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Legacy IT System Modernization: Benefits & Barriers

A key challenge facing IT leaders in the fast-changing digital landscape is the constraints of legacy systems which limit business agility. These old systems are becoming increasingly difficult to change and no longer provide efficient support to growing business activities.  

However, the continuing process of transforming legacy IT systems is no easy task. As of 2020, 78% of companies are still reliant on outdated business critical systems, though many have started modernization efforts. About 33% are depending on legacy technology for overall systems.  

 

The Benefits of Legacy Modernization

 

Legacy modernization isn’t just about updating IT systems with the latest technological tools. Instead, it is a critical component that has helped accelerate digital transformation efforts by reducing network complexity and cost, enabling cross-platform collaboration, and optimizing process flexibility.  

 

Cost Reduction

 

The main benefit of modernization is cost reduction. Cleo reports that organizations lose about USD $1 million in total annual revenue due to legacy technology and applications. The lack of interoperability inherent in legacy systems hinders digital transformation and incurs additional costs to businesses when new technology is introduced into a non-homogenous IT architecture, creating lost opportunities.

Beyond that, legacy systems are also expensive to maintain the older they get, costing businesses up to 15% each year for just maintenance. OverOps estimates that poor quality in legacy systems cost businesses in the US about $520 in 2020. Similarly, the shrinking pool of skills and knowledge required to operate and service legacy systems will end up costing companies more in the long run as these skills become more expensive. 

Another major cost of legacy systems is technical debt – the cost incurred by reworking legacy systems due to the implementation of limited short-term solutions over effective strategies that do better in the long run.  

Overhauling legacy systems can be a complex and costly decision. However, the longer decision makers wait to implement transformative solutions, the higher the technical debt. This debt also includes the potential revenue a business loses due to the inability to stay competitive in a fast-changing market.  

Modernizing IT systems will significantly reduce these costs, saving organizations millions each year that could otherwise be channeled into other valuable endeavors.  

 

Better Mitigation of Security Risks

 

Generally, legacy systems are more vulnerable to cybersecurity threats. Over time, the security capabilities of legacy IT systems become outdated. The network may no longer have the necessary technology to deter modern attacks, making them an easy target for bad actors.  

This poses a significant business risk and additional cost for businesses. IBM’s Cost of Data Breach Report estimates that the average cost of a data breach in 2021 is $4.25 million, the highest it has been since 2015. 

Check Point Software found that state and local governments in the US experience a 102% increase in cyberattacks on critical infrastructure in the first half of 2021. Many of these were running on legacy systems. 

Moreover, the volatile global conflicts – such as the Russia-Ukraine war – also has a ripple effect on cybersecurity, with US-based cybersecurity agencies observing an 800% increase in cyberattacks in the the two days following the start of the Russia-Ukraine war. 

This makes the case for legacy modernization, which would enable organizations to shore up against more sophisticated cyber threats.

 

Increased Competitive Advantage

 

Another clear benefit of updating legacy systems is that a more integrated network makes businesses more agile and scalable. These are both important traits for any organization that wants to stay competitive.  

An agile and flexible business is better able to react and change to the environment and market demands. It is also better able to serve its employees by optimizing processes to increase productivity while also serving customers more efficiently.  

Modernized systems also free up valuable IT resources that would otherwise be occupied with putting out fires within the legacy system that is no longer supported by third-party vendors.  

Without the need to constantly babysit legacy systems, IT teams can focus on tasks that will drive the business forward such as exploring advanced technology and innovative transformation ideas to serve shifting demands.

 

Barriers to Modernization

 

Though the IT leaders are focused on legacy modernization, Cleo found that the 2021 Advanced Mainframe Report notes that 74% of organizations fail to complete these projects. The report suggested that part of the reason for this is that organizations have underestimated the complexity of the processes involved, especially as they were rushed into it due to the pandemic.

Breaking it down further, Levvel’s Legacy Modernization Report states the lack of buy-in from key decision makers in an organization is major factor, with 45% of leaders saying that a main barrier to modernization is it is a low priority compared to other initiatives.  

