Stop pumping cash into your old legacy system clunker

May 1, 2010

There comes a time for all technologies when the drawbacks simply outweigh the benefits.

Key Points

Still, there inevitably comes a time for all technologies when the drawbacks simply outweigh the benefits.

Often the key to determining whether a legacy system has reached the end of the road is to look at the bigger picture, according to Peter Bristol, senior director of information technology with Medford, Mass.-based Network Health, a Medicaid plan.

When executives begin to wonder whether that dreaded time has come, they need to ask themselves:

1. Although I see the end of the line for this legacy system, how do I know if this is the right time to replace it?

2. Can I get a few more productive years from the technology and push the expense and productivity costs into the future?

3. I've come to grips with the fact that this legacy system is holding me back and costing more than it's worth, but how do I go about replacing it?

Even if this year isn't the right time to launch a new technology, major system replacement is a massive and expensive undertaking that can take years to plan, much less execute. Executives should know what signs to watch for and what they need to do to prepare, because despite what the old adage says, death and taxes aren't the only guarantees in life-legacy system replacement is, too.

There's no way to avoid it, because the law of diminishing returns eventually comes into play-much like the old clunker car that keeps running but needs a new quart of oil every week.

"While there are costs and risks associated with a major system change, the benefits will make it worthwhile in the end," says Davina Lane, executive consultant with Sinaiko Healthcare Consulting in Los Angeles. "You get to stop pouring money into upgrades that continue to cost more, yet offer an increasingly lower return. At first, you just need a little patch every six to 12 months, but eventually you'll also need to change hardware to keep supporting the old technology."

If the hardware fixes that keep the old system operational don't turn out to be a fit for a new system, even more investment will go inevitably down the drain.

Sometimes technology teams need to take a step back and look at the organization's entire IT ecosystem, Network Health's Bristol says. CIOs should look for internal or external customer dissatisfaction, whether there are an unusually high number of operational bottlenecks and emergency IT situations, or a disproportionate amount of time being spent on system maintenance.

He also recommends looking at the business landscape by measuring the organization's performance against external benchmarks, such as industry surveys and competitors' results.

Sometimes it's not the system itself that costs so much, but the related service costs, according to Eugene Sayan, founder and CEO of Softheon, a business process software provider based in Hauppauge, N.Y.

"It's really about the total cost of ownership," he says. "As technologies get older, fewer vendors support them. Over time, companies can become more and more dependent on a decreasing number of vendors, and they have no choice other than to pay whatever those vendors want to charge."

On occasion, analysis might show that only one or two components of a legacy system are causing a problem. In that case, it might be possible to build a bridge to work around the outdated functions while squeezing a few more productive years out of the otherwise efficient system.

"Some legacy systems have commonalities that allow you to connect the old to the new fairly painlessly, because today's technology is so flexible that we can put a Web interface on just about anything, even an old COBOL system," says Derek Woo, Sinaiko's managing director of revenue cycle and informatics. "But just because you can, doesn't always mean you should. If the systems don't talk well enough, you're just perpetuating the problem and pushing it into the future."