy with your user interface, they can easily engage one of your competitors.
Which Systems Should You Replace?
Now that you have seen all the ways your legacy systems could be costing your company time and money, you may wonder if it is wise to upgrade. Truthfully, the decision of whether to upgrade is unique to your business needs, but typically the answer is “yes.” Legacy system costs compound over time, so it’s smart to upgrade or replace your systems before you spend even more money trying to maintain ineffective systems.
Our ERP selection consultants can conduct a technology assessment to determine which of your current systems need to be replaced. Then, we can help you through the ERP selection process. Contact us below for a free consultation.