Another 37% said that it is because the business and IT sides of the organization are not aligned while 31% feel that there is no clear return of investment (ROI) to legacy modernization.  

Our Executive Trend Survey supports these findings, with 53.4% of IT leaders noting that the biggest internal challenge they face with tech adoption is integration with legacy systems. The incompatibility of aging IT systems creates a mounting technical debt that would only make legacy modernization even tougher task than it already is. 

In line with that, modernization efforts require careful planning to ensure that legacy IT systems are modernized in the most efficient ways possible, using the best tools and without compromising key business functions. In fact, 38% of IT leaders blamed the failure of their organization’s legacy modernization projects on a lack of planning.

 

Managing Legacy Modernization

 

Replacing or upgrading an entire IT system is a complicated process, especially when business critical systems are involved. However, there are certain strategies IT leaders are keeping in mind when tackling this mammoth task.  

Approaching legacy systems modernization with a holistic mindset is key and requires buy-in from decision makers as well as team members. After all, Levvel notes that the primary resistors to modernization are business-critical leaders (26%), executives (24%), and IT teams (20%).  

One way to encourage buy-in is by setting a clear plan and defined ROI based on frank discussion with all levels of the organization about where transformation is most needed and how it can serve them.  

Each organization will have to carefully study its current IT systems to decide across all levels where modernization will have the best impact on revenue, market share, customer experience, security, productivity and other business metrics.  

It is up to IT leaders to lead the way for legacy modernization that is cost-effective and as streamlined as possible. How would you do it?

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Günther Ghijsels: How Randstad Adapted to the Hybrid Work Environment

Going from fully office-based to fully remote and now a hybrid work model, organizations and employees alike are faced with a lot of change in such a short period of time. We speak to Günther Ghijsels, Chief Digital and Information Officer at Randstad Group Belgium, on the evolution of work culture, effective leadership in a hybrid environment, and the importance of adaptive change management.  

 

What do you think effective leadership looks like in a hybrid work environment?

I think as a leader, there’s a huge shift that you also need to make in this new world. What I see happening now is that it’s becoming much more difficult to get everybody aligned and keep working on the same vision, and realizing the strategies that you have been setting out. So, you need to try to really connect the people to what you’re doing. Whilst in the past, you’re connecting physically with people – you’re having a chat, or you’re having a presentation – it’s much harder to get into the real connection with people virtually. It’s a question of how you organize the connection between you and the people that you’re leading. 

Building the connection with what you’re doing as a company, that you know what’s on the mind of the people so that you still can have the connection as you had before. It’s having kind of the same thing that we did unconsciously in the past. You need to do it now consciously in the hybrid world. 

You need to adapt as a leader. You need to serve them in the way they want to be served because you’re in a world of a scarcity of talent. We are in a world where people need to be completely comfortable in what they’re doing. You need to be there for them one way or the other. It’s not them that need to adapt, it’s you that need to adapt as a leader. 

 

How would a leader balance that with some people preferring to work from home and some preferring to work in the office?

That’s exactly the hybrid model. We have clear rules on how much time you can spend at home and how much time you’re supposed to be in the office, but everybody’s free to come when they want to come to the office. So, you don’t have the whole team at the same time in the office anymore and that’s, from my point of view, the most difficult thing.  

Make sure that you involve everybody in the discussion, that you involve everybody in the meetings, gets his moment of taking part in the discussion that you’re having. You need to facilitate this kind of stuff.  

 

How do you think the pandemic has redefined work culture and what should organizations focus on?

From my point of view, the culture is you need to trust people. Even before, you needed to trust people, but today it’s even more. You need to trust people because you don’t see people anymore. You don’t know what they’re doing, if they’re working, when they’re working. So, you need to build a lot of trust with people. It always comes down to having clear expectations, to having open conversations about what you expect from people.  

