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When to Modernize Your Legacy System: Telltale Signs and Best Practices

Or How to Pay Your Tech Debt With a Minimum Interest Rate

As per Synopsys research, the operation and maintenance of legacy software have contributed $520 billion to the total cost of poor-quality software ($1.5 trillion) in 2021.

According to Gartner, 72% of companies allocate separate budgets just to "keep the lights on" and maintain their out-of-date software systems.

A recent survey by RealWire has found that 87% of IT decision-makers believe legacy software exposes their business to cyber security threats and vulnerabilities. According to Snaplogic, organizations' overreliance on legacy systems will be the biggest barrier to digital transformation in 2022.

Legacy systems contribute a great deal to the accumulation of technical debt, whose elimination can be detrimental for any business’s top line if done incorrectly.

This article will explore when it’s high time for any organization to sound the alarm and consider modernizing their legacy software, what effective strategies exist and how to choose the right one with data protection, scalability, and the user in mind.


What is legacy software and why do businesses use it?

A legacy software system is an obsolete technology that is still used in business. Legacy systems often run for years, unable to meet the ever-changing customer demands and costing companies a fortune in maintenance. Many legacy systems no longer receive support from their vendors, severely limiting their efficiency and providing no business value.

As employees come and go, the expertise of legacy systems can deteriorate, which, along with the loss of documentation, increases the likelihood of critical system failures.

The criteria below serve as a checklist for determining a legacy system.

  • Your software system cannot meet the organization’s current and/or future business needs and market challenges.
  • You require software engineers with an obsolete/hard-to-find/expensive technology skillset.
  • Your system requires high maintenance costs.
  • Your system performance is poor: slow, unscalable, and redundant.
  • It isn’t easy to build new features due to no in-house expertise and talent.
  • Vendors no longer support the system.
  • Your legacy application isn’t compatible with custom big data, AI/ML, or IoT solutions.


A 2020 report from the U.S. General Accounting Office identified ten industries and verticals still heavily reliant on legacy software. Retail, eCommerce, and manufacturing top the list.

Common reasons for refusing to modernize obsolete applications include, but aren’t limited to the following.

  • System modernization can be expensive, often requiring significant up-front investment and capital expenditures.
  • New technologies can require costly and lengthy training programs to quickly get users up to speed.
  • Management is unsure which modernization strategy is best for their needs or particular business case.
  • Stakeholders fear time-lapse migration of outdated versions, data loss, and operational disruptions.
  • System requirements can be challenging to scale, overwhelming staff in decision making.
  • No buy-in from senior leadership in “traditional” non-tech-driven enterprises, especially if they’re slow tech adopters on a personal level.
  • Lack of awareness about cybersecurity risks posed by outdated applications.

When is it high time to modernize legacy software?

There’re telltale signs that your legacy application badly needs s serious upgrade. Here to name just a few.

Your legacy system is highly vulnerable to cyber security risks

Online security threats grow and become more sophisticated every day. Business is the favorite target of hackers because they have a lot to lose. Data – a real asset in any business – can be easily compromised if not properly secured. 

The Cost of Poor Software Quality In the U.S.: a 2022 Report by Synopsys found that in 2022, poor-quality software cost American companies about  $2.41 trillion. Legacy software and technical debt factored into that staggering amount, along with failed software development projects and cybercrimes caused by exploitable software vulnerabilities.

Today, there are so many threats that antivirus and security systems should be updated every day to ensure they never get hacked. For many businesses, it’s a must to have a dedicated team of cyber security experts to ensure corporate systems are running smoothly with a high level of protection. On top of that, to decrease software products’ exposure to cyber threats, it’s highly recommended that cybersecurity be embedded into the software design as early in SDLC as possible.

Actions like encrypting your data, using the correct channels to transfer data, and restricting access will save you money and protect you from many internal and external problems. However, it’s next to impossible to achieve a high level of security with legacy systems.

Your legacy system is no longer supported by its vendor

When a legacy system manufacturer goes out of business or discontinues supporting your legacy solution for other reasons, it’s just a matter of time before it comes highly inflexible, irresponsive, redundant, and vulnerable to threats.

Even if your system offers regular fixes and updates, they may not be enough to block the sophisticated tools used by modern cybercriminals.

