A Complete Guide on Software Modernization: Why, When, and How To Modernize Your Solution

According to the KPMG Global Tech Report 2024, 74% of organizations plan to invest in new technologies over the next 12 months rather than enhancing the value of their existing tech stack. The desire to adopt AI, automation, and other emerging technologies often distracts companies from addressing flaws and technical debt in their current systems.

As a result, outdated infrastructure and unresolved issues frequently block the successful adoption of new tools and undermine transformation progress. In fact, the same report notes that 57% of organizations face weekly disruptions caused by flaws in their foundational IT systems. That’s a clear sign that software modernization should be a priority.

To fully leverage AI and other advanced technologies, businesses must first ensure their systems are up-to-date, secure, and adaptable. This guide will walk you through the essentials of software modernization: why and when it’s needed, the signs your system is becoming obsolete, the approaches available, and real-life examples of successful transformations.

Software modernization is the process of updating, refactoring, or rebuilding applications to make them more efficient, secure, and compatible with modern technologies. It involves replacing outdated frameworks, architectures, and infrastructure with current, future-ready alternatives, without necessarily discarding the entire system.
IT modernization can take many forms. It can be:

• Upgrading frameworks and libraries (e.g., migrating from AngularJS to Angular, or from .NET 6 to .NET 9)
• Refactoring code to improve maintainability and performance
• Rearchitecting applications using cloud-native or microservices approaches
• Migrating to the cloud to enhance scalability and reduce costs
• Replacing or rebuilding systems that are too outdated to adapt

The final goal of software modernization is to extend the lifespan and value of business-critical applications.

Software is never static. Even the most robust and well-architected systems require ongoing upkeep to stay relevant and secure. Without regular updates, you risk relying on technology that slowly drifts into obsolescence and becomes a barrier to innovation.

Why is software product modernization necessary?

Here we’ve gathered several main reasons to modernize your software.

First of all, every framework, library, and platform has a lifecycle. Vendors regularly release new versions to enhance performance, introduce new features, resolve bugs, and address security gaps. Eventually, older versions reach their “end of life,” meaning they no longer receive updates or support.

At this point, continuing to run an unsupported version exposes your company to security risks due to unpatched vulnerabilities and compatibility issues with newer tools and platforms.

That is exactly what happened to Xamarin and Xamarin.Forms, which reached the end of support in May 2024. Applications built on these frameworks no longer receive updates, fixes, or security patches, which makes them an easy target for cyber threats.

According to Statista, 58% of companies cite enhanced security as the primary driver for updating legacy systems. It comes as no surprise since outdated technology can more easily be exploited by malicious actors. Google’s study “Security at a tipping point” proves this point, with 59% of global security leaders acknowledging that legacy systems leave them unprepared to manage today’s security challenges.

A real-world example of how unpatched software vulnerabilities can lead to disaster is a massive data breach at the UK Electoral Commission. It resulted in the disclosure of approximately 40 million individuals’ personal information. Investigators later confirmed that basic technical and organizational safeguards were missing, and the vulnerabilities stemmed directly from unsupported, unpatched software.

The issue is further exacerbated by the fact that 62% of global security decision-makers say they expand their existing security tools instead of replacing them with modern, integrated solutions. While layering new tools may seem like a quick fix, it rarely resolves the fundamental problem: legacy software that was never designed with modern, secure-by-design principles.

Legacy software modernization addresses these risks by embedding security into the core of applications, ensuring compliance with evolving regulations, and reducing exposure to costly breaches.

Legacy systems are expensive to maintain and consume a disproportionate amount of IT budgets. According to Deloitte, CIOs are already spending 10–20% of their budgets just to maintain outdated systems. These hidden costs drain resources that could otherwise be used to fund growth and transformation.

Custom software modernization directly addresses this problem. By replacing or rearchitecting aging systems, you can significantly reduce ongoing expenses. IBM research highlights that, when handled right, application modernization can lower application maintenance and operating costs by 50%.

Generative AI is all the rage now. However, legacy systems often lack the necessary architecture, APIs, and performance capacity to support AI integration.

