Do you remember the last time you updated your phone’s operating system? Or how about your computer’s software? Chances are, you do it regularly to ensure you have the latest features and security updates.
Similarly, businesses need to modernise legacy systems in order to adopt the emergence of a broad range of new technologies to streamline operations, reduce costs, enhance security and improve competitive edge.
With cloud technology at its core, IT modernisation initiatives can help organisations to create more value through technology-based business innovation and digital transformation.
“Enterprises can leverage the cloud as a source of transformative value, which is estimated to be more than $1 trillion, across industry verticals with multiple use cases within each.”
The real value of modern IT systems lies in the business transformation benefits that are greater than just cost efficiencies. Companies that fail to modernise IT systems risk falling behind competitors, losing customers, and missing out on growth opportunities.
Enterprises need to act fast, and any delay in IT modernisation could be detrimental to business interests. Here are five reasons why organisations should not push back IT modernisation.
1. Inefficient and costly development and maintenance for applications
The development team must use the most agile environment to build and maintain applications requiring new architectures, tools, and business models. Enterprises also need to take legacy, on-premises applications, convert them to cloud-based, mobile-friendly applications, and run them efficiently. Application modernisation can help enterprises improve application development and maintenance productivity by 38 per cent and infrastructure cost efficiency by 29 per cent for using cloud-based applications.
Besides, modern IT applications and systems improve customer experiences, such as faster response times, personalised service, and easy access to information. According to a study, 80% of customers consider the company’s experience equally important as its products and services. Therefore, businesses that delay IT modernisation risk losing customers to competitors who provide better experiences.
Additionally, outdated systems are more prone to failure which can lead to significant financial losses for businesses in the event of unplanned downtime. The average cost of downtime varies from $5,600 per minute to $9,000 per minute, which again depends on industry vertical, organisation size and business function.
2. Limited scalability
Scalability and agility are critical in today’s business environment, and businesses with outdated systems risk losing market share to more agile competitors. The legacy system may have limited scalability, making it difficult for enterprises to scale business operations cost-effectively to meet their evolving needs. It restricts enterprises’ ability to handle the large volume of data generated by businesses and leverage modern analytic technologies for deriving valuable business insights.
According to research, companies that embrace enterprise agility can improve operational performance by 30 to 50%, leading to an improvement in financial performance by 20 to 30%. Therefore, businesses that delay IT modernisation risk falling behind competitors in terms of operational efficiency and financial performance.
3. Security vulnerabilities
Legacy systems have vulnerabilities that cybercriminals can exploit, and they are the most significant threat to a company’s security. In addition, older software may not receive updates or patches, making it more susceptible to cyber-attacks.
“The cost of data breaches and compliance risks can be high, not only in terms of monetary losses but also reputational damage. According to a study by the Ponemon Institute, the average cost of a data breach in 2022 was $4.35 million.”
This study also attributed outdated IT systems to be a primary contributing factor for many of the breaches.
Having modern technology and systems in place can reduce this cost significantly. For example, organisations which have adopted the cloud can cut the cost of any cybersecurity breaches by 26%.
4. Innovation challenges
With modernised IT systems, businesses can leverage APIs to integrate disparate systems and unlock valuable data from various sources. Businesses can also use advanced data analytics to gain insights into customer behaviour, identify trends, and optimise operations.
One of the largest container logistics & shipping companies used the cloud to implement an innovative operating model which enabled users to do resource management on their own. The cloud platform enabled them to create tools and processes for real-time chargebacks at a project level. It also provided visibility into license management and better analytics to understand consumption patterns and potential cost savings.
Having a modernised IT system allows businesses to innovate and stay ahead of the competition. For example, the leading video rental company in the early 2000s, Blockbuster, ended up losing out to online streaming pioneer Netflix, who leveraged customer data to create an innovative analytical model powered by cloud computing. At the core of Netflix’s business model is its machine learning-based recommendation engine, which offers a personalised recommendation to users.
5. Costly Maintenance
Outdated systems require more maintenance and support, which can be expensive over time. Modernising can save you money in the long run by reducing maintenance costs and improving operational efficiency.
One of the leading German multinational automobile manufacturers has created a common cloud platform that connects 124 plants, 500 warehouses, and 1,500 suppliers. The company has set a goal of 30% factory cost reduction by 2025, leveraging its industrial cloud, which will enable it to consolidate real-time data from all its machines and systems across the globe and utilise advanced analytics tools to derive valuable insights for process improvement and innovation.
Better late than never
Delaying IT modernisation can have serious consequences for businesses. Delaying IT modernisation can lead to inefficient and costly application development and maintenance, limit scalability, restrict the adoption of emerging technologies and innovation capabilities, and increase the vulnerability of IT systems to cyber-attacks and data breaches.
“Central to IT modernisation initiatives is cloud technology, which has changed enterprise IT and redefined the competitive landscape.”
According to Gartner, 51% of enterprise IT spending in the four categories of application software, infrastructure software, business process services and system infrastructure markets will shift from traditional solutions to the public cloud by 2025.
It is therefore important that businesses act swiftly to establish a secure cloud-driven ecosystem to power their IT modernisation and remain competitive, meet customer expectations, and stay ahead of the curve in an ever-changing business landscape.
To know more about how Tata Communications can help enterprises with their IT modernisation journey, click here.