InformationWeek
Defining The Business Value Of Technology
August 9, 1999
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Should IT execs continue to pour money into their legacy systems or scrap time-tested infrastructures in favor of more open platforms? The answer is rarely cut and dry--but more often than not, these managers decide that there's life in the old systems yet.
Adecco Inc., which helps businesses in 50 countries engage temporary and full-time employees, recently embarked on an ambitious Internet project that ties new online services into a back-office application developed in-house for its Hewlett-Packard HP 3000 server, which runs on the proprietary MPE operating system. The company plans to give its customers Web access to data on its roster of 600,000 temporary and full-time clerical, industrial, and technical employees, which is stored in the custom-built system.
"The Internet drives our ability to provide customers with data, and we can use the same tools to build an extranet as we used for the internal network," says Brian Aden, manager of operations and technical services at the Redwood City, Calif., company. "For the first time, customers can get to the data itself, rather than having to talk to a customer service rep."
Aden says it wouldn't make sense for Adecco to change platforms, because the commercial software available for commodity platforms, such as PeopleSoft on Unix or Windows NT, can't match its 10-year-old legacy code. "We have so many different issues--flexible hours and how we pay people. No other app would meet all the requirements," he says.
Adecco illustrates a truth about legacy systems: Custom-built applications created by programmers long since retired, or commercial software that has become obsolete, are often more effective for specific IT needs than packaged apps. And the proprietary hardware they run on may still be the most efficient.
Make no mistake: Legacy doesn't necessarily mean old-fashioned. The mainframe and midrange servers at many companies may well be state-of-the-art in their class, thanks to regular upgrades and maintenance and new installations. Aden says Adecco recently spent $400,000 to upgrade to a new HP 3000 server to cut processing times for invoices from 12 hours to between three and five hours and to take advantage ofdisk mirroring to reduce downtime. In contrast, the business logic that informs these systems--providing the routines that define how to perform data entries, updates, and report processing--may have Web front ends or other updates, but the core is unchanged.
In the Internet age, says Carl Greiner, a VP and analyst for the Meta Group, most companies will find that it's more strategic than ever to maintain their legacy systems--where 70% of the world's data still resides. "Anyone who wants the world of E-business must leverage legacy systems, because they can't replace them quickly enough and still be responsive to business needs," he says.
That's been true for the Army Air Force Exchange Services in Dallas, where Clyde Todd, section chief of the Fast Action Support Team for the eighth-largest retailer in the world. The private company provides 7.6 million active service people, active reservists, and retired soldiers and Air Force members with low-cost merchandise and services via 10,500 facilities in 25 countries--and, most recently, over the Internet. It keeps its systems for sales operations and its payroll on IBM mainframes bought in 1974, as well as on IBM mainframes purchased over the last nine years. Replacing them with a commodity platform for Internet activities was never considered, says Todd.
"Replacement would be an administrative nightmare and extremely expensive," says Todd, who notes that the company's main legacy costs are salaries for six IT employees. "With the catalog tied into inventory, ordering, and logistics for shipping and billing, it's all quite interwoven." The Army Air Force Exchange realized some time ago that it had to move to the Internet quickly, in the face of increasing competition from stores, such as Wal-Mart, that also offer low-cost goods, Todd says. There wasn't time to rebuild a billing or inventory control or shipping system for electronic-commerce activities.
"It took us 90 days to transition to the Internet," says Todd, "and we're projecting 30% of catalog sales to happen over the Internet this coming holiday season, in its third year." Business has expanded, too, because now even soldiers stationed far from the company's facilities can shop over the Internet.
Illustration by John Bleck
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nformation technology executives at large companies face the same pressing question at the end of each fiscal year: Should they budget hundreds of thousands or millions of dollars to maintain and upgrade legacy hardware and software, or do they put that money into newer, more open platforms? The year 2000 issue is almost a moot point, as most companies have by now retired legacy computers or code that couldn't be brought into line efficiently, or that wouldn't provide competitive business value in the next millennium. The consensus for many businesses, still, is to continue making sizable investments in their tried-and-true systems, including adapting them for Internet applications, to which they bring a level of scalability and reliability that some of the newer systems can't match.
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