How Legacy Systems and Tech Debt Keep Your Business at a Loss
Everyone talks about technical debt and legacy systems, but how many truly understand what these terms mean and why they matter? These buzzwords are often thrown around in business and IT discussions, yet they rarely get a proper explanation.
Let’s strip away the jargon and get to the heart of these concepts. What is tech debt? Why does it happen? And, most imporantly, what are the risks of ignoring it?
Technical Debt: What is it?
Let’s start with tech debt meaning.
By definition, technical debt is the cost of maintaining or revising systems due to past decisions—whether those choices were made with intention or by oversight.
While many assume technical debt means bad code, that’s usually not the case. It rather comes from taking shortcuts, such as choosing speed over quality in the rush to launch a product, or deciding not to fix a bug right away because it just doesn’t seem critical enough. Over time, these small choices add up, creating what we now call technical debt.
The term, coined by Ward Cunningham, one of the creators of the Agile Manifesto, was designed to help stakeholders understand why investing time and resources into refactoring and maintenance is so essential.
Technical debt refers to the cost of short-term gains that create long-term inefficiencies and risks—a debt that must eventually be paid.
It has since evolved into a broader concept encompassing the long-term costs of non-optimal technology. It's the inevitable fallout of cutting corners and prioritising short-term goals over long-term solutions, and, just like financial debt, it must eventually be repaid.
Types & Causes of Technical Debt
Technical debt doesn’t look the same in every scenario. It can take on many forms, but let’s focus on three types most important from a business perspective.
Intentional
Sometimes, teams knowingly take on technical debt to meet deadlines or budget constraints. This is common in Agile software development, particularly when launching a Minimum Viable Product (MVP). The trade-off? You release faster, but untested features or unresolved bugs may create problems later.
Unintentional
Unintentional debt happens when lack of planning, time pressures, or poor oversight lead to rushed decisions. You might have had good intentions, but skipping steps (like thorough testing or documentation) can create hidden issues that only reveal themselves later, potentially delaying projects and causing major headaches. Because these issues often go unnoticed for a long time, it’s considered to be the most dangerous type of tech debt.
Environmental
This type of debt relates to systems that were perfectly fine when they were created, but have become outdated over time due to external changes. Think about how an operating system update could cause something to break, or a third-party API upgrade could cause a critical part of your system to stop working. Even if the original system was solid, these changes make it harder to maintain and evolve.
Legacy Systems: Explanation
When discussing technical debt, it’s essential to consider the systems that hold it—namely, legacy systems.
Legacy code, or, more broadly, legacy software, refers to outdated technology that wasn’t necessarily flawed when it was first created, but as time passed, it failed to keep up with new developments and advancements.
Some developers like to define “legacy code” as code that wasn’t tested, but we prefer to morph the definition of legacy code and legacy systems altogether to mean outdated computing software or hardware that is still in use, but its older technology won't allow it to interact with newer systems. The primary challenge with legacy systems lies in how old technology fails to keep up with the speed and demands of modern business. This forces organisations to spend more time on maintenance and support than they would if they could upgrade their infrastructure.
And it’s not an uncommon issue. Right now, an estimated 90% of businesses report being held back by legacy technology that’s limiting their growth and operational efficiency1.
Legacy system is a system that has outlived its usefulness, but businesses keep it around because it’s deeply embedded in their operations. The problem with legacy systems is that while they may have been built well for their time, they often can’t integrate with newer systems and may be missing critical documentation or support.
Take a moment to consider the history of technology: the first programming languages, some of which are still in use today, were developed in the 1950s. Over the years, technology has gone through significant optimisation and innovation. What was once cutting-edge has now become clunky and obsolete.
Some legacy technology is so outdated that they can’t even support newer technologies or integrations. This has become especially evident with the rise of artificial intelligence (AI). Around 25% of businesses have reported that their legacy systems cannot support the integration of AI tools, which means they’re unable to take advantage of one of the biggest technological advancements of the decade2.
To make matters worse, the skills needed to maintain legacy software have largely disappeared. The original developers are no longer around and often didn’t leave clear documentation of their work. While figuring out how to properly run and fix these systems is possible, it requires significant time and effort from modern developers, around 40% of their time on the clock in fact3.
Business Impacts
Legacy systems play a significant role in accumulating technical debt. In fact, nearly two-thirds of businesses are investing over $2 million annually into legacy system support4.
The average cost of maintaining a legacy system can be upwards of $30 million, a figure that only grows as the system ages5.
This doesn’t even factor in the opportunity cost—the potential lost opportunities for innovation and improvement. The good news? Retiring legacy systems and investing in modernization or migration to newer software can reduce operational costs by up to 65%, freeing up capital for future advancements6.
But costs are more than simply financial, as a lack of modernization impacts business in more ways than one:
1. Poor customer and employee experience
In an era where customer experience can make or break a business, legacy systems frequently fail to deliver the streamlined, responsive service that modern consumers expect. The impact is immediate: customers grow frustrated, and a poor experience leads directly to reputational damage. Studies suggest that a negative review can cost an organisation as much as 22% of its potential customers7. For businesses, this translates into lost sales, reduced loyalty, and lower market share.
The employee experience is equally affected. When internal tools are outdated, employees struggle to do their jobs efficiently. According to recent studies, more than half of U.S. employees report dissatisfaction with the software they are asked to use daily8. This frustration inevitably leads to disengagement, lower morale, and a decline in productivity.
