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Legacy Application Modernization Strategy: A Step-by-Step Guide

Digital transformation may have become a buzz word in the past few years, but that fact should not overshadow the critical importance of transforming existing products and processes to attract and retain customers, drive business growth, and remain competitive.

By 2022, 70% of all organizations will have accelerated the use of digital technologies, transforming existing business processes to optimize for the customer experience, employee productivity, and business resiliency. Within IT, digital transformation includes modernizing legacy systems and processes to increase efficiencies and infuse greater intelligence across the entire business.

As organizations undergo digital transformation, IT leaders must modernize the application portfolio to operate at the pace of business change.– Meghan Rimol, Gartner

A failure to modernize legacy systems can hold an organization back. For example, one study has suggested that maintaining legacy systems in a bank can take up 78% of the IT budget, with 70% saying these same systems are a bottleneck to change. More broadly, CIOs say 40-60% of their time is spent managing legacy systems, a clear roadblock to more strategic initiatives.

In this guide, we explore what constitutes a legacy system, the concept of legacy application modernization, common benefits and challenges, and a clear guide to help organizations on the path to success. If digital transformation is on the agenda, this guide is essential to success.

What is a Legacy System?

A legacy system is any older software, technology, or method/language that an organization relies on. While a legacy application may continue to be used, and in fact may be integral to the organization, this application comes with a whole host of challenges as a result of the technology, architecture or functionality that impede the business (value, agility, fit) or IT (cost, complexity or risk).

On a granular legal, applications become legacy systems when they start to introduce these common challenges:

  • Difficult to maintain or update, increasing IT costs in both time and staff
  • Code bloat or hacked integrations can lead to performance issues, instability, or bottlenecks to scaling
  • Code bloat in monolithic apps or undocumented elements of the code make it difficult for new IT staff
  • Third-party elements of the application may no longer be supported
  • The application may not interact with newer systems
  • System is no longer agile to emerging customer needs
  • Potential security or compliance risks

Though planned obsolescence is a term that applies to product life cycles, the rapid pace of technology change, market dynamics, and organizational change inevitably lead to legacy systems.

Legacy systems in both life and P&C are built on outdated architectures with high maintenance costs, inherent inflexibility, redundant features, lack of connectivity and low efficiency. Complex application and process logic is often hard-coded and undocumented.Gartner

What is Application Modernization?

If one were to ask, ‘what is legacy system modernization?,’ the answer would be: the process of taking a legacy system and updating it to include modern platform infrastructure, architecture, and/or features.

Application modernization is a journey that can take many paths depending on the state of the legacy system, the problems being faced by the organization, the business goals driving the app modernization (and digital transformation). Application modernization isn’t just replacing – there are many modernization approaches to migrate, update, and optimize legacy systems to more modern architecture.

Later in this guide, read on for a 7-Step Application Modernization Strategy an organization can go through to understand drivers and choose the approach that is right for each project.

Why Modernize Legacy Applications?

While agility has always been a priority in IT, systems designed 5 or 10 years ago could not imagine the technology changes or competitive landscape of today.

While many legacy systems are critical for business operation, at some point IT managers and executives must examine the continued cost of maintaining a legacy system against the cost and migration of application modernization.

Further, the decision about legacy application modernization must look beyond cost to the strategic importance of modern applications. As noted in a recent McKinsey report on digital transformation acceleration related to COVID-19, there has been a huge mindset shift into the strategic importance of modern technology:

The drivers to modernize legacy applications include addressing all the challenges associated with legacy applications, from cost to customer and employee experience. Meeting customer expectations is currently the primary driver of digital transformation, but the decision is much more complex. 52% of employees are unhappy with the applications they are using – and 24% would consider leaving their jobs because of it. Further, organizations that prioritize digital transformation could reap a 20% increase in revenue, according to research by IBM.

Key Technologies for Application Modernization

When speaking to “modernization,” organizations are typically aiming to take advantage of several key technologies:

1. Cloud

Replatforming or rehosting applications on the Cloud is almost always a part of the application modernization approach. With a variety of options – public, private, hybrid and multi-cloud – organizations can help make the benefits of cloud accessible, including scalability, agility and lower cost.

2. Containers and Kubernetes

Containers are a method for packaging, deploying, and operating executable units of software in the cloud, leading to benefits in scalability and portability. Kubernetes are a container-orchestration system to automate these processes.

3. Microservices

Most legacy applications are monolithic – a self-contained single-tier application. One of the main drivers of modernization is to achieve agility to meet changing customer and employee expectations. To do this, most organizations opt for a microservices approach which emphasizes services linked by API, allowing organizations to choose and change out best-of-breed solutions to meet changing expectations or to scale as needed.

4. Orchestration and Automation

Automation sets up individual tasks to run on their own while orchestration automates multiple tasks as a process or workflow. Operationally, automation and orchestration introduce efficiencies to deployment, scaling, networking and security.

