Why is making a business case to get out of the legacy technology trap so difficult?

In my last posts, I outlined what the legacy technology trap looks like, and what root causes contribute to its development. It would appear easy, then, to make a business case to overcome legacy issues; but it isn’t. In this post, I will explain why that is, and how to go about it instead.

A bottom-up cost savings approach may not be enough

There comes a time when the pain points caused by legacy issues start to outweigh the (perceived) pain points of change. Perhaps a major transformational event, such as a merger, has taken place, or the expense ratio is becoming a burden.

And this is where things can get tricky.

The business case for disjointed legacy transformation can be a difficult one to make, if it is based only on bottom-up cost savings. This is because the incremental cost difference following the replacement of platforms in isolation rarely appears attractive when it is based exclusively on total cost of ownership savings.

Because legacy transformation typically involves implementation of a new platform, data migration, and subsequent legacy platform decommissioning, the incremental savings from a new platform may not be sufficient, on their own, to outweigh the complexity burden of legacy transformation.

Adding to the problem is the fact that, because legacy platforms have typically been part of an organization’s IT architecture for years, capitalized expenditure on their deployment may well be fully depreciated, and run-rate costs are likely low, creating a “low cost of ownership” perception.

A business-driven focus is essential

Now that you know that platform-by-platform remediation may not work, what can you do instead?

The answer lies in re-orienting the business case with a TOP-DOWN FOCUS.

This requires a radically different way of thinking about the organization’s architecture: no longer viewing it through how it exists right now, but rather constructing a vision of how it would look free from legacy.

By placing the emphasis on new target capabilities, you can start building the business case around opportunities for business growth, via new revenue pathways and new target customer segments.

In this way, the business case is no longer driven from within the IT department, but instead becomes a driver of core business strategy.

Steps to success

To sum up, the business case for overcoming the legacy technology trap is based on the following steps:

  • Adopting a business-driven, step-by-step approach, rather than a revolutionary, “big-bang” transformation.
  • Converging business and IT operating models to create one integrated digital organization.
  • Tackling each layer of the IT stack with tools, platforms and services enabled by open cloud environments.
  • Simplifying data access and improving front/back-end integration.
  • Injecting innovation by replacing incumbents with new strategic IT partners.

In my next post, I will define concrete steps for escaping the legacy technology trap, and discuss how Accenture’s expertise can help.

Until then, take a look at the full Overcoming the Legacy Technology Trap—A playbook for legacy IT transformation in the insurance sector, and the Escaping Legacy—Why bank’s core systems must be made fit for purpose report.

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