Legacy Modernization: What Vendors Won’t Tell You

Based on a CSC white paper by Bob McDonald. Download it

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Read the full Spring 2012 issue.

Companies of all sizes are grappling with aging, complex systems that are costly to maintain and too inflexible to support new business initiatives.

In the current economy, with IT budgets likely to stay flat or grow only modestly, this problem is getting worse — with organizations forced to use an ever-increasing share of their budgets just to maintain existing legacy systems.

Most companies are ready for legacy modernization but, not surprisingly, the solution put forth by most software vendors is to install new software.

Contrary to what most software vendors tell their clients, there’s no off-the-shelf solution for application portfolio modernization. Unfortunately, all too often, vendors are part of the problem by selling companies on a new system while lacking the expertise or support needed to convert huge blocks of data or completely retire the old system.

What the organizations can end up with is yet another system to maintain — increasing the overall cost of maintaining the IT systems portfolio rather than reducing it. And what most vendors won’t tell their clients is that system replacement is just one of many options available to them.

Here’s a look at what most vendors won’t tell you about legacy modernization:

1. SOMETIMES IT’S OK TO DO NOTHING

Depending on the application and its function in the organization, sometimes the best strategy is to leave the application in place and focus on reducing maintenance costs. Remember, though, any systems that are retained contribute to ongoing costs, requiring specialized teams to maintain and use these antiquated systems.

2. IT MAY BE TIME TO OUTSOURCE SYSTEMS AND PROCESSES

A growing number of companies are looking into rehosting legacy systems — moving applications from one technical environment to another with no or very little change to code. This “lift and shift” approach is typically provided by an outsourcing vendor to manage the application for a predictable cost on a long-term basis.

Outsourcing enables organizations to refocus resources on activities that support the core business, while leveraging third-party expertise and efficiency. Historically, this strategy came with a limited set of options. More recently, however, as systems have become more component-based — and Web-based interface points have become more prevalent — outsourcing can be effectively applied to much smaller pieces of the business.

For instance, outsourcing can be used to support application development, maintenance and infrastructure — as well as individual business processes, such as customer billing, printing and mailing. Consequently, interest is high in business process outsourcing (BPO), staff augmentation and application management.

Outsourcing can potentially introduce new challenges, however, particularly when the goals of the outsourcer and the client are not aligned. An outsourcer, for example, may not be able to fully support new product launches or customer service strategies that were not considered when the contract was signed.

3. CONSIDER CONVERTING TO A STRATEGIC IN-HOUSE PLATFORM

One of the best responses to rationalizing additional platforms and custom solutions that come into the enterprise through mergers and acquisitions is converting the business onto a single in-house platform. The ideal scenario is to consolidate to an existing strategic system that can carry the merged business into the future. So, choosing a target platform with proven scalability is critical.

Conversions can often have significant up-front costs, but their long-term benefits can be equally substantial. Articulation of a good benefit case is a critical success factor.

4. YOU MAY BE ABLE TO BREATHE NEW LIFE INTO CERTAIN OLDER APPLICATIONS

In some cases, organizations can modernize an application’s internal design while retaining its functional equivalency. Application code refactoring allows an application to be modified so that it can interface more effectively with other systems based on modern technologies.

This approach may only be practical for standalone applications that are a true differentiator for the business, such as a specialized application that embodies proprietary business processes, formulas or corporate knowledge.

5. DON’T REVISE AND CUSTOMIZE ANY MORE THAN YOU HAVE TO

Most vendors don’t mind if you want to revise or customize their software if it means more services revenue and possibly more retrofitting work down the road. In most cases, companies purchase a business platform and customize the source code to their specific requirements, or they simply patch an older version of the system to meet new business needs, such as new regulatory requirements. Revision can be a faster way to add new functions and fix problems than keeping the system updated to the most current release.

It is not uncommon for some companies to have modified as much as half of the original source code to meet their custom requirements. But what saves in the short term almost always costs more over time, and when companies must update that old release, they have to deal with the plethora of custom in-house modifications, which can be expensive. So, be wary of this strategy.

6. REBUILDING IS USEFUL ONLY IN SPECIFIC SITUATIONS

Similar to code refactoring, the process of rediscovering an application’s business requirements and redeveloping them from the ground up may be practical only for specialized, proprietary applications driving core market differentiations.