Also, you need to really make sure that you create a good feeling with the people that are working for you, and that they know why they are working for you. You need to spend much more time to really keep people connected to what you’re doing. Because if it is all virtual and there’s no connection to the company, why shouldn’t they work for another company in a totally other country or city? So, culture is becoming much more important to connect people to you. So how can you make sure that the values that you have as a company are also transferred to them in the virtual way.  

Trust is one thing. It’s also transparency, it’s keeping the feedback open. And I really believe that there shouldn’t be a difference between the virtual world and the physical world on how you work together. 

 

What are the challenges that organizations face with change management during the digital transformation process?

I think it’s discussing the why. And if you are clear on the why, then you get people along with you on the journey that you’re in. I’m always struck by the fact that people in their personal lives, things are changing very fast. They have their own clear expectations of what is going on, and what they are doing. But when you’re changing something about the way of working in the company, that’s always a huge change to people. You need to give them the same kind of eagerness for the change as you do in your personal life.  

You will not get everybody along. That’s also something that you need to be aware of. It’s not that you have everyone looking for a change. I think you need to try to really make clear what’s in it for them and use the same arguments as they would use within their personal life on the change that you’re doing in their professional life.  

 

What about some other challenges leaders face when trying to figure out change management during the digital transformation?

You need to adapt the way you’re doing things to the new environments that we are in. The change management practices need to change, in that sense. How you do it practically, how you support these kinds of things, you also need to change them, and you need to try to align it with the way that you’re working at the moment. For the people that are doing and bringing the change, it’s also a new way of working that you need to bring in place. As a leader, you need to facilitate this. Why are we doing things in another way? It’s not just because it’s different or it’s better. No, it’s aligned with the expectation of the people. 

 
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How can organizations use digital tools to spearhead change management efforts or strategies?

There are a lot of digital means now that you can use to really track and trace what you’re doing, and how far you’re going.  

If you’re introducing some new things in your organization, don’t forget from the start to also include the whole project measurements, to make sure that you measure the change and not only the business idea that you’re realizing. Because we tend to measure the results of things, but we also should try to measure the change rates that we are achieving. So how far are we in the change? There are always a number of KPIs that you can try to find out how far are you in the change. How do you measure that? If it’s about an application, for example, that you newly tried to introduce, how do you measure that people are really using all the functionalities that you have been introducing, and are they using it well? And if they are not using it well, how do you make sure that people who are using it try to influence other people? Do you see the connection between the people that are using it very well and people who are not using it?   

There’s a lot of social information available that you also need to use within your change environment. And that’s kind of new to us as a company as well. So how can we really try to use this kind of information to really steer learning? The aim is to get people comfortable with what they are doing and how can you facilitate this.  

By giving these kinds of small learning snacks to people, it’s also less overwhelming than before when people were just stuck in a meeting room or in a training for half a day. Now you can measure what people are doing and you can see where they have problems and where they don’t have problems. There’s a lot of information. Use data to also facilitate the whole change that you need to go through. 

 

How has Randstad’s approach to change management evolved in the last few years?

Yeah, it certainly has evolved. I just gave a number of examples that we are dealing with. We are trying to use data. That’s really the biggest step that we have been taking which we really need to dig into. People need to trust the data because the data tells you a lot of things, but people are kind of a little bit afraid of just using the data that we have and relying on all the data that we have. You need to build up the trust, you need to build up the process, and you need to become better and better at what you’re doing. And you need to become better and better at defining what are the right KPIs that you need to measure to change the behavior of the people because that’s what you’re doing within change management. 

 

You mentioned earlier that knowing what to do with the data and being able to use it properly are two different things, right? So how do you go about figuring that out?

It’s by experimenting. We tried to adapt to a very agile approach. Because you might draw a number of conclusions out of the data and define a number of actions, but you also need to measure the effect of those kinds of actions. You need to accept as a leader that some things don’t work, and you need to say, “Okay, this doesn’t work. Let’s try something else.”  

