Financial and enterprise applications have become more essential than ever in the past year. According to a report by Plaid, 73% of Americans see Fintech as “the new normal” ever since the advent of the COVID-19 pandemic. But now that such applications are becoming even more widely used, it is crucial that these applications stay up-to-date on their software.
Modernizing your legacy application can provide your customers with years of continued use and your organization with years of additional revenue.
Companies in the finance sector, in particular, are less likely to replace old software unless it’s broken (the old adage: if it’s not broken, don’t fix it). However, this can be detrimental to operations. If financial companies only become digital on the surface—that is, embrace new technologies and make other changes—they will still have an outdated core in terms of technology.
In this article, we cover the issues with legacy application modernization, as well as the benefits of updating software. We will also discuss strategies for modernization.
Pitfalls of Legacy Applications
Data Privacy and Other Security Risks
Financial applications are more likely to be targeted by cyberattacks than other industries—up to three hundred times more, according to the BCG Report. Furthermore, such attacks on financial applications lead to higher risks than other industries. This makes it even more dangerous for financial institutions to use legacy systems, as they often represent a huge risk when it comes to security. Legacy software isn’t designed for today’s standards of cloud, API, blockchain, and big data. Older legacy systems are also less resistant to cyber-attacks and harmful software. According to Symantec, legacy systems and other outdated systems are vulnerable to malware and breaches, which can lead to data privacy risks. With legacy systems, you could put your entire network at risk.
Costly to Maintain
Often companies maintain legacy systems because although they cannot be updated, they are mission critical. However, because of this, the slightest hiccup can be extremely painful.
For example, supporting obsolete applications takes up the majority of Federal IT spending. Imagine the ROI if only a fraction of this had been spent on infrastructure modernization, redundancy and security.
Furthermore, because legacy software is usually obsolete, there are few experts able to fix them, making such repairs costly. There are also other hidden costs to legacy software. A Reuter’s survey found that compliance costs for financial legacy software is a black box. For example, how do you calculate the inefficiencies of an outdated user experience? What is the opportunity cost you face against competitors if you can’t act quickly or access key data to make strategic decisions? How do you quantify loss of agility, or the inability to change and adapt to an evolving environment? Although updating legacy systems may seem costly upfront, it will save much more money and time that it takes to keep old software functioning in the long run.
Due to their older nature, legacy systems have slower operating speeds and often glitch. Legacy systems are also often unstable. This is often due to the fact that legacy systems are no longer supported and do not benefit from vendor updates, which fix bugs and stability issues. In fact, according to a Samanage survey, American businesses lose up to $1.8 trillion a year in wasted productivity due to outdated technology. It’s clear that with legacy software, the extra time it takes for teams to perform basic functions adds up to large losses in time and money.
Benefits of Modernizing Legacy Applications
Adoption of New Technologies
The coronavirus pandemic has further emphasized the importance of scalability and adaptability in technology. This growth has been especially apparent in the past year. In 2020, investment applications saw 88% growth in sessions and payment applications saw 49% growth in sessions, according to a report by Adjust and Apptopia. However, legacy software reduces your organization’s flexibility and scalability, and limits the integrations you can perform. As a result, older systems need to be complemented by other technology layers to meet current needs. This results in complexity and more management that makes it more difficult to respond to market opportunities and emerging technologies. Adopting new technologies, such as cloud computing, is essential to take advantage of new capabilities and save costs. Modernizing legacy applications is the only way to take advantage of these technologies.
Better Customer Experience
Modernizing legacy applications can improve the customer experience in a number of ways. For one, a new system will be less slow and glitchy, and not as prone to crashes. Without these software setbacks, your organization is less likely to lose business to other institutions. Updating legacy software can improve speed and effectiveness and reduce risk.
Not only will new software reduce the costs associated with running legacy systems, but can also help you generate revenue. As well as encouraging business, research has found that modernizing legacy applications can increase business revenues by up to 14%.
Strategies for Transforming Your Legacy Apps
Leveraging AI and Machine Learning
When it comes to modernizing your legacy software, using AI and machine learning have many benefits. However, it’s important to distinguish the two: AI, or artificial intelligence, is a broader term for intelligent software that emulates human thinking and behavior. On the other hand, machine learning is a subset of AI which learns from data and makes changes, without being programmed specifically. As a result, AI and machine learning can both capitalize on providing new insights that range from financial to social media monitoring to customer feedback. All of this data can help your software better serve your customers. Incorporating AI and machine learning will take your application to the next level, but it can’t happen with a legacy system.
With an modernized legacy system comes opportunities to upgrade security and data privacy. In fact, according to a 2020 survey by IDG, 78% of IT leaders believe their organizations lack sufficient cyberattack protection. Security breaches in financial and enterprise systems are only increasing with technology (such as machine learning and 5G) and with working from home businesses. Outdated software simply doesn’t have the security your organization needs to keep up with these ever-changing challenges.
Ensuring Data Privacy Compliance
The requirements for data privacy have changed as well. Laws such as General Data Protection Regulation (GDPR) in the European Union regulate data security measures, data protection by “design and default,” the processing of data, and more. Worldwide companies that have a database including EU citizens are bound to these laws. But adhering to these regulations favors the consumer, as it allows for more transparency and signals a positive foundation for your future interactions. Modernizing legacy software, however, is the first step to having these essential security and data privacy updates.
Extending to Mobile
An essential part of legacy transformation is building a system that can extend your service to mobile devices. The pandemic has made it clear that the public is largely switching over to online and mobile financial services. When embarking on a legacy update, also ensure that your system can extend to mobile.
Incorporating Enhanced Data Analytics
While many confuse data analytics with AI, it’s important to have both systems implemented in your transformed legacy software. Data analytics uses data in a fast, efficient way to proactively solve problems. Through past customer insights and tapping into real-time time data streams, data analytics can help organizations provide better customer experiences. It can also help prevent fraud by detecting the ways anomalies are changing, for instance. Data analytics have also increased efficiency by being able to adapt to changing business needs. For all of these reasons, incorporating analytics is essential to financial and enterprise legacy transformation.
Simplifying Your Software
Simplifying legacy systems can be incredibly useful as well. With streamlined software it is easier to adapt to changing requirements. In the long term, such transformation can help your organization stay competitive and flexible to changing demands. With solid simplified software in place, you can build with more digitization techniques.
Updating the Experience and/or Performance
Utilizing new software to provide a stronger performance is beneficial in many ways. It will make for an improved experience for your organization (and can also save on costs and internal struggles), but it can also increase your customers’ experiences as well, boosting overall success.
Providing as a Subscription, a SaaS (Software as a service), or a Managed Service
Updating your service to a new paid model could not only be a good source of revenue for you, but could be more efficient for your clients as well. However, such software is not plausible with a legacy system in place. Creating a new cost-efficient system will open up the opportunity to implement these services to your system.
If you don’t have one or more of these strategies in place for your business, it may be time to modernize your legacy software. Catalyst UX will offer you a free evaluation for your application, and identify the guiding strategies to consider when updating your software. Contact us today to get started.