Moreover, if you have legacy code, you will likely find this code very complex and difficult to read and understand. Legacy code is often referred to as “spaghetti code,” i.e., one that’s changed many times by different people over many years, hasn’t been documented properly, or doesn’t follow modern coding standards and rules. Such code leads to many errors and inconsistencies, causing bugs and issues, affecting usability, slowing down performance, etc.

In many cases, rewriting the entire code is the most feasible solution that will eventually cost you less than fixing the messy legacy code.

Your legacy software is incompatible with third-party solutions and is unscalable

Old technologies rarely integrate successfully with new ones. The combination of incompatible systems often creates loopholes that cannot be successfully overcome, opening up security risks for your business and slowing things down. It’s usually better to upgrade than try to piece together incompatible systems.

As the company grows, the functionality of a software solution changes. Software should grow and evolve at the same rate. One of the risks of retaining legacy software is that it may not adapt or expand to meet new business needs.

For instance, in the case of retail, legacy solutions are highly unscalable, meaning they can’t cope with the rapidly growing business audience. Once your business starts attracting thousands of users, the software should be optimized to handle massive traffic of concurrent users. Failure to do so can kill your business as it’ll negatively affect usability and disrupt loyalty.

You’re facing compliance challenges

If your industry requires regulatory compliance, your legacy system may be lagging behind. General rules requiring strict adherence to established guidelines and standards include:

  • GDPR (General Data Protection Regulation)
  • HIPAA (Health Insurance Portability and Accountability Act)
  • GLBA (Gramm-Leach-Bliley Act) 
  • CCPA (California Consumer Privacy Act)
  • SOX (Sarbanes–Oxley Act),
  • MISRA (Motor Industry Software Reliability Association),
  • ISO 26262 (Road vehicles – Functional safety) and many more.


Failure to comply with relevant industry regulations can pose a significant risk to your business continuity.

Your legacy system isn’t optimized to work with big data

Data is the new oil. Modern companies collect all kinds of data and analyze it to do their job faster and more efficiently. One of the most significant benefits of using data is informed decision-making. Data-driven decisions aren’t based on guesswork, but on past knowledge and experience and customer insights.

For proper data collection, processing, analysis, and decision-making, you have to harness the power of data science and emerging technologies such as machine learning, computer vision, cloud, or IoT. Modern big data solutions are incompatible with legacy systems. As such, outdated software robs you of the ability to leverage the full power of your data.

Your legacy software requires developers with obsolete tech skillsets

Let’s say your legacy solution is based on COBOL or other pretty outdated tech stacks that only a small cohort of engineers are skilled in. Finding engineers to replace someone on the team will be time-consuming and require efforts your recruitment team may not be able to cope with. In addition, this will add up costs to your software maintenance budget.

While today’s competition for software development talent is tough all over the world, it’s still easier and less expensive to tap into mainstream tech skill pools. In addition, switching to modern tech stacks will allow you to jump on the emerging tech bandwagon and capitalize on advanced technologies to ensure future readiness for your business.

Are you looking to hire expert consultants to help you with legacy system modernization, cloud migration, or scalability improvement?

Legacy system modernization benefits

  • Faster time-to-market
  • Better customer service
  • Increased efficiency
  • Reduced risk and better application security
  • Better competitiveness
  • Flexibility and scalability
  • Better use of software engineering talent


So, what options do you have for modernizing legacy applications? Should software systems be upgraded and maintained, should they migrate to a new infrastructure, or should they be rebuilt from scratch?

Let’s understand the difference.

Legacy sofware modernization methods and approaches

All legacy modernization approaches fall into two main categories based on the strategy used in the transformation process. It can be revolutionary or evolutionary, depending on the structural change made to the legacy system.

Revolutionary method

In a revolutionary method, the old system is completely replaced by a new one, developed from scratch. This helps avoid security breaches, address poor system performance or enable complex third-party integrations and scalability. This method may apply to older monolithic systems where it’s impossible to change a single block without changing the entire system. For an application to be scalable, it must be modular, or even better, reworked using a Cloud and microservice-based architecture.

However, this strategy has a downside, as it may involve risks and potential disruptions to the regular business operations. It can also be more expensive.