For example, applications built on AngularJS, which reached the end of long-term support in December 2021, struggle to integrate with modern AI frameworks. AngularJS lacks support for current JavaScript standards, TypeScript, and modern module bundlers, which makes it difficult to connect with cloud-based AI services or ML libraries.

Similarly, outdated mobile frameworks such as Xamarin.Forms are not designed to integrate efficiently with cloud-native AI APIs or edge computing services. Without migrating to supported frameworks like .NET MAUI, companies face compatibility issues and cannot embed intelligent features such as voice recognition, predictive analytics, or real-time personalization.

Software modernization is most effective when it happens alongside your software growth. However, according to the latest RedHat survey, only 18% of companies have made it a continuous process.

As systems age, they begin to show clear warning signs that indicate your technology is holding the business back.

If you start experiencing some of these signs, it’s likely that your software has already begun to slip into obsolescence. At this stage, maintenance costs typically rise, and your ability to integrate with modern tools decreases. If you ignore these issues, they can soon escalate into system failures, decrease your performance, and lead to security problems. That’s why recognizing the early warning signals is crucial to planning a modernization strategy in a timely manner.

Jumping straight into modernization without a thorough assessment can lead to wasted investment. A technical audit provides a clear, data-driven picture of your system’s strengths and weaknesses. Thanks to it, you can avoid guesswork and make modernization align with your business goals.

A technical audit is a comprehensive assessment of your software system, its current condition, and potential risks.

The purpose of a technical audit is to:

• Identify technical debt and inefficiencies that contribute to increased maintenance costs
• Highlight security vulnerabilities or compliance risks
• Assess scalability and performance under current and projected workloads
• Evaluate integration capabilities with cloud services, APIs, and modern platforms
• Provide a roadmap for software modernization strategies (will cover it later in the article)

In short, a technical audit acts as the foundation for any modernization initiative. The insights gained from a technical audit enable you to determine whether incremental improvements are sufficient or if more substantial legacy system modernization strategies are needed.

For example, Leobit conducted a technical audit of a customizable SaaS platform used across various industries, including energy, logistics, and manufacturing. Our specialists analyzed the tech stack, architecture, codebase, and infrastructure to uncover inconsistencies and misalignments with the customer’s business goals.

We delivered a structured report with detailed recommendations, including a new tech stack and architecture, and validated our approach with several PoCs demonstrating the solution’s core functionalities. This gave the customer clarity on next steps and confidence to proceed with a module-by-module modernization roadmap.

Gartner recommends seven modernization strategies, often referred to as the “7Rs”. These approaches differ in their complexity of implementation and the level of change they introduce to systems and business processes. In general, the simpler the strategy, the lower the risk and business impact, but also the smaller the long-term benefit.

Let’s take a closer look at what each strategy entails.

The retaining strategy is essentially a “wait and see” approach. It works well for companies that have recently built or modernized their systems and therefore do not need immediate upgrades. In such cases, the return on investment from another round of modernization may not yet justify the effort. Instead, businesses can focus on monitoring industry trends and technological shifts to stay aligned with the market.

That said, relying on this approach for too long carries risks. Software that is left untouched can quickly fall behind competitors and accumulate technical debt. Even when you choose to retain, it’s important to establish a process of continuous monitoring and analysis. This ensures you can pivot at the right moment before small inefficiencies or gaps pile up.

Often referred to as “lift and shift”, rehosting is the process of migrating a legacy system to a new environment (e.g., cloud), without significant changes to the codebase. This approach allows organizations to quickly take advantage of modern infrastructure benefits like improved availability, scalability, and disaster recovery while keeping the core application intact.

However, rehosting has its limitations. Since the application itself remains unchanged, issues such as security vulnerabilities or architectural inefficiencies are not resolved. This makes rehosting more of a first step in modernization rather than a complete solution.

For instance, in one of our large-scale projects, we migrated client resources from the Azure message broker to an Apache-based alternative, which we then hosted on a dedicated server. This shift helped us reduce infrastructure costs and improve overall software performance. However, while rehosting delivered these immediate infrastructure benefits, the system’s size and complexity meant that it was not enough on its own to achieve the legacy application transformation the client required. So we continued modernizing the application.

