Failure to modernize legacy systems quickly and efficiently leading to spiraling costs for enterprises

The average global enterprise wastes more than $370 million a year due to their inability to efficiently modernize outdated, inefficient legacy systems and applications, according to estimates from research by Pegasystems Inc. (NASDAQ: PEGA), the Enterprise Transformation Company™. The study, conducted by research firm Savanta, surveyed more than 500 IT decision makers across enterprises worldwide on the challenges caused by technical debt and the progress in modernizing legacy technology.

The study estimated that the time taken to successfully complete legacy transformation projects through traditional, outdated, resource-intensive processes, is by far the biggest contributor toward the total financial cost of technical debt for today’s average global enterprise – accounting for nearly $134 million wasted each year. The next biggest contributors were the cost of time invested in legacy transformation initiatives that have failed due to outdated systems and applications ($58 million a year on average), followed by the estimated cost of maintaining, updating and integrating with legacy systems (an estimated $56 million a year on average).

Respondents were also asked for their views on managing technical debt, their dependency on legacy systems, and their attempts to eliminate them. The research found:

• A waste of time, effort, and money: Seventy-eight percent agree the time, money and effort spent maintaining legacy applications could be spent more productively on other projects that could make the business more effective.
• A thankless task: Asked for reasons why they had not already removed support for legacy systems, more than a third (36%) said it was too time-consuming to do so. More than a quarter (29%) said they were too busy fire-fighting problems caused by legacy systems to address the root cause, while a quarter said their business leaders don’t view it as a priority.
• A dangerous dependence: Two-thirds (63%) of respondents say they depend on between one and 10 legacy applications in the front and back office on any given day. More than a quarter (29%) say they depend on between 11-20 legacy applications.
• Running to stand still: Less than one in 10 (9%) say their digital transformation efforts to date have put them in a position to fully retire or replace all their legacy applications – suggesting technical debt problems aren’t going to go away any time soon.

To calculate the average annual cost of technical debt to global enterprises, Pega questioned respondents on the most critical considerations – some of which might have an intangible or indirect cost, which can fly under the radar – within their legacy transformation projects. Pega ascribed estimated cost values to each response, none of which were visible to respondents as they answered, and then calculated the average total of these values across all global respondents. These monetary values were projections based on common industry benchmarks of legacy transformation spend based on enterprise revenue, as well as IT spend on legacy transformation initiatives. In addition, Pega applied its extensive experience of working with leading enterprises, as well as its understanding of the fallout of technical debt and its associated problems to arrive at the final estimated values.

Quotes & Commentary

“Too few enterprises today consider the hundreds of millions of dollars they hemorrhage every year because of both the direct and indirect financial impact of inefficiencies caused by legacy technologies and technical debt,” said Don Schuerman, chief technology officer, Pega. “It’s no longer acceptable to depend on systems that are no longer fit for purpose, take valuable resources to replace, and which could be the difference between your organization’s success or failure. It’s time to stop the bleeding, embrace innovations like Pega Blueprint™, and maximize the transformative impact of these technologies to unlock business logic and data from the legacy systems where they are currently trapped. The time has come to turn tech relics into modern, cloud-ready, AI-enabled applications that deliver transformed outcomes to your customers and your business.”

Notes

Pega surveyed more than 500 IT decision makers worldwide on their legacy transformation projects, how they work, and the challenges and opportunities they present. The results included responses from North America, the United Kingdom, France, Australia, and Germany.

Methodology

For all respondents, Pega defined ‘technical debt’ and ‘legacy transformation’ as outdated hardware, software, or technology platforms that remain in use due to their critical role in business operations. This is despite challenges such as limited scalability, security vulnerabilities, high maintenance costs, and incompatibility with modern technologies. Technical debt is the implied, often intangible, cost of additional work, or strain using them places upon the business.

Additional Resources

• More information: Pega Blueprint
• Break free from legacy: Rethink and retire your tech debt
• Demo video: See Pega Blueprint in action
• Other background: Pega Gen AI and Pega Infinity

About Pegasystems

Pega provides the leading AI-powered platform for enterprise transformation. The world’s most influential organizations trust our technology to reimagine how work gets done by automating workflows, personalizing customer experiences, and modernizing legacy systems. Since 1983, our scalable, flexible architecture has fueled continuous innovation, helping clients accelerate their path to the autonomous enterprise. Ready to Build for Change®? Visit www.pega.com.

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