We had everybody working from home and at one moment in time, we came into a hybrid situation. The things that we were doing during the full lockdown and full working from home period didn’t work anymore in the hybrid world. You also need to adapt and really make sure that you measure all the things that you’re doing, and adapt the way you’re trying to implement change in your organization.  

 

How has the talent pool and talent requirement changed in recent years?

It’s changed a lot because you’re now in an environment where everybody’s fighting for talents. Everybody’s talking about the war for talent, but there is no war. The talent has won the war.  

So how do you create an environment where people are willing to work for you? That’s different for all kinds of people. You might be attracted by having a very nice work environment and having the latest tools available. For some other people, it’s about more of the purpose. So, what’s your unique selling proposition to the talent? You need to sell your company. It’s not the talent that sells himself to the company. It’s the company selling itself to the talent, and I think that’s a huge shift that we have been making over the last years.  

What I see is that with the younger people that are entering into our environment now, they have totally other needs than the older people that are in our company. So how do you, as a company, organize yourself to work with the different generations that have different needs? And how do you make sure that you have the connection between all those people? Because there are different mindsets, different ways of working, different ways of thinking. How do you make sure that you built those into one environment? Because the fast change that all the young people are used to is not always the fast change that the other people want in the organization. So, you need to balance between both, and you need to try to create an understanding between both worlds.  

*The answers have been edited for length and clarity.    

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Carl-Magnus Norden: From Idea to Global Business in Just 6 Years

The journey from an idea to a company that is growing at an industry-leading pace is not easy. However, several business examples show how it can be done, including Volta Trucks which manufactures and provides service for zero-emissions commercial trucks. 

Founder Carl-Magnus Norden started investigating the concept behind the Volta Trucks in 2016 and is now on track to go public with the company in 2023. He takes us through this journey and shares his strategy for the organization’s success on the future of electric vehicles.  

 

Identifying and Addressing Problems

 

Volta Trucks’ approach is to provide Trucks as a Service (TaaS), an innovation to accelerate the transition to zero-emissions commercial trucks and reduce customer complexity and risk. 

 
 

The growing appeal of electric vehicles (EVs) indicated that the market is ripe for such an innovation. Wanting to address three main issues of climate change, road safety, and driver shortage that is sweeping Europe and the United States, Norden came up with the idea for Volta Trucks.  

Norden emphasized the importance of listening to Volta Truck’s potential customers to identify the issues and the best ways to address them – which is the core of the company’s strategy right from the beginning. 

He said, “When you start a venture like we have done, I think It’s very important, number one, like we have done from day one, to talk to the customers, listen to their problems.” 

Norden recounted his discussions with Transport for London which illuminated the scale of the road safety issue that the city was facing. According to Transport for London, while only 4% of traffic in the city are trucks, they are involved in 78% of all fatal accidents with bikers and about 26% with pedestrians. This is a major issue that requires an effective and innovative solution which Volta Trucks wants to address. 

As for the driver shortage issue, Volta Trucks focused on the truck design itself using a “driver-centric” approach. A standard diesel truck is built in such a way that drivers are sat quite high up in the cab. Climbing in and out of a commercial truck over 20 times per day can be frustrating for many drivers, leading to them simply jumping out of the cab instead, Mr. Norden found. This results in many of them developing issues with their knees, hips, and joints.  

They are also sat on one side of the cab, meaning that they can only exit the truck on one side, which may pose safety risks when coming out on the side of traffic, creating blind spots. It also poses a risk for other road users.  

 
 

Coming with a “driver-centric” approach, the design by Volta Trucks starts with an electric drive train as a base, with the motor on the rear axle and the battery housed within the ladder frame. This allowed for full freedom to create a cab design that optimized for driver comfort and safety.  

Design features also include much bigger windows to minimize blind spots; a center seat for the driver allowing for exits on either side and 220-degree vision; and sliding doors to avoid risks to oncoming traffic.

 

Sharp Focus is the Key to Success

 

The key to Volta Trucks’ success in going from an idea to a global business was a sharp focus on its mission, according to Norden. 