That said, rehosting can be a viable standalone strategy for smaller projects, especially when the goal is simply to replace on-premises hosting with more flexible cloud solutions. A common example is moving from on-premises IIS hosting to Docker images in the cloud, which can reduce infrastructure management overhead and improve disaster recovery capabilities.

This strategy goes a step further than simple rehosting. It involves making moderate adjustments to the application’s code to better align it with the target environment. These targeted changes ensure a smoother IT infrastructure modernization, while unlocking immediate benefits such as better performance and simplified maintenance.

Replatforming is often best suited for applications that are still on-premises or those where the current cloud platform no longer meets business needs. For example, in some cases, migrating virtual machines (VMs) to containers can simplify deployment. Similarly, moving from legacy databases to cloud-native managed databases (like Azure SQL Database or Amazon RDS) can provide built-in auto-scaling and security features without a complete system rewrite.

By carefully balancing cost and value, replatforming delivers faster wins than refactoring while addressing more limitations than rehosting. It’s a practical middle ground if your company is seeking legacy system transformation without the heavy investment of a full rebuild.

Refactoring is the process of restructuring and optimizing existing code without altering its external functionality. The goal is to improve the system’s internal quality by reducing technical debt, and making the codebase more maintainable. Non-functional attributes such as performance, scalability, and readability also benefit from refactoring.

While it doesn’t deliver new features or dramatic architectural changes, refactoring provides important “quick wins”. Cleaner code makes it easier for developers to introduce future improvements, reduces the likelihood of bugs caused by complex legacy logic, and improves overall system stability.

However, this strategy requires careful planning and extensive testing, since even small changes to code structure can unintentionally introduce regressions. Regular code reviews and scheduled refactoring sessions are best practices to ensure the system doesn’t accumulate technical debt over time.

For example, our customer’s commercial real estate CRM had a monolithic architecture and required substantial improvements. Yet, due to time and budget constraints, our customer requested that we perform refactoring and make minimal system enhancements while continuing to build new features. To address this, our team reorganized existing interaction points and encapsulated legacy code into a separate unit. This approach enabled us to develop upcoming features on top of existing functionality with minimal dependencies on the outdated architecture.

Rearchitecting is a comprehensive redesign of an application’s architecture to adopt modern patterns such as microservices, serverless computing, or event-driven architectures. Unlike refactoring, which focuses on improving code quality, rearchitecting fundamentally changes how the application is structured and deployed.

This software modernization strategy is most valuable when the underlying technology stack is still viable (e.g., .NET), but the application’s design has become outdated. For example, monolithic applications often struggle to support high user loads or frequent feature updates. Breaking them down into microservices allows for independent scaling, faster deployments, and easier fault isolation. Similarly, in some cases, moving workloads to a serverless model can reduce infrastructure costs while enabling automatic scaling based on demand.

Rearchitecting is particularly effective when the goal is not just to modernize infrastructure but also to transform functionality or user experience. For instance, migrating to an event-driven architecture can enable real-time processing, integrations with AI/ML services, and more responsive user interactions.

A real-life example of rearchitecting comes from one of our projects, where a customer faced significant issues after migrating a legacy Android application from Java to Flutter without a proper architectural foundation. The app was plagued by glitches, poor functionality, and performance problems due to the lack of structure and adherence to best practices. Our team identified and fixed over 1,000 code issues, introduced proper architecture, and implemented UML diagrams, documentation, and unit/widget tests to ensure long-term maintainability.

By adopting the BLoC architecture for structure and scalability, and using a combination of BLoC and Cubit for state management, we converted the application into a stable, scalable, and high-performing cross-platform solution.

While the investment in rearchitecting is higher compared to legacy system modernization strategies like rehosting or replatforming, it delivers long-term agility and resilience, setting the foundation for future innovation.

This strategy involves redeveloping an application or its components from the ground up, while maintaining the original functionality, scope, and business rules. Unlike rearchitecting, which focuses on redesigning structure, rebuilding is about starting fresh with modern technologies.