Evolutionary method

The evolutionary method is less painful since it doesn’t require shutting down the entire system. It implies replacing one component at a time without disrupting routine business processes. This method is less risky, but it can be extended over time and cause more pain in the neck than lead to benefits.

Whichever transformation method you choose will be critical to secure your place among the best-performing companies on the market. Legacy software modernization will bring advanced, connected technology and IoT innovation to your business, which 60% of CEOs believe will also play an important role in their company’s digital strategy.

Once you have decided which path you would like to take to modernize your legacy system, you can choose an approach based on the degree of impact and complexity.

The following approaches are ranked from the simplest and least risky (evolutionary method) to those with the greatest impact on your business processes (revolutionary method).


Encapsulation is one of the most economical and fastest methods. It reuses the core components of a legacy application by encapsulating its data and functions and making them available through the API. Encapsulation provides a new interface to an existing legacy system but doesn’t address maintenance issues. So this is a good option if the legacy application has well-written code, high business value, and still functions as expected.


Re-hosting means redeploying an application to a different physical, virtual, or cloud infrastructure without changing code or functionality. This method is also one of the most economical, fast, low-risk and helps resolve support issues. It doesn’t negatively impact the business, and the system functions the same way at the end of the process.

While moving to the cloud with a re-hosting technique doesn’t fully leverage cloud functionality, it still provides better security and the ability to deploy continuous updates. It should also be noted that re-hosting isn’t the only way to transition from legacy to the cloud; this is also possible through re-platforming or refactoring.


Re-platforming allows you to migrate a legacy application or its components to a new platform with minimal code changes. It leaves the structure of the code and the existing functions unchanged. This option is ideal for business owners concerned that their clients will not adapt to the new system. The advantage of migrating to the legacy cloud with the platform change technique is that it optimizes costs and offers basic cloud functionality. Although this approach requires less effort than refactoring, it can still offer the main benefits of the cloud.


The refactoring method optimizes existing code without changing the behavior of the legacy application. Refactoring involves changing back-end elements to ensure a smooth migration from legacy to the cloud. This helps you take full advantage of cloud functionality and move from containers to microservices. This approach effectively reduces technical debt, increases productivity, and improves system flexibility.


Re-architecting is a more advanced approach to modernizing a legacy system that entails creating new architecture and changing the code. This method allows for significant improvement of the application’s functionality, letting you take advantage of the best features of the new technology stack. It also simplifies the process of introducing new features.

Re-architecting is an effective solution to address performance and scalability issues.


A rebuild or redesign is rewriting legacy application code from scratch into a completely new cloud environment. This approach is used when it’s necessary to preserve the scope and characteristics of a legacy application. Rebuilding has many technical benefits, such as introducing DevOps, microservices, containers, service grids, etc. This is one of the longest-running methods that requires many changes to the system, which is considered risky, but the benefits outweigh the risks.

At the end of the modernization process, the business gets a technologically advanced and flexible solution with higher performance and lower operating costs.


In this case, it’s best to uninstall the application and replace it entirely, creating a system that better serves the current business needs. Replacing a system with a custom-built new system requires a significant amount of planning, but this is a sure winner in terms of fully meeting new business needs.


One of the leading banking and FinTech companies has once turned to us for help upgrading their legacy systems and automating their global banking workflows.

The goal of legacy software modernization was to address the following challenges fast and effectively:

  • lack of risk data accuracy and integrity for credit decisions,
  • high fragmentation of legacy systems,
  • non-automated workflow support for Structured Credit Analysis,
  • process breaks, manual workarounds/inefficiencies,
  • lack of transparency and traceability of processes and data for Lending & Deposits,
  • lack of real-time monitoring,
  • slow and inconsistent pricing exception approval tracking and execution.


As a result of our collaboration on legacy systems modernization and custom business process integration layer development, the client managed to achieve the following benefits:

  • 6-digit figure yearly cost savings,
  • Increasing business process visibility and integrity,
  • 15% increase in customer response rates,
  • 35% reduced effort spent on platform monitoring and cross-systems health checks and redundant work tasks,
  • New DataModel corporate strategic objectives linked to KPIs and automatic reporting,
  • 20% faster time to market,
  • Improved customer service quality and regularoty compliance.