The result? A business less capable of meeting its objectives, both internally and externally.
2. Lack of scalability and new features
Legacy systems are rarely designed to grow with the company. As demands increase, these outdated platforms buckle under pressure, leading to slower response times and missed opportunities.
Legacy systems were often designed for a very specific set of needs, many of which no longer align with the demands of today’s business world. The problem becomes even more apparent when these systems can’t support new features or integrations. In a business environment that thrives on flexibility and innovation, clinging to technology that can’t adapt is a significant liability.
3. Decreased efficiency & data silos
The inefficiency of legacy systems often goes unnoticed until it’s too late. Outdated technology typically operates in isolated silos, meaning departments cannot easily share information or collaborate effectively.
In fact, 47% of employees report wasting hours each week trying to track down and consolidate data from disparate sources9. Instead of focusing on high-value work, employees find themselves bogged down by unnecessary processes and manual workarounds.
The resulting inefficiency can drain company resources and eat into profits, with some estimates suggesting that poor efficiency accounts for up to 30% of a business’s annual revenue10.
4. Security vulnerabilities
Security is one of the most pressing issues for businesses relying on legacy systems. As these systems age, they become easier targets for hackers looking to exploit outdated software that lacks the latest security patches. Businesses with legacy systems often find themselves exposed to serious data breaches and financial losses as they scramble to patch up weaknesses.
In fact, experts have long warned that older technologies present a clear security risk. Both the UK and U.S. governments, as well as MITRE Corp., advise companies to migrate away from legacy systems to reduce their risk of attack, but many businesses continue to operate under the misconception that their legacy infrastructure is secure enough.
The longer an organization holds on to outdated systems, the more likely it is that it will suffer a damaging attack.
5. High financial cost of ownership & maintenance
The cost of ownership and maintenance of legacy systems is far higher than that of more modern solutions. Businesses spend huge sums just to keep outdated technology running, and often at the expense of innovation. It is reported that an average of 60 to 80% of IT budget is allocated to simply keeping them running11. The more complex the system, the higher the cost to maintain it.
As staff expertise dwindles over time, external consulting fees and the expense of training new employees become a further financial burden. This results in ballooning costs and an increasing drain on resources, all while the systems continue to underperform.
Legacy System and Technical Debt Management: Business Perspective
There’s no clean or simple fix when it comes to addressing technical debt reduction and moving away from an outdated operational system.
Sometimes, a little debt is unavoidable. When you're on a tight deadline or need to push a critical update, some compromises must be made, and that’s okay. The danger, however, lies in postponing repayment. Acknowledging the debt is the first step, but it can’t just sit there, accruing interest indefinitely. At some point, it must be paid back—through refactoring, regular bug fixes, or full-scale rewrites, depending on the scale and scope of the issue. The key is to plan ahead as soon as the decisions are made.
The question, of course, is: how do you know when the debt has become unmanageable?
Many developers, when faced with measuring tech debt, rely on what’s known as the Technical Debt Ratio (TDR)—a metric that quantifies the cost of addressing debt relative to the size of the codebase. It's a handy tool, but only part of the puzzle. More tangible signs might be familiar to anyone who's worked in a strained tech environment. If your codebase is a house of cards, just one small update away from collapse, you’ll know it.
Frequent errors, sluggish performance when adding new features, or systems that crash seemingly without reason are all cries for help from the aging infrastructure.
These are the early indicators that your debt is overdue, and it’s not just a matter of slapping on a patch.
Technical debt quadrant
When deciding on the best approach to managing technical debt that has already accumulated, a lot of people refer to Martin Fowler’s technical debt quadrant. It is a way of categorising tech debt into reckless, deliberate, prudent, and inadvertet.
Understanding where technical debt falls within these quadrants can help teams make informed decisions about when to refactor, when to rewrite, and when to leave things as they are.
Tech debt prevention
Once the immediate debt has been paid off, the long-term solution is to focus taking responsibility for maintaining and improving your codebase over time and implementing good code hygiene via solutions such as code stewardship.
Good tech debt management and prevention means writing clear, flexible code, documenting it properly, leaving enough context for future developers to work with, and having a solid code review system in place.
It’s about making sure the code your developers create doesn’t become a burden down the road.
Legacy system transformation
For legacy systems, the solution is a little more complicated. It often involves refactoring or rewriting parts of the system. Refactoring means improving the internal structure without changing the functionality, while rewriting may involve building something completely new.
There are three main approches you might consider when wanting to deal with your outdated legacy system:
- Legacy system migration
Moving data and processes to a more modern platform.
- Legacy system integration
Connecting outdated systems with newer technology.
- Legacy system support
Extending the life of old systems while planning a transition.
The decision depends on how outdated the system is and how much it will cost to maintain.
Conclusion
The road to addressing technical debt and legacy systems is hardly linear, and it’s rarely easy. But the alternatives—sticking with outdated infrastructure at the cost of growth, security, and efficiency—are far worse.
While some technical debt is inevitable, most of it can be prevented with the right practices in place.
Whether it’s implementing solid code hygiene practices, migrating or modernizing existing legacy systems, or simply setting aside time for regular maintenance and refactoring, addressing technical debt proactively will set your business up for future success.
Ready to take the next step? We support businesses in legacy system modernization, transformation, and integration. Our team assesses tech debt, prioritises refactoring, and develops practical strategies for business growth, all while providing IT solutions that focus on security. Let’s talk.
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