Rebuilding is often used as an incremental software modernization strategy, when you take one functional block at a time, rebuild it on a new stack, and deploy it as a standalone service or application. For example, a legacy billing module might be rebuilt as a microservice using modern frameworks and connected to the old system through APIs. This way, the legacy system can continue operating while new components are introduced gradually.

One of the key benefits of rebuilding is that you can encapsulate existing data and business logic, expose it via APIs, and layer rebuilt components on top of it. This reduces the risk of a “big bang” legacy system migration and enables the parallel development of new features. Over time, the legacy codebase is replaced piece by piece.

Rebuilding is particularly suitable when:

• The existing codebase is too outdated or rigid to maintain
• The legacy application still serves a valuable purpose, but requires higher scalability, performance, or compliance with modern standards
• Organizations want to introduce new technologies (e.g., cloud-native services, containerization, or AI integration) without discarding their core business logic

For instance, one of our clients had a solution originally developed in the 1990s that required an upgrade to improve speed, user experience, and scalability. Our team rebuilt the system by transitioning its codebase from ASP.NET Forms to Angular 11.

Our UX designers revamped the interface and introduced new features. At the same time, Leobit’s engineers modernized API endpoints and adopted a cloud-native, multi-tenancy approach, allowing new modules to securely connect to different client environments in production. This gradual rebuild helped the client preserve critical functionality for the government and legal sectors while introducing new features and improving current functionality.

When a legacy application can no longer meet current business needs, replacement may be the most effective strategy. This involves developing a completely new system to replace the old one.

Replacement is generally suitable for applications that are no longer relevant, maintainable, or viable, and cannot be effectively modernized through other strategies like refactoring or replatforming. It requires careful evaluation, planning, and change management to ensure business continuity.

At Leobit, replacement is one of our software product modernization services. We often do it incrementally, replacing modules one by one. This allows users to continue working within a single interface, using older modules alongside newly modernized ones. Over time, as all old modules are replaced, the legacy application can be fully deprecated without disrupting operations. This method balances software development risks, continuity, and modernization speed, making full replacement feasible even for complex, business-critical systems.

In practice, companies rarely apply a single strategy. Based on Leobit’s experience, most organizations adopt a hybrid approach. After assessing the system, it’s often possible to break a legacy application into smaller components and apply different strategies to different parts. For example, some modules may only need rehosting, while others require deeper refactoring or a complete rebuild.

Industry research supports this trend. A Red Hat survey found that most companies pursue modernization in multiple steps rather than all at once. 47% of organizations plan to replatform applications before refactoring them, while 38% take a staged approach of rehosting, then replatforming, and finally refactoring. Among companies that treat modernization as a continuous process, this figure rises to 52%. Only 15% of organizations attempt a full refactor in a single step.

Modernization often goes hand in hand with cloud migration (or sometimes even cloud-to-cloud migration). Moving to the cloud enables companies to replace their on-premises infrastructure with on-demand resources, optimize operational costs, and utilize advanced cloud-native services, such as AI, machine learning, and serverless computing.

The 2024 Cloud Computing Study highlights that 29% of companies migrate to the cloud to accelerate the adoption of advanced technologies like AI and ML in the first place.

When companies migrate, they don’t always go all-in. Some companies shift selected workloads to the cloud while keeping others on-premises. Others adopt multi-cloud strategies or even migrate between cloud providers to gain better scalability or performance.

For example, a Norwegian startup (later acquired by a US-based indoor cycling hardware manufacturer) turned to Leobit when their monolithic IIS-based system on virtual machines could no longer scale with user growth. We migrated their solution to Azure infrastructure, introduced CI/CD pipelines with Azure DevOps, and restructured the system into separate services.

Over time, we containerized components using Docker on Linux-based machines and adopted a microservices approach, which significantly boosted scalability and resilience. These efforts enabled the platform to securely handle settings and data, streamline releases, and support a 15-fold increase in users, from 20,000 to 350,000.

No matter what legacy system migration strategy you choose, you’ll also need to decide how to approach modernization itself: either vertically or horizontally.