Unfortunately, over the years, many companies have tried to rebuild their core applications and failed. In today’s environment, with technologies and standards changing every 18 months, the prospect of a multiyear development project, with multiple iterations of testing and performance tuning, is too overwhelming for most IT departments even to consider.

7. SOA SYSTEM INTEGRATION IS NO SILVER BULLET

Vendors are quick to recommend externalized systems that can be interfaced with legacy systems through a serviceoriented architecture (SOA). For this strategy, monolithic applications are partitioned, allowing portions of the functionality to be externalized.

A fully component-based system may allow companies to mix and match components as needed. This flexibility comes through the use of well-crafted business service models. Therefore, it’s imperative that the component boundaries be clean.

Wrapping is a common strategy, with predictable costs and well-tested patterns. One frequent use is to wrap systems with a common user interface, which masks the idiosyncrasies of each system from the user. More recently the focus has been on wrapping systems with service layers that let them plug into service buses; this architecture promotes reuse and high-level process assembly. This strategy makes sense for companies seeking short-term improvements to specific processes affected by several legacy applications.

However, if legacy systems have fundamental technology issues or they can be converted and decommissioned in a relatively short period, wrapping may not be practical. While many organizations view SOA as a silver bullet for integration woes, it doesn’t eliminate the underlying legacy system complexity and drag on costs.

8. IT MAY BE POSSIBLE TO UPGRADE INSTEAD OF RIPPING AND REPLACING

For companies with vendor-supported applications, upgrading to the latest version is a common strategy for modernization. Unfortunately, many companies wait too long to take advantage of the vendor’s modernization program. Many vendor applications have come and gone over the decades, leaving companies with unsupported applications and no migration path to a new system. Instead of a series of routine upgrades, organizations often face a major licensing decision and complete system replacement.

The major obstacle companies face is often their own penchant for revising and customizing the vendor’s code. Too much customization makes it difficult for companies to port these changes to the latest version of the software. Once two or three opportunities to upgrade are missed, the vendor system essentially becomes another legacy system maintained by the company’s IT department. As with the other approaches, companies must weigh the costs and benefits of a continuous upgrade program against those associated with a big-bang upgrade or complete system replacement.

9. SYSTEM REPLACEMENT MAY SOLVE ONLY PART OF YOUR PROBLEM

System replacement is by far the most common step recommended by outside vendors, but companies seldom hear all of the facts about the potential costs and impacts on the current environment. For example, a replacement system may be implemented for only a portion of the business, while the older systems are retained or outsourced. Another common strategy is to replace and convert the older data or records to the new system.

The benefits of system replacement can be significant — the ability to deploy new products or functional capabilities, the ability to provide Web-enabled self-service, and the ability to reduce the complexity of business processes, to name a few. However, it’s important to remember that the introduction of a new system actually makes the system environment more complex, as it is a new application that must be maintained. Long-term plans for managing or retiring existing systems, including the costs of conversion and infrastructure, must be included in the business case for the new system.

System replacement and consolidation simply may not be practical if there is no credible vendor package available; if the functional gap between systems is too great; if there is no real business mandate to support a large-scale change or willingness to compromise on requirements; or if the cost of replacement is too high for the size of the company.

10. ADOPT A PLAN TO RETIRE YOUR LEGACY SYSTEMS — AND STICK TO IT!

Most vendors are more concerned with selling new systems than helping to retire old ones. It can take a lot of effort to move data off the old system, archive the application’s data and decommission the supporting infrastructure. It can be a challenging project because of lack of documentation or data — or both — but the more legacy applications that are retired, the greater the cost savings in ongoing maintenance. This helps companies meaningfully shift their IT spending to more business-focused initiatives. Further, companies can manage operations more effectively with common technologies and processes.

Successful companies choose to follow a methodical, yet flexible, modernization framework and achieve transformational change throughout their organizations. In addition to modernizing and simplifying their portfolios, they are increasing agility and reducing maintenance costs, which in turn frees up IT funding to support new business initiatives.

That’s the best path to legacy modernization — even though most vendors won’t tell you.

GLENN DAVIDSON is a senior partner in CSC’s Global Business Solutions organization and leads the SOA/Modernization practice.