Risks of replacing legacy systems

Businesses regularly replace their equipment and machinery with modern systems. However, scrapping legacy systems and replacing them with more modern software involves significant business risk. Most managers try to minimise risks and therefore do not want to face the uncertainties of new software systems. Replacing a legacy system is a risky business strategy for a number of reasons:

• There is rarely a complete specification of the legacy system. The original specification may have been lost. If a specification exists, it is unlikely that it incorporates details of all of the system changes that have been made. Therefore, there is no straightforward way of specifying a new system which is functionally identical to the system that is in use.
• Business processes and the ways in which legacy systems operate are often inextricably intertwined. These processes have been designed to take advantage of the software services and to avoid its weaknesses. If the system is replaced, these processes will also have to change with potentially unpredictable costs and consequences.
• Important business rules may be embedded in the software and may not be documented elsewhere. A business rule is a constraint which applies to some business function and breaking that constraint can have unpredictable consequences for the business. For example, an insurance company may have embedded its rules for assessing the risk of a policy application in its software. If these rules are not maintained, the company may accept high-risk policies which will result in expensive future claims.
• New software development is itself risky so that there may be unexpected problems with a new system. It may not be delivered on time and for the price expected.

Legacy system maintenance costs