Legacy software modernization: What it is and why your business needs it

Technology is a critical driver in achieving companies’ strategic goals, contributing to as much as 71% of the value derived in business transformation. However, the blazing-fast pace of technology advancements pushes organizations to innovate to meet the demands of the modern business environment. Dell’s study indicates that over 50% of business leaders struggle with outdated technology, which fails to provide the agility and speed required to keep up with the market dynamics. 

This article will serve as a guide for IT professionals and business leaders, explaining the intricacies of legacy system modernization. 

So, let’s jump in.

Software ages. No matter how modern and well-developed it is today, it may become obsolete in a few years or even months. The reasons range from the programming languages approaching the end of their support lifecycle to new, better solutions appearing on the market. Failing to keep up with these technological shifts may lead to falling behind peers, compromised security, a lack of flexibility, and higher maintenance costs.

But what is the right time to update legacy software?

Here, we’ve gathered six main signs indicating your software has already become obsolete and needs modernization.

• Outdated tech stack. Even the most popular programming languages may go out of use (this happened to Cobol, Erlan, and Perl). If your software relies on obsolete programming languages, frameworks, or libraries, you might find it challenging to maintain and integrate with a newer tech stack. A 2022 IDC study reveals that 88% of organizations are hindered by using legacy technologies.
• Inefficient performance. Slow response times and frequent crashes show your software can’t meet the demand. Such performance issues affect your software’s reputation and may cause user churn.
• Technical debt. Operating outdated systems as a cost-saving measure may accumulate technical debt. In the long run, too many workarounds, hotfixes, and patches may hinder the system’s adaptability and consume much development time. Studies indicate that the average organization spends 23 – 42% of its development time dealing with technical debt.
• High maintenance costs. When the cost of maintaining and troubleshooting the software surpasses the benefits or value it provides, it indicates that the system may be outdated and no longer aligns with your organizational goals. This can impact your software’s return on investment (ROI) and drain your budget and development team’s time. For example, in 2023, U.S. government agencies collectively spend a staggering $337 million each year on operating and maintaining legacy systems, some of which are half a century old.
• Limited scalability. If your software struggles with rising or variable workloads or demands, it may hinder your app performance and result in glitches or downtime. In the long run, this constraint may affect your software’s overall capacity, limiting potential growth and expansion.
• Inhibited adaptability. When your application becomes rigid and difficult to accommodate changes, it’s one of the signs it’s already outdated. And as your organization evolves, legacy apps may encounter issues adapting to new business processes, regulations, or customer demands. For instance, a 2023 Deloitte report highlights that legacy tech hinders Zero Trust adoption, with 44.6% of C-suite and other executives acknowledging this concern.

If you notice at least two of these signs, there is a high chance your software needs legacy transformation. Migrating to a newer tech stack can open the door to adopting the latest innovations and following software development trends. But that’s only the icing on the cake. Let’s dive deeper and uncover other benefits legacy software modernization can bring your company.

In 2023, Statista revealed that more than 50% of companies identified increasing security and improving efficiency as primary motivations for modernizing their legacy applications and data. Close behind considerations such as cost reduction, seamless integration with modern tech stack, and increased agility and flexibility.

Let’s look at the key benefits of legacy system modernization.

• Increased security and compliance. Modernizing legacy applications can improve security by timely patching vulnerabilities and implementing forward-facing security best practices before regulations demand them. As a result, you can protect your organization from data or regulations breaches and associated penalties, legal liabilities, or reputational damage.
• Improved efficiency and performance. Upgrading software can enhance operational efficiency, making it easier to scale and manage workloads. Modernization allows you to use cloud computing, load balancers, modern caching systems, and containerization and orchestration tools to enhance system scalability and performance.
• Cost savings. Legacy software modernization helps you reduce operational expenses. IBM emphasizes that successful modernization brings significant benefits, including a 14% increase in annual revenue and a substantial 30%–50% reduction in application maintenance and operational costs.
• Better integration with modern technologies. Legacy software modernization can improve your system’s integration capabilities by adopting modern architectural approaches. This will help you employ advanced technologies like Gen AI or ML-based automation and stay on top of software development trends.
• Enhanced customer experience. Legacy applications often have outdated and complex user interfaces that may frustrate or alienate customers. Modernization can enhance customer experience by improving the usability, functionality, and look and feel of your application. This can help you attract new customers and increase loyalty and user satisfaction with existing ones.

Now that you know when and why to modernize, let’s examine the most popular strategies for upkeeping legacy systems.

Contrary to popular belief, legacy software modernization doesn’t necessarily involve replacing an application entirely. Instead, it focuses on revitalizing it to align with your current company needs and standards.

