Legacy technology sucks.
It’s outdated, old and inefficient. It’s wasteful, expensive and high maintenance. And it simply doesn’t hold up in the world we live in.
With digital transformation expanding at a rapid rate, we’re seeing more and more businesses jump on the proverbial band-wagon.
And it’s certainly the smart thing to do.
The World Economic Forum reported that industries undergoing digital transformation would see returns of over $100 trillion in the next decade. That means massive ROI.
Trust us. It doesn’t stop there.
What Happens If We Neglect Legacy Transformation?
And none of the results are good.
There’s an ongoing list of businesses that have either lost millions, gone bankrupt or completely failed due to a lack of adoption.
And you really don’t want to be on that list.
But first, what is legacy technology?
The term ‘legacy’ describes outdated and inefficient technologies, systems or infrastructures.
Cambridge Dictionary defines it as: “a legacy product or system is one that is no longer available to buy or no longer used very often, but that is still used by some people or companies”.
So how does it relate to IT systems?
With outdated technology, you run the risk of falling behind, losing out on missed opportunities and laying waste to resources.
Legacy technology simply doesn’t work.
Firstly, the traditional IT approach can be very expensive.
You invest in systems (infrastructure, servers, hardware and software) that the provider manages and maintains. Then you need to hire the correct staff to operate and maintain those systems.
You also have to lease a space or property to house all of the necessary hardware.
Then there’s capital expenditure (CAPEX). Costs tend to be large and inconsistent. And to top it off, hardware and equipment also needs upgrading every few years.
According to Digital Cloud Training, “This model requires large amounts of capital expenditure (CAPEX) to pay for data center costs, equipment purchase, software licensing, maintenance contracts, staff wages and more. Typically equipment is then depreciated over the course of 3-5 years, and must then be replaced.”
With such large expenses, it makes it much harder to scale.
Getting access to capital for further growth (salaries, equipment, training, licensing, etc.) becomes a huge challenge and can end up straining the entire company.
Even worse, if there’s less demand, the costs to manage, operate and maintain the current system still exist.
A Growing List of Failed/Failing Businesses
You measure a company by its profits.
If it makes none, then it ceases to exist. So it would be safe to say that if it consistently makes major losses, it is failing. Or at the very least, on its way to failure.
The following companies have all gone through some sort of failure due to legacy technology and thinking.
General Motors (GM) was one of the largest car manufacturers in the world. They were going strong for about 100 years until finally going bankrupt in 2009 after failing to make any profit since 2005.
During those four years, GM lost upwards of $90 billion and have since been acquired in a bailout by the US government.
While there are a variety of reasons given as to why GM didn’t make it, failure to invest in new technology, innovation and the slow adaptation to customer changes ultimately led to their demise.
British Airways (BA) is another big name that has stood the test of time. Like GM, they’ve been around for over 100 years.
And like GM, they failed to see their legacy systems and approaches becoming a major issue further down the line.
First they had a major data breach in 2017, leaving them responsible for a £183 million fine. Then in 2019, an issue in their check-in and departure system caused over 100 flights to be cancelled and 200 delayed.
As you can imagine, millions were lost as a result.
The biggest contributing factor: a flawed technology strategy and a lack of attention to core legacy systems.
A brand that most would be familiar with, Kodak was the go-to for photography. Whether you needed the camera or the film, they had it all. Until they threw it all away.
And it wasn’t only one mistake. Their lack of foresight had them ignore the potential of digital, as they tried to pioneer and push for traditional film and print.
They spent billions on digital cameras and mobile phones photography, but never took the right approach.
To top it off, they were nearly the first to launch an early form of Instagram. Which, with the right direction, would have developed into something huge.
When they acquired Ofoto in 2001, they had ample opportunity to disrupt the world, but they chose to push for their customers to print images. Rather than store and display them.
In 2012, Kodak filed for bankruptcy and faded into the shadows. It’s probably safe to say that they couldn’t see the bigger picture.
Resilience Requires Action
With these few examples, it’s pretty safe to say that technology and vision are essential to the longevity of any organisation.
Those that have kept up have survived the test of time. If they lack the innovation or foresight, they buy it.
Think Google, Apple, Amazon or Facebook. Each one as powerful as they are today because of acquiring hundreds of smaller businesses.
Legacy technology, thinking and approaches will inevitably create chaos and disorder.
The world is growing at a rapid and unfathomable rate thanks to contemporary technology and AI. So the sooner our world adapts, the sooner we can level the playing field.