Hidden Cost of Outdated Technology: Why It Costs More Than You Think
Technologies are developing at a tremendous pace. According to the study, there will be 38,6 billion IoT devices, 1.35 million tech startups, and 7.3 billion mobile users in the upcoming years. Another study points to 43 new technologies emerged recently and states that 8% of the total US workforce is involved in the tech industry.
According to Finance Online, 61% of marketers consider AI the priority of data strategy. And according to ZD Net, 91% of Fortune 1000 companies actively invest in big data and AI.
While such rapid development points to swift digital transformation, it also creates new challenges for organizations. Companies often appear unprepared for innovations, which leads to high costs of using outdated technology.
Results of employing obsolete tech
The larger and older the company, the more difficult it is to change its software. Imagine that you have been performing operations using a particular program for years. The workflow is already established, staff trained, and documentation prepared. As new technologies emerge, you need to rebuild processes from the ground up. This task seems too resource-intensive. But if you don't dare to change, you will face serious problems. And this applies not only to the cost of outdated technology.
Here are the challenges you are going to encounter:
Low productivity. Old systems are slower and less efficient than new ones. Even if you are satisfied with everything and do not see much need to update the software right now, you must understand that your competitors are already one step ahead. Depending on the business specifics, your rivals may process payments faster, fill orders faster, and respond to customer needs faster. In the long term, this will decrease your customer loyalty and shrink your customer base. And this is the price paid for using outdated technology.
High maintenance costs. Maintaining old technologies in a fast-evolving digital world is challenging. Imagine, for example, having a twenty-year-old washing machine at home. If it breaks, you may have a hard time finding the parts to repair it. The same is true with software systems. When an obsolete program starts to malfunction, replacing it is often more economically beneficial than repairing it. Therefore, when you choose to stay with the old software, you must add the price of system maintenance and repairs to the cost of outdated technology.
Security vulnerabilities. New technologies are not only about technical progress but also about guarding against cyber criminals who are improving their skills. As programs become more advanced, attackers become more sophisticated. Therefore, if you don't want to upgrade your software, the cost of outdated technology can be significantly increased by the cost of data breaches. In some cases, companies spend millions of dollars on dealing with information leakage. This should be considered when deciding on new or obsolete tech.
Compatibility issues. Today, hardly any software works in isolation. Programs interact with each other to bring greater value to the business. However, when using outdated technologies, integration of third-party services is not always possible. The reason is that obsolete software often uses outdated programming languages, libraries, or protocols that are incompatible with modern third-party services. It may also use legacy data formats inconsistent with contemporary data exchange standards, which leads to data translation issues.
Staff shortage. The longer you delay updating your software, the more difficult it is to find staff to maintain and support it. Today, IT professionals see no point in studying outdated technologies. They work with modern systems that are highly in demand. Given this, you need to add the price of staff training and recruiting to the cost of using outdated technology.
Five signs of outdated technology
Outdated technology can be a heavy burden for organizations, leading to constant costs for updates, repairs, staff training, and workarounds for third-party integrations. Companies do not face these costs all at once, but gradually, and often miss the moment when outdated software needs to be replaced.
So, how do you know that your tech has become obsolete? The following signs should be a red flag for you.
End of life (EOL). This is when a product reaches the end of the supported life cycle. At this stage, the software vendor typically stops providing support services and no longer offers the product for sale.
Examples of EOL products are Adobe Flash Player, Oracle Java SE, Windows Server 2003, iOS 6, Android Gingerbread.
No updates. If a system is not updated regularly, it cannot meet the demands of today's technological world. It makes no sense to maintain such a system because you will spend a lot of time and costs on outdated technology and will not get the desired business result.
Examples of systems that longer receive updates are Windows 7, macOS High Sierra (10.13), Adobe Creative Suite 6 (CS6).
Non-scalability. Modern software systems deal with a growing amount of custom traffic. This is especially true for B2C programs engaged in gaming, insurance, banking, etc. The inability to scale quickly indicates a failure to meet modern business requirements. If you work with high-load systems but have a non-scalable software architecture, you risk paying a high price for outdated technology. To avoid irreparable consequences, you need to re-architect the application and look towards cloud technologies.
Incompatibility. It could be a sign of obsolescence if you can't integrate your system with the right third-party services. Depending on your business specifics, you may need to integrate with a payment gateway, location service, messaging platform, analytics tool, etc. This integration significantly saves time and money because you do not need to develop such functionality from scratch but use a ready-made service. In the case of an incompatible software system, however, the outdated technology cost rises to the budget for implementing the functionality on your own.
Legal compliance risks. Outdated software often does not comply with current laws and regulations. For example, with the release of PCI DSS, software systems involved in online transactions were required to encrypt data, implement multi-factor authentication, and use secure coding and testing practices during development. If your system was developed before the PCI DSS release and you have not made the appropriate changes, you risk having legal problems.
Real-world examples of the high cost of outdated technology
Often, companies that use outdated systems do not see the point in upgrading them because everything seems to be stable and working, and even if some operations are performed slower than expected, it doesn't pose much concern. However, the danger of using old tech is not only a decrease in productivity. The price of outdated technology may be the loss of customers and a damaged reputation.
The examples below show the colossal cost of old technology incurred by world-famous companies.
Delta Air Lines
Delta Air Lines, one of the major airlines in the USA, lost $150 million in income due to an outdated reservation system. This system was developed in the 1960s. However, the company was still using it in 2016 when there was a massive system crash caused by a power outage.