Horizontal modernization refers to upgrading your software layer by layer. For example, rewriting the front end first, then modernizing the back end, and finally migrating the database. While this can provide incremental improvements and spread investment over time, it often comes with a hidden drawback: legacy inefficiencies and outdated coding practices can be carried into the new layers. This creates technical inconsistencies and increases the complexity of integration between old and new parts of the system.

A good example of horizontal modernization comes from a project where our customer struggled with the performance of scripts used to collect and prepare data from multiple sources. Their solution relied on Azure SQL tables with stored procedures that aggregated and joined growing volumes of data, which were then sent to Google BigQuery for analysis. Over time, in-memory computations became a major bottleneck, taking more than 15 minutes to process just 270,000 records, with delays constantly increasing as new data was added.

After a brief investigation, the Leobit team redesigned the architecture to synchronize Azure SQL tables directly with BigQuery, which helped us eliminate the reliance on in-memory operations. This layer-by-layer modernization significantly improved scalability, resulting in a 96.07% decrease in processing time (from 15 minutes to 35.4 seconds).

Vertical modernization, by contrast, aims to upgrade an application feature by feature across all layers simultaneously. Instead of simply replacing technologies, this approach allows you to rethink the business logic and workflows behind each feature. It reduces the risk of inheriting previous insufficient technical decisions and helps you avoid tightly coupling old and new systems.

Both approaches can be effective, depending on your specific goal. Horizontal modernization works well when your system is stable and you simply need incremental upgrades (e.g., migrating to a newer framework version without altering the overall design). But if the goal is to innovate or significantly improve a specific part of your system, then vertical modernization is the better choice. It allows you to rethink functionality end-to-end and deliver real business impact.

One of the most important decisions in legacy software management is whether to modernize the existing system or rebuild it from scratch. Both approaches can deliver value, but the right choice depends on several key criteria.

In a nutshell, if your legacy system still provides business value but needs enhancements to remain competitive, modernization can be a go-to approach. However, if your system has reached its limits, both technically and functionally, and can no longer support long-term growth, rebuilding can be a better option. Based on Leobit’s experience in software modernization, adopting a hybrid strategy (e.g., modernizing certain modules while gradually rebuilding others) can be a great option to maintain your business’s competitive edge.

Our team brings extensive expertise in reengineering the architecture of high-load applications, which enables businesses to handle rapid user growth and data-intensive operations without compromising performance. We’ve delivered over 70 successful software reengineering and legacy modernization projects across various industries, including fintech, healthcare, logistics, proptech, and manufacturing.

As a Microsoft Solutions Partner for Digital & App Innovation, and with ISO 9001:2015 and ISO 27001:2022 certifications, we adhere to strict quality and security standards. Additionally, as an ISTQB Gold Partner, we bring advanced testing practices to ensure reliable and predictable results.

We provide end-to-end software modernization services tailored to your business needs, including:

• Legacy system modernization from incremental updates to full system overhauls
• Architecture reengineering, transitioning monoliths to microservices, serverless, or event-driven architectures
• Cloud migration and cloud-to-cloud transitions to optimize workloads for cost, performance, and scalability
• Performance optimization to eliminate bottlenecks in both front-end and back-end layers
• Code reconstruction and reverse engineering to improve code quality, reduce technical debt, and restore undocumented systems
• Technical audit to provide a data-driven foundation for modernization decisions

By combining proven methodologies with technical expertise, Leobit can help you select an optimal modernization strategy to maximize ROI.

Modernization is an inevitable stage in every software lifecycle. What was once innovative quickly becomes outdated, and the only way to stay competitive is to make software modernization a continuous part of your strategy.

Whether it’s refactoring to reduce technical debt, migrating to the cloud for scalability, or rebuilding features with modern architectures, choosing the right path depends on your system’s current state and your long-term goals. A thoughtful approach, backed by technical audits and clear roadmaps, ensures that modernization strengthens your software capabilities rather than simply replacing old problems with new ones. This is why having an experienced technology partner is critical.

At Leobit, we help businesses modernize with confidence by providing end-to-end services, from technical audits and performance optimization to architecture reengineering and cloud migration. Contact us and we’ll help you ensure your systems are ready to meet today’s demands and tomorrow’s opportunities.