Gartner recommends seven essential strategies for modernization, categorizing each option based on the ease of implementation and its impact on system and business processes. The easier the implementation, the lower the risk and impact, and vice versa. Additionally, there is an option focused on retaining the existing system without significant changes.

Let’s take a look at each strategy and what they encompass.

Retaining

A so-called wait approach is suitable for companies that have recently built or modernized their legacy software and thus don’t need to upgrade it immediately. In this and similar cases, the ROI for modernizing legacy software may not justify the effort, so companies can just monitor the industry to keep up with the pace.

However, persisting with this approach for too long can cause the software to lag behind its peers and lose flexibility.

Encapsulating

This modernization approach allows you to preserve your legacy software by isolating it from the rest of the system and developing new modules using a modern tech stack. Encapsulation facilitates more straightforward integration with other systems and supports a gradual transition to modern architecture.

The process involves creating a modernized layer around the legacy application, where services and components are decoupled from the monolithic code base and rebuilt into microservices. Encapsulating old software is particularly valuable when it contains essential business logic you want to retain or when a complete overhaul is not feasible due to cost or risk considerations.

Rehosting

This approach encompasses legacy system migration to a different environment or infrastructure (e.g., from on-premises to a cloud platform) as-is, with minimal or no changes to its code or functions. Rehosting is often referred to as a “lift and shift” migration since the core infrastructure remains the same, but it lets your software benefit from cloud-based resources.

While it can improve availability and performance, rehosting doesn’t let you fully leverage the modernization potential. It may not address the security, quality, or functionality issues of the underlying application and may still require further modernization efforts.

Replatforming

Replatforming goes beyond rehosting. It involves making moderate changes to the legacy application’s code, configuration, or data to ensure a smooth migration to a different cloud platform or infrastructure. As a result, you can get quick performance improvements and enhance application scalability.

This option is mostly suitable for applications hosted on-premises or when their current cloud platform doesn’t meet the company’s demands. For instance, migrating VMs to containers can positively contribute to the system’s maintainability and cut costs.

Refactoring

This approach involves restructuring and optimizing the current code without changing its external behavior. It offers “quick wins” by reducing risks and improving IT efficiencies (e.g.,  eliminating technical debt and enhancing nonfunctional attributes such as performance, reliability, or maintainability). 

Refactoring is a fitting choice for companies seeking to improve their software’s quality, stability, or scalability. However, refactoring may also introduce new bugs, errors, or dependencies, so doing it right requires extensive testing and verification. 

As the codebase grows, there is always room for improving or optimizing features. At Leobit, we suggest performing regular code reviews and refactoring sessions to keep the codebase clean and up to date.

Rearchitecting

This legacy software modernization approach involves a comprehensive code redesign to shift it to a new application architecture (e.g., microservices, serverless, or event-driven architecture) to align with modern standards and leverage better capabilities.

Rearchitecting is ideal for applications that need to transform their functionality or user experience.  It’s the most effective when the technology used to build the system is modern (e.g., .NET, Flutter) despite the application itself being old. However, this option may demand substantial investments of time, money, and skills. Due to the potential high risk of failure or disruption, we recommend adopting a phased approach.

Rebuilding

This strategy involves redesigning or redeveloping the application from scratch while preserving its scope and specifications. It involves incremental modernization, taking one functional block at a time, rebuilding it using new technology, and deploying it as a separate application. 

When rebuilding your legacy application, you can also encapsulate old data and functions and make them available via an API. 

Rebuilding is a low-risk approach that allows you to transform the entire system concurrently with developing new features. It suits companies who want to adopt new technologies, standards, or paradigms without disrupting business operations. However, it may entail a complete loss of the existing code, data, and functionality, necessitating your dev team to adopt a thorough analysis and design process.

Replacing

When your legacy application doesn’t meet your current business needs, you may need to completely replace it with new software. While this strategy provides a fresh start, it poses the challenge of potential disruptions during the transition.

Replacing the application with a new one requires simultaneously considering new requirements and current needs. This option is suitable for applications that are no longer relevant, useful, or viable and can’t be modernized by any other means. As it implies a radical change in business processes and workflows, replacing it requires a careful evaluation of alternatives and trade-offs. Proper planning, management, and iterative development are essential for successfully implementing this strategy.

With so many options and the ability to combine them, selecting the right legacy modernization strategy may seem challenging. Choosing the right approach depends on the specific context, objectives, and constraints of your company and your software application. 

How should you approach legacy software modernization right?

Gartner suggests conducting a three-step evaluation to determine which modernization approach would have the highest effect and value on your software.