Thousands of flights were canceled due to this incident, and many customers expressed distrust in the company and reluctance to use its services in the future.
Lesson learned: Switch to new technologies regardless of how stable the processes are in the current obsolete system. Even if your program works satisfactorily today, this does not mean it will be the same tomorrow. Gradually adopt new technologies so the transition doesn't ruin your workflow and stress employees.
Myspace
Myspace, one of the first social networking sites, could not withstand competition from Facebook and Twitter and ceased to exist in April 2008. One of the main reasons why Myspace lost customers was the lack of competent management and ignorance of design trends.
While competitors conducted UI/UX research, adapted the design for different platforms, and took a customer-first approach, Myspace remained with a design solution that has hardly changed since its creation.
Thus, lack of design thinking and unwillingness to walk in the customers’ shoes created a massive outflow of users. Eventually, the platform completely disappeared.
Lesson learned: New technologies are not just about functionality. The product look and feel is crucial for software success. When switching to new technologies, choose a comprehensive approach. Make sure your product develops along with users' needs; otherwise, you will have to pay a high price for outdated tech.
Hershey
Hershey, one of the largest chocolate manufacturers in the world, faced a specific problem associated with old technologies. The company used an outdated ERP developed in 1999. The company authorities realized the system no longer met modern requirements and were desperate to update it as quickly as possible.
Despite the recommended 48 months for new system implementation,
Hershey pushed deadlines and launched the updated system within 30 months.
The software, however, was not properly tested. The company also simultaneously updated ERP, supply chain, and CRM components.
The worst problem occurred during the hot season. At the height of the Halloween sales, Hershey was unable to process $100 million worth of orders, even though all the items were in stock.
Lesson learned: No matter how high the price of outdated technology is, do not rush to launch a new, untested system. Create a detailed plan for migrating your legacy tech, hire expert developers, and set realistic deadlines.
How you can benefit from software modernization
Outdated technology prevents your business from developing to its full potential. With old software, you work less productively and securely. You are also losing potential customers who could bring you profit and promote your business to greater heights.
Many organizations, however, put off software upgrades because they cannot calculate the benefits the new technologies may bring. Indicators such as incompatibility, ineffectiveness, and insecurity sound too abstract. Companies do not see the before and after effects and, therefore, postpone technological changes indefinitely.
At this point, it is necessary to point out that the exact cost of outdated technology can only be calculated after a detailed study of your project. Business analysts and technical specialists must study business processes, technical documentation, do code reviews, and identify system shortcomings. After this, an expert IT team will be able to select an alternative technological solution and estimate the cost of project implementation.
Despite the fact that the price of each project is calculated individually, studies indicate an ROI of up to 69% after the introduction of innovations.
Also, replacing outdated software can increase the annual income of organizations by 14.4% and reduce operating costs by 13.6%.
Not ready for full software modernization? Start small
If you are not ready to completely revamp your software, you can make a smooth transition to new tech. The incremental approach will help you reduce the cost of outdated technology and accelerate digital transformation.
Here are different approaches to modernizing your legacy software:
Lift and shift. This approach involves rehosting existing software without changing the product code base. In other words, you move from one IT infrastructure to another but do not change anything in the product itself. The lift and shift approach is mostly chosen by organizations that want to move from an on-premises environment to a cloud environment. This transition allows for improving the performance of the application and avoiding the troubles of a full revamp.
Codebase improvement. This approach is relevant when you do not change the app business logic but want to optimize code that enables current software functionality. You should consider codebase improvement when:
your code base is difficult to read and maintain
you are expanding your team with new tech experts
the team spends too much time figuring out what certain code lines do
writing new features ruins software logic
Rearchitecting. If your current software system cannot scale quickly and maintain high performance as user traffic increases, you should consider rearchitecting. As the name suggests, this approach involves changing the system architecture. The most common example of rearchitecting is switching from monolith to microservices. Such a switch allows you to pack specific functionalities in separate microservices. If one of the microservices malfunctions, it doesn't affect the entire system.
Containerization. Legacy applications are containerized to improve their portability, simplify management, and reduce outdated technology costs. Containers can help you utilize IT resources more efficiently because they share the host's kernel and include only necessary dependencies, which reduces overhead. If you have an extensive system with multiple containers, you can set up orchestration for managing containers automatically. Docker and Kubernetes are the most common solutions when it comes to containerization and orchestration, but the final technology choice must be made based on your project needs.
Complete reengineering. This approach means rewriting the software from scratch and involves both rearchitecting and replacing the code base. With complete reengineering, the logic of the software, its functions, and integration with third-party services are significantly changed. Also, the product can be rewritten in a completely different language, for example, from Ruby to Java or C++ to Python.
Complete reengineering is a major change that requires a significant investment of time and money. However, in the long run, it will allow you to save significantly by removing the burden of the cost of outdated technology.
Reduce the cost of outdated technology with Erbis
At Erbis, we have been helping companies embark on technological modernization for 11 years. We work with enterprises and startups and understand that a software upgrade is a big move that requires careful consideration and preparation.
If you want to reduce the cost of outdated technology, it is crucial to develop a step-by-step transition strategy. This strategy should help you upgrade the system without downtime, data loss, and productivity reduction.
In this regard, choosing a reliable technology partner is vital for a software modernization project. If you are looking for experts to help you upgrade the legacy system and eliminate obsolete technology costs, drop us a line. We will be happy to assist.
