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Tech Leaders Devise Strategies for Controlling Legacy Tech Costs
Modernizing legacy systems while minimizing disruption to business operations requires a strategic and phased approach.
4 Min Read
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Legacy systems can be difficult and expensive to scale, and organizations looking to modernize or migrate off a legacy system often want the agility and ease that their current systems can’t provide.
A recent Deloitte survey of 300 industry leaders revealed technology infrastructure challenges have emerged as the primary hurdle in controlling costs for half of all businesses -- a significant increase from just a year ago.
The survey underscored the detrimental impact of legacy technology on organizations' agility and profitability as they struggle to adapt to evolving internal dynamics as they're ensnared by outdated systems.
To identify opportunities for cost optimization, IT leaders must take stock of legacy infrastructure and devise a stepwise plan for updating, integration, or outright replacement.
Taking Stock of App Stacks
Howard Weale, vice president at Cockroach Labs, advises organizations to start by examining their current application stack in detail to identify areas of improvement.
They should then overhaul these systems gradually, instead of trying to change everything in one go. “Divide the modernization process into smaller, easier steps, which will enable companies to make continuous progress and avoid disrupting operations,” he says via an email interview.
To see impactful change, the entire IT organization needs to be bought in, and have other senior-level stakeholders' support.
In addition, IT leaders must clearly communicate and manage the risks of these investments early and often. “This means working directly with the entire C-suite in addition to the CEO to align on the right IT strategy for the organization,” Weale explains.
Scott Wheeler, cloud practice lead at Asperitas Consulting, says that along with identifying modern technology replacement options, organizations must calculate the estimated costs of migrating to the new technology, including maintenance costs.
He recommends evaluating the replacement technology in three dimensions, starting with calculating the business opportunity and risk of not replacing the legacy technology.
“Then, consider the labor and software cost differential between maintaining the legacy and modern technology, followed by the cost estimate for migrating off the legacy technology,” he says in an email interview.
Align IT with Business Goals
Ryan Downing, vice president and CIO of enterprise business solutions at Principal Financial Group, says the company's approach to modernizing legacy systems is deeply rooted in aligning technology initiatives with the overarching business strategy.
“By adopting a business-driven approach, we ensure that our modernization efforts are not only strategic but also seamlessly integrate with the evolving needs of the business,” he explains via email.
Central to the strategy is the recognition that modernization isn’t just about updating technology -- it’s an investment in positioning the business for sustainable growth.
“While we strive to minimize disruptions to our operations, we acknowledge that all modernization initiatives drive change which can bring some level of disruption,” Downing says.
Rather than having a separate technology strategy, Principal Financial Group embeds technology considerations into the overarching business strategy.
This enables the organization to review strategic technology investment decisions right alongside other investments they are making to grow our businesses.
“Once strategic investments are identified and funded, we track their implementation and performance at an enterprise level to ensure we are seeing the appropriate value capture,” Downing says.
Benefits of Leveraging AI
The Deloitte survey also found four out of five enterprises are turning to generative AI and machine learning to drive efficiencies and enhance both customer and employee experiences.
Weale says he agrees AI can be effective for some organizations to determine exactly where spend is going and can help establish guardrails for certain operations.
“AI-driven automation can also significantly reduce structural and operational complexity of data infrastructure, and opting for a system that can automate time intensive, manual tasks is table stakes,” he adds.
Wheeler says organizations should prioritize AI initiatives based on their potential value to the organization and the feasibility of implementation.
“Consider cost, technical complexity, and necessary data and skills availability,” he says. “Implement pilot projects to test and validate the AI solutions before full-scale deployment.”
He adds that encouraging a culture open to innovation and continuous improvement can help foster an environment where AI-driven cost optimization is seen as a strategic enabler rather than just a cost-cutting measure.
Downing points out GenAI brings new capabilities that require organizations to look at cost optimization opportunities differently than they would have historically. “It is crucial to have technology embedded across the enterprise to fully reap the benefits of this emerging tech,” he says.
A strong partnership with key leaders including the CIO and CFO allows IT leaders to leverage their core understanding of business process performance.
This focus on collaboration helps bring forward the best opportunities where GenAI can provide significant financial value.
Downing says that at Principal, a “rigorous” prioritization mechanism is used for GenAI to identify and focus on the most impactful use cases as the organization continues to learn how to deploy the technology.
“This ensures our investments in GenAI align closely with our strategic objectives and deliver tangible value to our organization,” he explains.
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