Business leaders tend to stay with what they know. It's familiar, comfy, and—above all—seems trustworthy. However, this comfort zone can be costing us more than they realise when it comes to legacy software systems.
Many leaders focus on the upfront costs of new technology while failing to consider the long-term implications of remaining with outdated systems. As technology advances, it's important to examine how past systems stack up against modern cloud-based options, particularly in terms of scalability, integration, and access to upcoming breakthroughs.
True cost of legacy systems
The upfront expenses of sustaining legacy systems do not account for all of the challenges that firms should consider. These antiquated systems, for example, often rely on on-site physical servers, necessitating substantial infrastructure expenditure. Setting up a new server can cost up to $10,000, with additional costs for software licenses, maintenance, and support adding up quickly.
These systems also incur additional operational costs, such as higher power consumption, heat output, supplemental cooling requirements, and a constant demand on bandwidth during data backup.
Another often-overlooked expense is the knowledge reliance that these systems entail. When key IT personnel leave, they take with them the knowledge required to maintain and troubleshoot these outdated systems. Equally troubling is the increased IT complexity of managing server-based systems, particularly as an organisation grows and scales.
While the disadvantages of legacy software are widely known, there are some legitimate reasons why some organisations continue to use it—at least for the time being. Regulatory or compliance frameworks may require on-premises data storage or auditing transparency, which cloud providers cannot currently provide. In some circumstances, modernisation may be delayed out of necessity rather than choice.
ROI of cloud-based platforms
Think of modern cloud-based platforms as growth accelerators rather than cost-cutters. Cloud solutions include scalability, artificial intelligence, and automation. According to McKinsey, firms who go beyond basic cloud adoption and proactively integrate cloud into their operations could unleash up to $3 trillion in global value through faster product creation, better decision-making, and increased operational resilience.
Cloud solutions also enable the use of open APIs, allowing enterprises to seamlessly integrate technologies. Unlike traditional software, which locks firms into rigid systems, contemporary cloud platforms with open APIs allow for unique technology stacks adapted to specific business requirements. This transition allows organisations to select best-in-class systems for finance, customer management, logistics, and marketing automation.
These skills are especially important in healthcare, where interconnected systems can simplify operations and improve patient care. According to another McKinsey analysis, 62% of healthcare professionals feel generative AI offers the greatest potential to boost consumer engagement, but just 29% have begun to deploy it, indicating a considerable gap between opportunity and implementation.