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What is a Legacy System?
A legacy system refers to outdated software or hardware that continues to be used within an organization despite being superseded by more advanced technologies. These systems often serve critical business functions but are difficult to maintain or integrate with modern solutions.
Classic Legacy System Examples
Common examples of legacy system are:
- COBOL: Introduced over 60 years ago, this “granny” programming language is still critical in banking and government sectors. Despite its reliability, they face a dwindling pool of developers, making updates and maintenance increasingly difficult.
- Mainframes: Around for over 50 years, these robust systems handle massive data processing, particularly in financial institutions. However, their high maintenance costs and limited flexibility have made them less viable for modern needs.
- Monolithic systems: Developed 20–30 years ago, these architectures are tightly coupled, making updates and scaling challenging. They often struggle to adapt to the demands of cloud-native and microservices-based technologies.
Why do these legacy systems exist?
Black Box Phenomenon
Legacy system, often updated over time, risks becoming “black boxes” when experienced personnel retire or leave, taking critical system knowledge with them. This leads to a lack of understanding, making maintenance and troubleshooting increasingly difficult. Coupled with an aging workforce and a shortage of skilled professionals, organizations struggle to find talent capable of sustaining or modernizing these outdated systems.
Departmental Silos and Fragmented Optimization
It is common for individual departments in large organizations to tailor systems by adding functions specific to their needs. While this may serve short-term goals, it results in fragmented optimization, making the system overly complex and unwieldy. Eventually, it will leave the system outdated and contribute to the legacy system problem.
Dependence on External Developers
When an organization lacks in-house resources for system development, outsourcing becomes a necessity. However, entrusting the entire development process to external vendors without ensuring an adequate internal understanding of the system poses risks. Such systems are more likely to be mismanaged, and over time, they devolve into legacy system that are hard to modernize or replace.
Resistance To Change
Finally, Japanese culture is famous for valuing tradition and established processes, which leads to a cautious approach to change. Not just employees, even the C-level would often hesitate to embrace large-scale transformations in company infrastructure and technology, as their deep-rooted beliefs prioritize stability and harmony.
Legacy System Issues: Hidden Costs and Risks
Outdated legacy system can create a range of problems:
Operational inefficiency
Outdated systems force employees into cumbersome workflows, turning minutes into hours. In today’s fiercely competitive market, where speed and efficiency are invaluable, this delay is a costly setback. By neglecting to address legacy system issues, businesses risk handicapping themselves in a race where every second counts.
High maintenance costs
Many businesses fear the cost of modernization, yet fail to see that maintaining outdated systems is far more expensive. According to METI, 40% Japanese companies spend 90% of their IT budgets simply keeping legacy technologies alive. The real price isn’t just financial—it’s the missed opportunity to innovate, increase productivity, and stay competitive. By resisting change, businesses don’t just spend money; they surrender their future.
Security vulnerabilities
Legacy system lacks modern security features, receive infrequent or no security updates, and frequently fail to comply with current security standards. This creates substantial risks of data breaches and cyber attacks, potentially exposing organizations to significant financial and reputational damage.
Incompatibility
These outdated systems struggle to integrate with modern technologies, creating operational silos between departments. Limited support for contemporary APIs prevents organizations from effectively implementing cloud services and AI solutions, ultimately hindering technological innovation and business agility.
How to Change Legacy System: Steps to Modernization
Migration and Modernization are 2 key strategies to upgrade legacy system.
- Migration focuses on transferring existing systems to a new environment while keeping the architecture intact.
- Modernization often involves replacing legacy system entirely.
Legacy Migration Practices
Rehosting (“Lift-and-Shift”): Move the system from its current environment to a new infrastructure, such as the cloud, with minimal changes. This is a quick and cost-effective way to improve system performance without significant redevelopment.
Example: Migrating an on-premise COBOL system to a cloud-based virtual machine.
Re-platforming: Adjust and optimize the system slightly while migrating it to a modern platform. This often includes upgrading databases, middleware, or frameworks to improve scalability and reduce operational costs.
Example: Moving a legacy mainframe application to a cloud-native platform such as AWS or Azure.
Data Migration: Transfer data from outdated systems to a new, modern database or infrastructure. This ensures that valuable information is preserved while enabling access to advanced analytics and reporting capabilities.
Example: Transferring data from a legacy IBM DB2 database hosted on a mainframe to a modern PostgreSQL database in the cloud
Read more about VTI’s successful case study of AWS Cloud Migration for Japan’s Top Retailer here
Legacy Modernization Practices
Rearchitecting: This involves redesigning the entire architecture of a legacy system to leverage modern technologies.
Example: Shifting from a monolithic architecture to a microservices architecture
Rebuilding: Starting from scratch to create a completely new system.
Example: Replace old ERP systems with a cloud-native solution using AWS Lambda and DynamoDB.
Refactoring: Focusing on restructuring the existing system without changing its core functionality. It simplifies the codebase and updates the system’s structure to make it more efficient, scalable, and compatible with modern technologies.
Example: Refactor monolithic system into microservices with Docker and K8s.
Replace: Discard existing apps and use commercial software
Example: Replacing a legacy COBOL-based mainframe banking system with a cloud-based core banking platform like Temenos.
Key Considerations for Legacy Modernization
Legacy Modernization demands a strategic approach: not every challenge requires a complete overhaul. Targeted updates can often be more effective than transformation. However, the critical challenge lies in expertise—with Japan’s aging workforce, finding skilled professionals domestically is increasingly difficult and expensive.
Offshore outsourcing emerges as a smart solution. By tapping into global talent pools, companies can access specialized skills, reduce recruitment costs, and ensure smooth technological transitions. The goal isn’t just changing systems and reducing cost, but unlocking potential for efficiency and innovation.
VTI: The Ideal Outsourcing Partner
VTI offers a unique value proposition by addressing both challenges simultaneously:
- Proven Expertise: With years of experience serving Japanese clients, VTI has built a strong reputation for understanding the local market’s technical and cultural requirements. Trusted by many customers, VTI has expanded significantly over the past 7 years, establishing 4 branches in key cities across Japan.
VTI operates in four countries, with Japan hosting its largest presence—four branches—highlighting its strategic importance - Cost-Effective Solutions: Operating from offshore locations, VTI provides skilled, young talent at competitive rates, ensuring high-quality delivery within budget. Within our experiences, by entrusting an offshore ICT partner, businesses can save up to 50% of operational cost.
- End-to-End Support: From managing complex system to implementing modern DevOps practices, VTI’s comprehensive services ensure a seamless transition to a more agile, future-ready IT infrastructure.
VTI’s expertise goes beyond words, proven by prestigious achievements. In September 2024, VTI Group proudly secured a spot in the “Top 10 Software and IT Services Outsourcing Companies” category of the Vietnam Top 10 Digital Technology Companies 2024. Organized by the Vietnam Software and IT Services Association (VINASA), this award reinforces VTI Group’s position as a trusted leader in Vietnam’s tech industry.
See more about our Awards & Recognition here.
VTI transforms legacy system limitations into strategic opportunities, delivering precise migration solutions that optimize both time and cost. We don’t just modernize system—we architect pathways to sustainable digital transformation that align precisely with your business goals.
Conclusion
Legacy system transformation is a strategic imperative, not a technical choice. VTI stands at the forefront of this digital evolution, offering precise, cost-effective solutions that transform technological challenges into business opportunities. By bridging expertise, innovation, and strategic insight, we ensure our customers a future-ready IT infrastructure that drives innovation and success.
Learn more about how our services help you with your legacy system here.
Source:
METI (2024)- Overcoming the IT system “2025 cliff” and full-scale deployment of DX
