Legacy Systems: The Cost of Doing Nothing

When a company chooses to modernise, the up-front expense is always clear. Managers know exactly how much spending has been allocated to building new systems and overhauling old ones. The cost is easy to establish, and the benefits are quickly felt. 

But what is less clear is just how much money financial institutions end up spending or losing when they simply do nothing.  

Legacy technology increases the cost of doing business by slowing down everyday processes and adding friction throughout an organisation. The amount of old customer data stored on these systems also creates a breach risk and can cause serious compliance issues.  

Additionally, legacy tech carries an opportunity cost. When companies are stuck with outdated technology, they put themselves at a competitive disadvantage, missing out on opportunities. To stay competitive, financial institutions should view technology as an enabler that supports agility and innovation, rather than as a constraint. 

The benefits of modernisation 

On the other hand, modernising old systems has the opposite effect: boosting security, resilience and productivity whilst giving financial institutions the ability to quickly respond to a shifting regulated landscape.  

So what’s stopping you? We know the rational decision is to modernise. But we also understand why banks and insurance companies avoid it.  

Modernisation can seem expensive. In truth, it is much more affordable than simply absorbing the costs of legacy tech.  

 Disruption can also seem inevitable. Yet it’s nothing compared to the dangers of sitting back and waiting for problems to arise.  

 Critical Software specialises in lowering the risk of change and giving banking leaders the ability to deploy new technology progressively – with a minimum of cost and disruption.  

 We understand that modernisation looks like a challenge, but it doesn’t have to be. With the right partner, the benefits will quickly outweigh any difficulties.  

By adopting a phased approach, financial institutions can avoid the pitfalls of large-scale overhauls, such as feature freezes or massive projects that strain resources. Incremental updates allow for continuous improvement, enabling institutions to adapt swiftly to market demands without compromising stability. 

Transformation may seem hard. But one thing is clear: the cost of doing nothing is far greater than the expense, organisational upheaval and compliance considerations of modernisation.  

The risks of doing nothing 

• Cost: The IBM 2024 Cost of a Data Breach Report revealed that the average cost of a data breach is $4.88 million - with legacy systems often more vulnerable due to outdated security protections.  
• Disruption: Legacy systems are more prone to outages and slow recovery. In complex banking environments, this can lead to problems, including lost transactions, customer churn, and even serious reputational damage following a cybersecurity incident.  
• Customer attrition: Outdated digital experiences lead to customer frustration and attrition, especially among younger demographics who are used to seamless app-based services and the gold standard customer experience delivered by Big Tech.  
• Competitive Disadvantage: In a fast-moving market, legacy technology slows innovation and forces tech teams to focus on fighting fires or maintaining older systems. While time is wasted, competitors will move forward, potentially creating an innovation gap and leaving outdated banks behind. 
• Operational Inefficiencies: Outdated systems are slow, rigid, and prone to errors. As companies continue to use these systems, manual processes often become the default, leading to redundant tasks, unnecessary complexity, and wasted resources 
• Loss of Business Agility: When companies depend on legacy systems, they lose the flexibility needed to respond quickly to changing market conditions. These older technologies are often difficult to update or scale, making it hard for organisations to innovate or pivot when necessary 
• Data Silos: Disconnected systems trap information in isolated pockets across an organisation. This fragmentation makes it difficult for teams to access consistent, real-time insights, leading to delays, duplication, and poor decision-making. In a competitive landscape, these blind spots can be costly, stifling agility and slowing innovation. 
• Complexity: Constant patching and layering on new features have also left banks with disjointed systems that struggle to work together - resulting in clunky operations and frustrating customer experiences. 

How to assess legacy tech and prepare for modernisation  

A legacy system analysis involves a comprehensive evaluation of the current technology infrastructure to identify areas that hinder operational efficiency, agility, and innovation. The process includes analysing system architecture, data flows, integration points, security, and compliance with industry regulations.  

The goal is to pinpoint bottlenecks, technical debt, and opportunities for modernisation - whether through incremental enhancements or full-scale replacement. This assessment helps leaders understand where they stand in terms of digital transformation readiness, ensuring they prioritise investments in technology that align with their long-term strategic objectives, while minimising disruptions.  

After assessing legacy systems to decide which technologies to upgrade or replace first, data should then be moved from older applications to a new platform, making migration more straightforward. 

In the short term, it can be advantageous to focus on solutions that can be augmented in a modular fashion to improve performance quickly and with a minimum of upheaval.  

Don’t delay – start modernising today 

Now is the time for banks and insurers to assess and modernise their legacy systems. With increasing digitalisation, regulatory pressures, and customer expectations for seamless, real-time services, legacy infrastructure simply cannot keep up.  

Delaying modernisation efforts only deepens the gap, leading to operational inefficiencies, security risks, and missed opportunities for innovation. Organisations that fail to act may find themselves at a competitive disadvantage, unable to adapt to new market demands or capitalise on emerging technologies. 

By launching a full modernisation programme, institutions can secure their place in the future, ensuring they remain agile, secure, and responsive to the needs of their customers. This process can take place at your own pace, following a phased and progressive path rather than risking disruption by doing everything at once. 

Banks and insurance companies that do not modernise can be sure their competitors are. Don’t get left behind.  

Start modernising your legacy systems. 

Rodrigo Baptista, Principal Engineer for Digital Finance Solutions, Critical Software.