Industry Insights

Three Ways Legacy IT Is Holding Back Your Digital Transformation—and One Strategy to Fix It

By Ideas @ AppDirect / July 23, 2018

Old technology can often seem a little laughable. Remember when phones had to be physically connected to the wall before you could make a call? Or when you had to listen for a dial tone and screeching noise to know that you were connected to the Internet?

As quaint as it may seem, old technology is no laughing matter for many of today’s communications service providers (CSPs). In fact, a recent survey by the Cloud Industry Forum (CIF) found that almost 9 out of 10 companies believe that legacy IT is holding them back as they look to digitally transform their businesses.

The reasons why are understandable. Legacy IT is almost always deeply ingrained in the critical business operations that keep a company running, and removing it can be risky and expensive. The CIF survey underscores these fears: 46 percent of businesses believe that trying to change legacy systems would result in major disruptions, while 40 percent said it would cost too much.

CSPs are often at impasse when trying to figure out what to do about legacy IT, but the growing importance of digital business models is making the question more urgent than ever before. Here are the three biggest issues that legacy technology can create, and one strategy that can help CSPs strike a balance between the risks and rewards of IT modernization.

1.) Legacy IT Creates Unnecessary Complexity

Over the years, many companies—particularly large organizations like CSPs—have cobbled together a patchwork of systems to handle functions like billing, ERP, and CRM across different divisions, regions, products, services, and devices. Some of these systems have grown so complex that few, if any, employees understand the full effect that changing one part of the system would have on the rest.

New, rapidly changing business demands, however, are placing unprecedented pressure on legacy systems like these. To stay competitive, companies need to bring products and services to market faster. At the same time, these systems must be able to keep up with a steady stream of new devices, new consumption models, and new ways of interacting with customers.

To stay competitive, companies need to bring products and services to market faster.

Reducing this complexity can provide tangible, real-world benefits. Replacing a legacy billing system with a more agile solution, for example, can help organizations get to market 50 percent faster, and first-to-market advantage can increase product line revenues by 176 percent over three years.

2.) Legacy IT Slows Innovation

In the technology industry, it can be hard to define just how old a system has to be to earn the “legacy” label. Some cases are easier than others; any software written in COBOL, a 60-year-old programming language, for example, can probably be considered a legacy application.

For CSPs grappling with older technology, rather than focusing on age, it’s better to ask whether a legacy solution is open or closed, or is API-addressable. Why is this so important? For decades, companies have created products and built walls around them to keep out competitors. In today’s digital economy, companies must always be open to new ways of collaborating to deliver value to customers.

As the World Economic Forum explains, open “ecosystems” of both internal and external stakeholders “allow [companies] to accelerate innovation and develop features at a pace that is not possible when they operate alone.” “Closed” legacy IT that doesn’t easily share data via APIs can make it harder to gain insights into customer behavior, for instance, and slow down innovation.

3.) Legacy IT Builds Technical (and Business Strategy) Debt

To riff on the old saying, the path to a legacy IT environment is often paved with good intentions. IT leaders are under intense pressure to make decisions to keep operations running and don’t have time to focus on strategies that are better for long-term success.

The end result is “technical debt,” a software development concept that also applies to IT operations. When a CSP chooses to patch an old ERP system that can’t meet its current needs, instead of evaluating solutions that would serve it better in the long run, the CSP is accumulating a type of technical debt.

When a CSP chooses to patch an old ERP system that can’t meet its needs, it's accumulating a type of technical debt.

The concept fits business strategies as well. For example, a CSP that relies on price cuts and old go-to-market strategies to get a quick spike in sales volume—rather than deploying newer flexible technology that can power the sales and provisioning of innovative digital product bundles—is building up a “strategy debt.”

Legacy debts like these can be particularly hard to address, since they are difficult to quantify and the full impact across the business is hard to measure, let alone mitigate.

Overcoming Legacy IT with Experimentation—and Failure

The problems created by legacy IT can affect companies of any age, both those that were founded decades ago and those that were recently born in the cloud. The great news is that any company can overcome these issues and succeed at digital transformation, but how?

The fact remains that legacy IT is often difficult and expensive to change, so the best option is not to rip and replace. Instead, CSPs should consider an integration layer that connects legacy IT to new systems and acts as an interface for data flowing between them. Powered by APIs, a layer of this type is among the least disruptive and most cost-effective ways to mitigate the effects of legacy technology.

Whether you decide to build the integration layer in house or work with a provider, your solution should make it as easy as possible to experiment with digital business models, fail, and learn from your mistakes. Risk-taking leads to success in the digital economy, and technology that helps CSPs quickly try new approaches can be a critical factor in accelerating innovation.

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