Legacy models are one of the biggest obstacles in achieving digital transformation. Here's how to maneuver the task, from the CIO of Deloitte.
Engaging in digital transformation initiatives are the new norm for businesses, mainly out of necessity. Digital transformation is not only crucial for modern day business survival, but also critical for maintaining relevance in the enterprise, according to a recent KPMG report.
While digital transformation is expected to yield impressive results for businesses—a 17% return on investment (ROI) in the next year, to be specific, most digital transformation initiatives actually fail. In 80% of organizations, only one quarter of those companies actually create new ways of working from these projects, a recent Gartner report found.
Other than a lack of resources and skills, one of the biggest obstacles preventing the successful execution of digital transformations is reliance on legacy systems. This isn't a new issue, as outlined by VMware in 2017, when some 62% of IT leaders pointed to legacy systems as their biggest roadblock to multi-cloud success.
"Legacy technologies are comprised of aging or outdated systems that once served as the foundation for business scale and automation," said Brian Solis, principal analyst at Altimeter Group.
An example of a legacy system could be the presence of an on-premises database, which many companies have replaced either partially or completely with a cloud-based data service. Because of the security, accessibility, and storage benefits of the cloud, the days of on-site databases are quickly becoming outdated.
How legacy models hold businesses back
"Keeping up to date with software and technological updates is crucial when maintaining a successful business," said Nishita Henry, CIO of Deloitte Consulting. "However, not every enterprise has made the necessary investments to thrive in the current and future state of business."
During the economic downturn of 2008, businesses focused on ways to cut costs, which placed technological investments on the back burner, Henry said. "Now businesses that have legacy technology are at a crossroads between investing in modernized systems and making new strategic investments."
Henry said that signs of legacy models disrupting businesses can surface in three key ways: A decline in revenue or margins, a lack of return, and a distinct change in customer sentiment.
"They are the shackles that hold digital transformation and innovation back as they're integrated, complicated, expensive and often tied to critical business processes," Solis added.
These disruptions are even more amplified during digital transformations, with nearly 50% of employees citing legacy operating models as their biggest barrier to transformation.
"Lagging technology can impact business operations across the enterprise. For businesses attempting to achieve digital transformation, legacy models may create unnecessary pain points," Henry said. "For example, if enterprises adopt modern technology without a comprehensive digital transformation strategy in place, it may require a significant investment of time or money to fully integrate the systems."
How to work around legacy models during a digital transformation
"I often [compare] the challenge of modernizing legacy technology to fixing an airplane's engine midflight," Henry said. "The goal is to find a balance that both strengthens the core of your business – to prevent a disruption in revenue – and identifies ecosystem partners that can enable digital transformation efforts."
To help organizations maneuver the complexities of integrating legacy systems with new ones, Henry offered the following tips for a smooth transition:
1. Modernizing core systems: Whether the organization is upgrading legacy technologies, or replacing them all together, the ultimate goal is to create a roadmap that leads to the stable integration of new technologies, from the beginning.
2. Transforming business technology: In this next wave of business, every business is a tech company and every employee is a technologist. Business and technology teams must collaborate to effectively and efficiently tackle a digital transformation.
3. Evolving cyber strategies: While every company faces the risk of cyberattack, modernizing technology allows organizations to integrate risk strategies within business policies and strategies.
However, organizations aren't capable of innovating completely alone, Henry noted, and different types of digital transformations will demand its own unique partners.
"When modernizing legacy technology, most businesses can benefit from engaging an ecosystem," Henry said. "Think through the right partnerships for your enterprise—across start-ups, technology companies, academia, and even competitors. Before activating an ecosystem, cement an innovation framework that helps focus and measure the investments."
For more, check out the 4 ways IT can better collaborate with the business on digital transformation on TechRepublic.
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