Legacy System & Technical Debt - What is the Cost If We Don’t Fix It?

Legacy systems are a major cost driver for organizations, yet many businesses opt to retain these aging solutions. Taking a cue from McKinsey’s financial analogy, let’s explore how legacy systems contribute to technical debt.

Technical debt comprises two elements: principal, which encompasses the effort to modernize the technology stack, and interest, representing the complexity tax incurred by navigating fragile integrations and workarounds, collectively impeding productivity and impacting budgets and ROI. Businesses relying on legacy systems overlook an important caveat. The longer a company clings to legacy systems, the more it invests in keeping them alive, to the point where the cost of maintenance surpasses that of an upgrade.

The decision to retain these systems often stem from the seamless continuity they seem to provide in daily operations. There is also a perception that maintaining legacy system is cheaper than upgrading it to modern alternatives. But the data shows otherwise.

A survey by McKinsey revealed that CIOs allocate about 10-20 percent of their technology budget (dedicated for new products) to addressing technical debt. This allocation is driven by the pressing issues related to legacy systems:

1. Legacy systems, with their outdated code and architecture, consume a considerable share of resources for issue resolution, updates and upkeep. Some organizations see their annual maintenance costs increase by up to 15 percent, causing significant financial strain.
2. Beyond the apparent financial implications, hidden costs of legacy systems permeate various facets of business. These include challenges related to data security, customer experience, performance issues, and more.

The downsides of accumulation of technical debt are manifested through higher operational and technology expenses, slower time-to-market, and reduced adaptability. Effective technical debt management is essential for long-term viability, as mishandled technical debt can impede competitiveness. This significantly impacts a business’s bottom line and its ability to adapt and innovate.

1. Maintaining legacy systems is resource-intensive and could become challenging as skilled professionals for these systems may become scarce. This could lead to integration challenges with new tools, and some legacy systems may require special licensing, adding complexity and costs for businesses.

2. Due to their outdated technology, legacy systems lack essential security features, making them vulnerable to cyber threats. The resulting security breaches or system compromises can lead to reputational damage and financial losses.

3. Adding to the escalating costs are frequent breakdowns and time need to restore legacy systems. These systems also drain resources from other business areas, causing inefficiencies, higher labor expenses, and financial limitations, which lead to delays and errors in introducing new products or services.

4. Legacy systems often don’t meet modern compliance standards, making it difficult to stay in line with evolving regulatory requirements. This non-compliance can result in legal issues, fines, and disruptions to business operations.

Legacy Application Modernization With Compage

Addressing these challenges require legacy modernization, with one essential approach being app modernization. App modernization ensures individual applications are brought up to date, enhancing efficiency, aligning with modern technology standards and security. This is where Compage comes into play.

Compage, with its advanced capabilities, automates backend development ensuring efficiency and precision through auto code generation. The platform enables teams to adopt modern, secure programming languages, enhancing the resilience and reliability of their software. Additionally, it fortifies the security of software supply chain, facilitating compliance and safeguarding against vulnerabilities. Its seamless integration with containers and Kubernetes makes it an ideal choice for businesses adopting cloud native.

Opting for legacy application modernization with Compage yields several benefits for organizations. It significantly accelerates the development timeline, allowing for faster go-to-market strategies while also reducing costs. Enhanced security and compliance measures ensure data protection and regulatory adherence, and also enables software supply chain security measures. When talent shortage has become a huge concern for organizations, Compage standardizes the development process to bridge skill gap and elevate code quality, and in turn helping teams tackle technical debt.

Learn more on how Compage can assist you on your app modernization journey by filling out our contact form. Be sure to follow us on LinkedIn to stay updated with insights and product capabilities.