Obsolete hardware and software is the biggest barrier to digital transformation.
According to Deloitte, 62% of businesses saw legacy systems (out of date software and hardware) as a top barrier to digital transformation. The following case introduces our discussion of why, and what you can do about it:
Mark Bonds is the Financial Director of a medium sized manufacturer of pump equipment for the mining industry. He has been following recent advances in artificial intelligence and is excited about the possibilities it offers for analysis of production data that will enable costs to be better managed and more identification of opportunities for process improvement.
Mark has shared his ideas with the company CEO and has just presented them to the management team. The response from the Chief Information Officer, Ahmed Shakria, was swift, the artificial intelligence based systems that Mark proposed would need to be connected to the company’s existing technology, in a range of areas, including their ERP system, with its financial, sales and operational data and this would not be simple – the ERP system had been significantly customised and this complicated integration with other technology.
The Operations and Supply Chain Director, Linda Lui, liked Mark’s idea but felt that its value would be limited if the only data it had came from the ERP system. She argued that a lot of the production equipment gathered data that was currently seldom used but would greatly increase the value of the artificial intelligence, as long as the technical challenges of integrating the data with the artificial intelligence could be resolved.
Linda thought further about the operational impact of the changes being proposed. Some of the data the existing technology gathered from the operations equipment was very important in the work the machine operators and others did – providing them with feedback that was important in managing quality and productivity. If changes were made to the technology, would she lose this and would the finance department now be intervening in operational decisions with their new access to information? What would this mean for the workers – would their jobs change for the better by giving them more ability to control the output of their work or would they become more stressful as more data-based direction was given to them?
This case study provides a brief introduction to the issues raised in dealing with legacy systems. Often when legacy system changes are considered it is the technical issues that most of the focus is on – and these are often considerable. We examined the reasons for legacy system change failure in research we conducted for the University of Waterloo Watspeed Digital Transformation online certificate program. It can be used to review your own legacy systems and develop your strategy for dealing with them, as part of your digital transformation.
Your starting point in developing your legacy systems strategy is your business strategy, which should include your digital transformation objectives. These will determine the critical challenges you will face in your legacy systems. For example, your strategic priorities may include a desire for greater flexibility in manufacturing in response to the market which may currently be limited due to the inability of the legacy systems to accommodate rapid product changes. Your analysis of your legacy systems should be firmly based on your future needs.
We identified the common technical issues that are found in legacy systems when technological change is taking place. These will enable you to review your own legacy systems and consider the impact they will have on your digital transformation activity.
Maintenance Cost: The cost of the legacy system maintenance is high and unsustainable
Skills Shortages: Skills required to operate and maintain the legacy systems are in short supply
Technical Incompatibility: The legacy systems cannot be technically integrated with the new digital transformation technology
Security Issues: The legacy systems are vulnerable to attack, data loss or functionally unreliable
Regulatory Non-Compliance: The legacy systems are not capable of meeting mandatory regulatory requirements
Unscalable: The legacy systems cannot grow to meet the forecasted business need
Unsupported: The legacy systems are no longer supported by their vendors
Innovation Hindrance: The legacy systems limit innovations that the business would like to make now or in the future
Technical Debt: Weaknesses in the technology itself that make it harder to use, maintain and update
The technical challenges can be addressed by modifying the existing systems to a small or large extent, in a variety of ways or replacing them altogether. A description of the options available is summarised by Gartner.
The challenges associated with legacy systems are not just technical though – they are also based on the impact changes in information systems have on process and human elements and these must be carefully considered in legacy systems changes – not doing so is a common cause of failure of legacy focused aspects of digital transformation projects.
Changes in legacy systems can have significant impacts on organisational processes that will influence support for and success of implementation. The process aspects that legacy system changes can impact include:
Process Complexity: Are the legacy systems changes making operational processes more or less complex?
Productivity: What is the impact on productivity – will it increase or decrease in the future?
Process Quality: Will changes to legacy systems improve product and / or service quality?
Process Agility: Will changes improve the ability of processes to respond to market driven changes or not?
Legacy system changes will also impact the human aspects of organisations. The areas this impact should be considered in include:
Skills: Are the skills necessary for operating and exploiting updated or new systems available within the organisation or can they be obtained easily by training and / or recruitment? Will skills changes increase or decrease the value of the skills of existing workers?
Job Security: Will there be an impact on employment numbers? If jobs will be lost, will this be sensitively managed?
Culture: Do the systems changes require changes in company culture? For example, do they require changes in levels of adherence to work instructions, role flexibility and agility, etc.
Quality of working life: What will the impact be on the quality of the job experience of employees? Will they have more or less autonomy in their jobs? Will they be more or less stressful? Reductions in quality of working life are likely to lead to resistance to technological change.
Management Capabaility: is the existing management structure and capability appropriate for the changes being made to legacy systems and, if not, how will you address this?
Successfully overcoming the challenges that legacy systems pose requires a holistic approach that combines understanding of technical, process and human factors. A mainly technically focused approach will usually fail.
