What is the hidden cost of maintaining legacy systems?

One of the main factors when deciding whether to keep or replace legacy systems is determining the cost. Here, we dive into five hidden costs CIOs should be aware of today.

CIOs are caught up in a constant need to balance old and new technology, systems, and processes. On the one hand, to embrace the new, they need to help their organization address new opportunities, deal with challenges, or improve efficiency and effectiveness. On the other hand, to commit to the existing technology, they must power existing processes and realize the full value of past investments in hardware, software, and staff, including the cost of maintaining a legacy system.

Somewhere along the line, "the existing system" imperceptibly transitions to "the legacy system." It's not simply a matter of no longer being the newest, fastest, and best: Most offerings cease to be those things within months of release. But some combination of distance from the state of the art, the approach of the official end of life, and the cessation of significant functional upgrades does the trick.

What should a CIO do when faced with a legacy system, be it hardware or software, that is still functionally viable? It's easy to say, "as long as it's cheaper to run the legacy system than to acquire something newer and better and continue to cash in on the original investment." It can be harder to fully account for the costs.

Here are five of the hidden costs of maintaining legacy systems that any CIO should keep in mind:

1. Maintenance

This one is the easiest because there's a bill each year, whether from the original provider or an aftermarket shop. Just remember, these costs typically decrease for a while as a product approaches the end of life -- i.e., as spare parts become more available when most users sell off old storage arrays or phone systems -- then increase steadily, sometimes sharply, afterward, such as when those parts run out of stock.

2. Environmental costs

For the most part, a new system capable of accomplishing a given task will be smaller, consume less power, and produce less heat than a legacy system doing the same job. The data centers left with dusty rows of empty racks in the wake of massive server virtualization onto newer generations of hardware or the migration of workloads to the cloud demonstrate this principle in action.

Modernization can not only reduce power costs but also enable the downsizing of cooling and power infrastructure.

3. Staff costs

The older a legacy system is, the less common the knowledge required to operate and maintain it becomes. This can turn into a need to pay unusually high wages for staff with old and rare skill sets or a need to pay to have new staff trained up on the legacy platform, which can mean a knock-on cost to the staff themselves, as they devote their time to picking up skills on the trailing edge of the technology curve. It can also translate into a need to maintain a larger staff.

Read: Insourcing Nightmares

4. Technical debt

The flipside of the costs associated with maintaining a staff skilled in a legacy system's operations is the cost of not doing so -- in other words, allowing the overall staff skill set to degrade over time and technical debt to accrue. This can result in crises, consulting bills, or both.

A crisis is when a service-affecting problem arises and staff members must learn how to solve it in the moment, which usually prolongs the event. Or, to speed up the resolution of the problem, the business may have to pay consultants -- often at very high costs compared to in-house staff -- to temporarily patch over the missing skills. Or, worst case, the staff try and fail to fill in the gaps in their skill, therefore prolonging the interval before outside talent is brought in.

5. Opportunity costs

This can be difficult to quantify in any way but retrospectively. Just as staff members incur individual opportunity costs when they devote time to mastering old systems rather than emerging ones, so too can businesses incur opportunity costs from clinging to legacy systems.

A business that ties up too many of its resources in a legacy system may be unable to invest in emerging technology areas such as AI and IoT. This will cost them not just the new revenue streams or improved efficiencies that could come from projects centered on those new technologies, but also the expertise they would develop and could then apply to other opportunities down the line.

Certainly, it can be irresponsible and shortsighted to upgrade systems before there is a business need or opportunity to justify the cost. However, it can be just as irresponsible and shortsighted to cling too long to a system on the trailing edge of a technology wave. CIOs need to make an effective, well-rounded account of the full cost of maintaining the legacy system to balance against the costs of adopting the new system in making their decisions.