Let’s start by acknowledging the obvious: Updating legacy software isn’t cheap. However, when we discuss costs with clients, the most important number — how much it actually costs to maintain their legacy software — isn’t always part of the discussion. But it should be.
According to a recent survey, the true cost of maintaining legacy software costs an average of $40,000 every year, and drains IT teams of 17 hours each week. However, those survey numbers get even worse for government agencies ($42,190), and manufacturing and energy companies ($53,429). But there are more costs to consider apart from maintenance. In this blog, we’ll explore this topic in more detail, starting with the basics. Feel free to skip ahead if some of this is review for you!
In a nutshell, legacy software typically refers to older programs and applications that companies continue using even though newer versions exist. However, when it comes to custom software, it can be trickier to identify when your software would be considered outdated.
So let’s explore some real-world examples of when the “legacy” term would apply. Feel free to skip over this section if this topic is review for you!
Not all legacy systems are created equal. They become outdated for different reasons and can present unique challenges for modernization.
Here are the key warning signs that indicate that it’s time to modernize:
This one’s fairly obvious. However, just to address a common misconception, software that no longer receives security updates and is no longer supported by the developer and support can still be used. Companies that continue to use outdated software do so at their own risk.
Example: Windows 10 after its end of support (EOS) date — October 14th, 2025.
Outdated architecture creates fundamental structural problems that limit growth and innovation.
Many innovative companies initially started out with monolithic architectures and had to adopt more modular approaches to enable faster development cycles.
Example: Netflix’s original system.
Skill gaps can present a critical challenge when the original developers leave the organization, taking their institutional knowledge with them — a problem that's amplified by poor documentation and knowledge transfer practices.
Example: COBOL-based unemployment systems during COVID-19.
Scalability limitations become increasingly problematic as businesses grow, with legacy systems failing during peak usage periods and constraining user growth.
Example: Twitter (now X) originally had an architecture that couldn’t handle the growing volume of real-time tweets, resulting in “Fail Whale” incidents.
Innovation bottlenecks emerge when simple feature updates that should take days instead require weeks or months to implement. This slowdown often stems not just from legacy code, but from outdated development and deployment tools that make the entire software development lifecycle inefficient.
Example: Many enterprise resource planning (ERP) systems.
Beyond the cost of maintaining legacy software, there are a number of significant costs to consider.
Support personnel with legacy system expertise can name their price, and they know it. Many experts with legacy program and application knowledge are retiring, creating a shortage of professionals capable of maintaining legacy systems. When your entire business depends on someone who understands a 20-year-old system, you're not just paying for their technical skills — you're paying for their monopoly on institutional knowledge. These specialists understand that their expertise is irreplaceable, leading to inflated compensation packages and the constant threat of operational disruption if they leave.
Sometimes it makes sense to modernize on top of a legacy system. Other times, it can create an expensive workaround rather than a real solution. Legacy ERP systems, for example, often have rigid structures that don't align with modern business needs. This can lead to inefficient processes, gaps in data, bottlenecks, and delays in decision-making.
These patches and integrations require constant maintenance, create new points of failure, and ultimately cost more than proper modernization would have.
Legacy systems were designed for how businesses operated decades ago, not for today's fast-paced, interconnected world. This fundamental mismatch forces employees to develop workarounds, increases manual processes, and creates more opportunities for costly errors.
While your business struggles with outdated technology, your competitors could be using their systems to enhance customer experience and operational efficiency. This technological gap doesn't just affect internal operations — it can directly impact your ability to serve customers and compete in the marketplace.
The bottom line? The true cost of legacy software isn't just measured in licensing fees and maintenance contracts. It's the premium you pay for scarce expertise, the compounding costs of makeshift solutions, the inefficiencies of outdated processes, and the competitive disadvantage of being trapped in technological amber while the world moves forward.
If the cost of maintaining legacy systems is so high, and legacy systems can slow down innovation, cause disruptions, limit growth, and add risk, then why are some companies — especially within certain industries — slow to modernize?
It’s often a perception problem. Organizations often stick with these outdated systems because their older hardware can't run modern software, making it seem more cost-effective than upgrading entire technology infrastructures. Another common barrier to modernizing legacy systems comes down to change fatigue. It’s understandable that people get comfortable working in legacy applications and simply don’t want to learn a new system
However, a number of industries face additional hurdles when modernizing their software.
It's very common for modern financial services companies to rely on legacy systems for core business functions.
Why would that still be the case in an industry that’s especially risk-averse? There are several reasons that can slow down progress:
A lot of hotels are still using old technology that is holding back their earning potential. Instead of proactively updating these systems, they tend to wait until something breaks down unexpectedly, which ends up costing them much more in lost revenue and emergency fixes.
Here’s what tends to get in the way:
This industry’s failure to keep pace is often surprising to outsiders. However, according to a 2021 HIMSS survey, nearly 73% of healthcare providers continue to use legacy information systems. Unfortunately, that stat has clearly contributed to the number of healthcare-related data breaches we see over and over again.
Here’s why these numbers aren’t budging any time soon:
Rather than adopting new technologies, avionics designers prefer to maintain their existing systems, which have proven themselves safe and reliable after thousands of proven flight hours in real-world conditions.
Here’s what else gets in the way:
Many manufacturing firms continue to use legacy systems to control their production lines, monitor inventory, and manage supply chain operations.
Even though outdated systems create known challenges, here’s why manufacturers are often stuck:
When organizations finally decide to tackle their legacy software problem, they face a critical choice: attempt modernization in-house or partner with experts who have walked this path before. The reality is that most companies lack both the bandwidth and specialized talent needed to successfully complete a modernization project, and the cost of getting it wrong can be devastating.
At Capmation, we've witnessed countless organizations struggle with DIY modernization attempts that result in delayed timelines, budget overruns, and solutions that fail to address core business needs. The complexity of legacy systems — combined with the need to maintain business continuity during transition — requires specialized knowledge that most internal teams simply don't possess.
Unlike competitors who present multi-year project roadmaps as all-or-nothing solutions, we take a different approach. We begin by thoroughly understanding the current state of your application: its business criticality, what's working well, what needs to change, what should be removed, and what must be added. This comprehensive assessment allows us to break modernization projects into manageable phases while keeping long-term roadmaps and goals in clear focus.
Working with a partner like Capmation allows organizations to run faster and complete modernization projects quicker, ultimately bringing solutions to market faster. This acceleration provides immediate cost savings and enables quicker revenue generation.
Our vast experience across multiple verticals means we understand both legacy and modern technologies intimately. We're not afraid of difficult, multi-phase modernization projects because we've successfully navigated them before. This hands-on experience gives our clients confidence that their solutions will move forward successfully.
At Capmation, we also work to overcome change management issues by making user acceptance testing (UAT) a central part of our modernization process, ensuring that new systems not only function correctly but also meet the real-world needs of the people who will use them daily. This focus on user acceptance significantly reduces the risk of implementation failure and ensures that modernization efforts deliver their intended business value.
Application modernization isn't easy, but it's essential for organizations looking to break free from the cost and innovation constraints of legacy systems. The question isn't whether to modernize — it's how to do it effectively while minimizing risk and maximizing business value.
Click the link below to see how we’re currently helping a large supplier of industrial surplus and equipment modernize their legacy software.