• Step 1. Evaluate your legacy system based on six key drivers: business fit, business value, agility, cost, complexity, and risk. To do that, assess your company’s goals, the current state of your legacy system, and the outcomes you want to achieve. If your application fails to meet these, there is a high chance you need to modernize the legacy system.
• Step 2. Once you identified the bottlenecks and challenges of your current software, you need to compare the modernization approaches we outlined above using seven criteria: purpose, effect, value, cost, risk, impact, and ease of implementation.
• Step 3. Select the modernization approach that can solve the identified issues with the fewest risks and the highest effect and value.

As you embark on the transformative journey, you may encounter challenges and pitfalls, even when choosing the best applicable modernization approach. Knowing what may hinder your legacy software transformation will help you be prepared and ensure a smoother and more successful modernization process.

Potential Challenges of Modernizing Legacy Software

Modernization often disrupts established routines and processes. Depending on the current state of your software and desired outcomes, the positive transformations introduced by modernization can also come with specific challenges.

Here are some of them.

Costs and uncertain ROI

Depending on the project’s size, complexity, and scope, modernizing legacy software can become costly and lengthy. Your organization may face difficulties estimating the costs and benefits of the modernization and measuring the ROI. This can create uncertainty and hesitation in initiating or continuing the modernization process. 

To overcome this challenge, you should start by conducting a thorough cost-benefit analysis, prioritizing the most critical and valuable features, and monitoring the progress and outcomes of modernization.

Data loss

Data is a crucial asset for any company, and the risk of losing it during modernization poses severe concerns. Data loss can result from errors, corruption, or misalignment in the data migration or transformation. 

To mitigate this challenge throughout the modernization process, your company should:

• Conduct a thorough data analysis
• Implement robust backup and restore mechanisms
• Ensure rigorous quality assurance

These actions will help you safeguard your data from leaking or loss.

Business disruption

The modernization process can potentially disrupt existing business processes and workflows that rely on the legacy system, impacting productivity, efficiency, and overall organizational quality. 

To navigate this challenge, a strategic approach involves mapping the current and future states of business processes, identifying gaps and dependencies, and gradually and iteratively implementing changes. This phased implementation helps mitigate disruptions and ensures a smoother transition during modernization.

Security gaps

Modernizing legacy software introduces the system to emerging security threats, including cyberattacks, data breaches, or unauthorized access. Additionally, the updated system may be required to comply with stricter and evolving security standards and regulations such as GDPR, HIPAA, or PCI DSS.

To tackle this challenge effectively, the organization should adopt a security-by-design approach, implement robust encryption, authentication, and authorization mechanisms, and conduct regular security audits and assessments.

Technical debt

Technical debt represents the accumulated cost of rework or maintenance resulting from shortcuts or suboptimal decisions in software development. When modernizing legacy software, there’s a risk of increasing technical debt as the new system may inherit flaws, bugs, or vulnerabilities from the legacy system or introduce new issues. For instance, recent studies indicated that CIOs allocate 10-20% of their new product technology budget to address existing issues associated with technical debt.

Depending on the size of the technical debt, you may need to consider refactoring, rearchitecting, or rebuilding the system. Additionally, adopting best practices, standards, and tools for software development is crucial in managing and minimizing technical debt during the modernization process.

Integration issues

Connecting a new system to your legacy infrastructure may pose compatibility, data migration, and interoperability challenges. The complexity increases when dealing with diverse endpoints or various data standards and formats like JSON, XML, or X12. 

The best options would be either rewriting data using a new format or working with the existing data by encapsulating it.

Lack of in-house skills

Modernizing legacy software demands specific skills and resources that your company may lack. This shortfall can lead to delays, errors, or even failures in the modernization process. For instance, in 2023, 33% of large UK companies identified a shortage of tech skills and legacy IT systems as critical factors contributing to delays in their digital transformation initiatives.

You can address this challenge by involving external expertise — through outsourcing your custom software development or hiring a dedicated team to complement your in-house capabilities and ensure a more successful modernization journey.

Custom software modernization is an integral aspect of the software development lifecycle, often driven by the emergence of new technologies and cost-effective solutions that may help enhance system performance, improve ROI, and keep up with market demands. 

Modernization isn’t a sporadic action you must take every few years; it’s an ongoing process that requires regular system maintenance to ensure smooth business continuity. When performed timely, it minimizes disruption to your business processes and contributes to maintaining an efficient software solution.

Each software modernization approach has pros and cons and may apply to a particular use case. Partnering with an experienced software development company can remove this burden and help you achieve the biggest value with minimum disruptions.

Contact us, and we’ll gladly consult you on legacy software modernization.