Computing technology has come a long way over the last decade. But legacy business systems–often written in Cobol and running on big iron–continue to comprise the core of many mission-critical computing systems. These high-value systems represent years of development and investment. They are often bullet-proof. And replacing them with new technology can be disruptive, expensive, and potentially risky. During the run-up to Y2K, many organizations favored a course of remediation over rip-and-replace strategies. And today IT managers are coming to the same conclusion: the safest and wisest course is to extend the life of their legacy systems through modernization projects.
The decision whether to renew or replace legacy applications is an economic one that many IT managers are wrestling with today. In this study, we assess current adoption and investment rates for legacy system renewal projects, based on our annual survey of about 200 IT organizations. Then, to determine risks associated with renewal projects we look at the return on investment (ROI) and total cost of ownership (TCO) experiences of organizations that have undertaken such projects. We also examine trends by organization size and conclude with a summation of our findings and key recommendations.
This Research Byte is a summary of our full report, Legacy System Renewal: Adoption Trends and Economic Characteristics.
Our annual survey of IT organizations indicates that there is currently a surge of activity surrounding legacy system renewal, along with substantial growth in service-oriented architecture (SOA) projects. While renewing legacy systems can be a daunting task, doing nothing is not an option. Mission-critical legacy systems are expensive to maintain. They lack the flexibility for integrating data, applications, and services to take advantage of Internet-enabled business processes. Cobol programmers and other personnel needed to maintain the systems are becoming increasingly scarce and expensive as baby boomers reach retirement age. And replacing legacy applications with new packaged applications can be even more expensive, more risky, and more disruptive to entrenched business processes.
Legacy System Renewal at Moderate Adoption Level
Our 2008/2009 IT Spending, Staffing, and Technology Trends study identified legacy system renewal as being at a moderate adoption level. Figure 1 shows that the percentage of organizations with legacy renewal projects in place (29%), those researching and implementing (39%), and those showing “no activity” (33%) during the current year are roughly equal, each accounting for about one-third of the sample. The relatively even distribution technically puts legacy systems renewal at a moderate adoption level, indicative of a steady, gradual migration toward renewal strategies.
The full version of this report gives in depth data and analysis of current trends in legacy system renewal. We first assess current adoption and investment rates for legacy system renewal projects, based on our annual survey of about 200 IT organizations. Next, to determine risks associated with legacy system modernization we look at the return on investment (ROI) and total cost of ownership (TCO) experiences of organizations that have undertaken such projects. Finally, we examine trends by organization size and conclude with a summation of our findings and key recommendations.
Our study finds that many organizations today are engaged in modernizing their legacy applications or have already done so. Better tools for extending and integrating legacy systems with new applications and the web, coupled with the maturation of SOA and the ever-present drive to lower TCO, add flexibility, and reduce risk, are prompting a surge in legacy system renewal activity.
This Research Byte is a brief overview of our report on this subject, Legacy System Renewal: Adoption Trends and Economic Characteristics . The full report is available at no charge for Computer Economics clients, or it may be purchased by non-clients directly from our website at https://avasant.com/report/legacy-system-renewal-adoption-trends-and-economic-experiences-2008/ (click for pricing).