One example of this sharp focus is Volta Trucks scope of producing only electric trucks. This means they only have one drive train technology to master, enabling the company to develop at a pace that many incumbents or existing marketplaces cannot.  

They also only manufacture mid-duty trucks at between 7.5 to 18 tons, leaving out long-haul trucks or small delivery vans. Further, Volta Trucks only offers two cargo box types: refrigerated and ambient. Their market research shows that this opens them up to at least 60% of the biggest cities in Europe. 

This level of focus led Volta Trucks to narrow its focus on city distribution with depots placed in the outskirts of cities, thus allowing Volta Trucks’ zero-emissions vehicles to go around the city making deliveries all day and come back to the depot in the evening.  

“The beauty of that is that they are stationary in the night. More or less, we know how long they are driving, and we can do the charging infrastructure around it. We don’t have to rely on public charging infrastructure. We install it at the depots,” Norden explained.  

To date, Volta Trucks have procured a location for a service center in Paris, with plans to open more centers in London and Madrid. They are setting up wide-reaching capabilities around maintenance services, charging infrastructure as well as finance and fleet management.  

 

From Big Idea to Big Business

 

In the passenger car market, Tesla has 75% of the market share in EVs in the US – with the remaining 25% being other major car manufacturers like Volkswagen and Mercedes. In the commercial vehicle world, Volta Trucks is making waves and growing rapidly.  

Norden attributed the company’s ability to outpace its competition because it started entirely from scratch. Volta Trucks created the opportunity for itself to not only come up with an innovative product but the services around it as well.  

Importantly, the company is not limited by legacy designs or organization. They are not held back by legacy business models. This allows Volta Trucks to start with a clean sheet and construct a business model, organization, and systems that are adaptable and tailor-made to its use case.  

 
 

“When it comes to strategy, …we tried to have a very simple and clear strategy. We have reimagined the urban truck, we are moving at speed and scale, and focus on sustainability and safety,” Norden noted.  

Volta Trucks is not a research project. Instead, it has jumped straight in with the intention to hit the market at volume with its product as soon as possible by leveraging proven, market-ready technology. They “look for people that know their business”. This strategy is applied across Volta Trucks’ supply chain.

For example, Norden worked with US-based Proterra for its batteries as the company has over a decade of experience working with electric buses and major commercial vehicles. For the motor and E-axle, Volta Trucks partnered with Meritor, one of the biggest axle manufacturers in the world.

Even in manufacturing, they have partnered with the existing manufacturing site for MAN Truck & Bus. As MAN ramps down, Volta Trucks is ramping up, allowing for plenty of room to expand.

Norden stressed: “You have to work very closely with all your stakeholders, I would say, and that has been our attitude from the beginning.”

“With the whole ecosystem, we have to work together. So in our case, we will have been talking to customers from day one, getting their input about design and other things. The same thing with our supply chain.”

“There is a lot of good developments out there. But we need to do it together.”

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How Does Good Employee Engagement Guarantee Organizational Success?

With the “Great Resignation” taking root as employees feel more dissatisfied with poor work-life balance, uninspiring jobs, and difficult managers, organizations are compelled to pay attention.  

Globally, employee engagement has been low for the past 20 years, with employees’ intent to stay in their jobs hovering just above 30% according to Gartner’s Global Talent Monitor. Worse still, discretionary effort – going above and beyond the call of duty at work – has been on a steady decline, registering just 15% in 2019.  

Unsurprisingly, employee engagement has taken a front seat in the strategic considerations of talent management leaders. However, even though about 90% of executives understand how important this is to an organization’s success, less than 50% know how to properly address the challenge. Especially in today’s technologically saturated workplace, ensuring employees are engaged can be a difficult and complex task.  

 
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What is Employee Engagement?

 

In order to address employee engagement, HR leaders must understand how it differs from employee satisfaction. The latter deals with the happiness of employees in their jobs which may have nothing to do with their sense of motivation, involvement, or emotional commitment to the organization. 