Proceed to this link to learn more about this project. 


Choosing the right approach to legacy software upgrade

Now, you may be wondering how to choose the right legacy modernization method.

Well, the answer is simple – choose the modernization approach that will maximize your business value with the least amount of effort. You must consider the amount of transformation you would like to bring about in your system as well as the risks and costs to be involved.

To simplify your legacy modernization, we advise you to focus on re-architecting, rebuilding, or replacing your system, as these are the most effective options to consider.

Assess your system, prioritize what needs to be done according to the target user and market research, and start upgrading. And keep in mind that you can always consult with technical experts like to help you make the right choice and accompany you throughout your legacy modernization journey.

While most organizations face challenges on the path to legacy system upgrades, many are pretty successful in dealing with them. Our customers are no exception. 

If you’re looking for legacy modernization best practices, the step-by-step plan below may get you on the right track.

Evaluate your legacy system

For a full legacy system assessment, start at the software level. No matter how modern your software is, it may still not meet your current business requirements. Also, think about your future business plans and see if your software will fit your future goals.

Based on your assessment, select the approach that best suits your needs. 

If necessary, navigate to existing products that you can use. There’s no need to develop an application if an existing SaaS solution is available at a lower cost. But if your system requires a specific solution with additional functions, go for a custom product development.

Define success

Don’t take the path of legacy modernization without defining measurable success rates and KPIs. Set clear goals so your dedicated software team knows what to focus on during the process. Some of the good examples of such goals are:

  • Maintenance costs reduction by X% one year after the release of an updated and revamped solution;
  • X% increase in staff productivity;
  • Increase product uptime from X% to X% in 3 months after the release;
  • Install rate increase for new clients from X% to X%.


Software performance is one of the most effective metrics to watch out. It easily demonstrates how the solution refactoring has impacted functionality and can clearly indicate a successful transformation. 

Choose the most viable approach

Choose the retrofit approach that gives you the results you want with the least effort and in the shortest possible time. Determine which parts of the current system you want to save and reuse if they have unique value, or consider turnkey solutions if they can cover that need for less money. For instance, in the case of CRM systems, it may be cheaper to take your current outdated system out of service and build a new solution from scratch.

Explore the existing solutions

Look for existing technology solutions to help you accelerate your future growth. There’re many SaaS products currently available for a wide array of purposes. Custom software development is an alternative if the tasks you need to complete are unique to your business.

Choose the right technology

Once you’ve identified your business goals, you need to choose the right, future-ready technology stack to help you achieve them. You might want to opt for cloud migration for improved speed, remote access, and scalability. Consider a microservices architecture if you currently have a monolithic application and want to speed time to market, make your product scalable, improve security, and introduce new features fast. You might also consider testing for performance, changing the look, implementing event-driven design, and more.

Create cloud migration strategy

Most modern software solutions are based on big data, and working with large datasets requires robust computing, storage and networking, and the ability to scale on demand. Some enterprises choose complete cloud migration to meet their IT infrastructure needs. Others opt for a hybrid cloud model — performing their most business-critical operations on-premises and moving less-critical processes to the cloud.

Create a “retirement plan”

Either way, you won’t give up using legacy software right away. Some upgrade methods might involve encapsulating its components for use in upgraded systems. You will also need access to documents and data until you set up a workable plan for migrating data from a legacy system. Create a “retirement plan” and determine how long you plan to maintain your old system until a modernized one comes along.

Plan for future upgrades

Upgrades often crash, so it’s best to plan for the downtime associated with the modernization. They’re also quite expensive, so budget ahead of time for tech upgrades.

Final thoughts

No matter how complex and multifaceted your legacy system modernization may seem, it should not deem as a one-time initiative. Today, technology is changing at a breakneck pace, so organizations are more likely to benefit if they perceive this as a cycle.

Plan every step you take carefully, do painstaking research and hire outside experts with tribal knowledge, sufficient bandwidth, access to robust infrastructure, and an available talent pool to help you jump fast on the newest tech bandwagon fast and cost-effectively. It can take time and investment, but it will help you get your technology modernization done smoothly and painlessly.

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