The engagement metric takes a deeper look at employees, specifically their level of involvement and enthusiasm for work and at the workplace, says Gallup. This is a measure of how actively employees are involved with their work or if they are simply going through the motions of daily tasks.  

Similarly, Gartner defines employee engagement as the measure of individual employee alignment with the organization and their willingness to go above and beyond the call of duty to achieve organizational goals.  

 

The Impact of a Highly Engaged Workforce

 

Employee engagement is a key driver of performance, making it a crucial piece of the puzzle to organizational success.  

Notably, People Element’s 2022 Engagement Report highlighted that companies with highly engaged employees show 81% less absenteeism and 43% lower turnover rates. Additionally, those companies also saw a 14% improvement in productivity, 18% increase in sales, and 23% increase in profits. The factor most affected was employee well-being which show a 66% improvement when employees are highly engaged. 

Gallup’s State of the American Workplace report further reconfirms the data, showing that low employee engagement can cost companies up to $550 billion each year in the US. Additionally, the impact is seen on the business side as Gallup reported that higher engagement led to a 10% increase in customer loyalty as well as a 64% decrease in safety incidents. 

 

Employee Engagement Markers 

 

With that in mind, CHROs who are seeking to measure the level of engagement in their teams are facing the challenge of gauging human behaviors and perceptions which are incredibly complex.  

CHROs and human resource leaders must consider a myriad of factors that contribute to an overall view of each person’s engagement levels within an organization. Generally, this is measured via an employee survey that is done regularly at all levels of an organization.  

Existing measurement frameworks for employee engagement – such as by Gartner, Gallup, and People Elements – suggest several important markers that should be considered.  

The first of these has to do with an employee’s understanding of their job as well as whether they receive adequate training, tools, and resources to perform their work well. Another relevant factor is whether employees feel that their work is important and connected to the organization’s overall mission. Employees that feel supported and valued tend to perform better.  

Next, engagement increases if employees feel that they have a good relationship with their managers, they feel they are supported, and that management is invested in their professional growth and development.  

Another core marker for engagement is an individual’s perception of senior leadership. Specifically, whether they believe the senior leaders are moving the organization towards a better future. Following that, it is also important to know if an individual feels that their own values align with those of the company. Employees who feel this alignment tend to perform better in their jobs.  

As Chief People Officer at Anyfin, Amanda Pusa Edwall notes: “I have found both personally, but also from my job with HR that one of the most difficult things is when a candidate’s core values don’t align with the company. I think when that happens, it’s almost impossible to do a good job.” 

Work conditions are another important driver of employee engagement. Particularly, it is crucial to find out if employees feel there is an effective feedback loop with their team managers, that everyone else on the team is equally committed, and that they receive adequate compensation and benefits. Also important is that employees feel that they have a work-life balance. 

While Gartner suggests annual or biannual surveys to measure employee engagement, they note that many in HR feel that more frequent insights may be necessary and will utilize real-time analytics for this.  

 

Analyzing HR and Business Metrics Together 

 

Correlating employee engagement with other HR metrics such as performance ratings, attrition, turnover rates, and more will give organizations a better view of how engaged their workforce is. Leaders can then take proactive measures to address any issues or underlying causes of low engagement on a granular level.  

Additionally, the measure of workforce engagement serves as part of a larger framework for measuring organizational performance. When tracked regularly, the data can help managers and business leaders make better decisions overall to improve their business metrics. 

A clear example of this at work is when American retailer Best Buy calculated that an increase in employee engagement of just 0.01% is worth US$100,000, according to a Harvard Business Review study. This underlines how important it is for organizations to have effective strategies in place to create a better work culture that matches their employees’ expectations, thus improving employee engagement. 

High employee engagement has been shown to reduce turnover, increase productivity, create better work and customer relationships, and ultimately have a positive impact on the company’s bottom line. It is up to HR leaders to come up with a strategy for employee engagement that best suits the needs of their organization and teams. What is your approach?