Five Questions for Enterprise Before Planning App Modernization

If an organization is considering a legacy application modernization project, the first step is to step back and understand the problem being solved by the legacy application and how that legacy application is or is not solving the problem. Let’s break that down into the following questions:

  • What is working well in our legacy software?
  • Which legacy application modernization approach do we want to take?
  • What are our goals in the enterprise application modernization process?
  • How will we accomplish these goals through modernization?
  • What are our next steps for legacy modernization?

The above questions can help an organization avoid common pitfalls in legacy application modernization, which most commonly include a failure to understand the why behind legacy application modernization.

7-Step Legacy Applications Modernization Strategy

Organizations should undertake the following 7-step strategy to evaluate legacy systems and choose an application modernization approach best suited to the needs at hand:

1. Evaluate Legacy Systems

Looking back to our previous challenges in legacy systems, Garnter recommends evaluating legacy systems against each of the six drivers:

If the legacy application is not meeting the business needs of today’s competitive landscape – if it is an impediment or simply not a contributor to success – it should be modernized. Equally, if the application is driving up the total cost of ownership or introducing undue risk, it’s time to modernize. Overall, the more drivers are present, the greater the overall benefit to modernizing legacy applications.

2. Define the Problems

If the legacy system is no longer meeting the organizational or IT needs of today, it’s time to further refine the problems. What specifically is causing friction for users (customers or employees)? Target the specific user stories.

However, in this approach, it’s also important to understand what is working well in legacy software. This understanding of what works – and what doesn’t – can help determine the modernization approach.

3. Evaluate Application Modernization Options

Once the opportunity to modernize a legacy application has become clear, and the problem is clearly defined, the next step is to decide on how the application will be modernized. There are seven approaches to application modernization, the “7 Rs, ranked from easiest to hardest and, equality, from least impact to greatest impact.

evaluate application modernization options

a. Retain / Encapsulate

A low-risk technique that retains or reuses components of the legacy application within a new architecture. The legacy software is wrapped or encapsulated and is accessed as a service via API. This approach also introduces the capacity to expand the app with a microservices approach over time.

b. Rehost

To rehost is to “lift and shift” application components to other infrastructure without any (or very few) modifications. This is often the fastest approach to move an application from an on-premise environment to the cloud.

c. Replatform

This approach moves the existing code to a new platform with some reshaping of the code, but retaining the existing code structure, features and functions.

d. Refactor

One step further, refactoring both optimizes the code as well as makes changes to the code structure (restructure) to remove some of the technical debt that leads to legacy software issues, which could be outdated libraries, frameworks, code, or incomplete or inefficient features.

e. Rearchitect

To rearchitect a legacy application is to significantly alter the code to shift it to a new architecture that has greater capabilities.

f. Rebuild

Redesign or rewrite the application from scratch, but without changing the scope or specifications.

g. Replace

When a legacy system is no longer working for a variety of business reasons, it’s time to go back to the table to understand the problem and find the right product solution to solve that problem. This approach will retire the legacy application and follow a comprehensive product development process.

Organizations can choose a gradual approach to modernization, first opting to encapsulate while undertaking a more comprehensive (and time-consuming) refactor, re-architect, rebuild or replace strategy for the long-term. This said, replatforming, refactoring, architecting are the most common approaches to legacy application modernization – the right mix of ease and return.

4. Choose the Application Modernization Approach

To choose among the seven options above, you can go beyond just effort and impact to evaluate the options in terms of their:

  • Workload
  • Architecture
  • Cost (modernization and continued operational)
  • Risk
  • Operations
  • Security

The weight of each of these will depend on their priority to each organization, but factors such as competition and shifting consumer demands are also considerations about the ultimate value of each modernization approach. So, one could consider the relative importance of features such as scalability and agility in evaluating each option in order to:

5. Prepare for Future Growth and Changes

Organizations do not operate in a vacuum: they are exposed to constant change from consumers, the competitive marketplace, the economic landscape, and the opportunities of evolving technologies. The average application has a lifespan of 6-8 years.

Legacy software today is typically monolithic in design, locking organizations into hard-to-update applications. Today’s modern digital landscape requires greater agility to roll out new features or capabilities and to scale as needed. Choosing the right modernization approach is about choosing the greatest flexibility to adapt to change. An encapsulated application can be connected to other microservices, but it still faces all the same limitations of its existing code base. However, software that has been refactored or rearchitected stands a much better chance at meeting the future needs of an organization.

6. Do Your Homework to Choose the Right Modernization Partner

Most organizations are not building or modernizing applications all the time – it’s simply not their core focus. Internal teams may lack the skills for the “new” environment, requiring training to even use a new system – so it is very unlikely that there will be enough internal resources to make all the appropriate decisions over modernization approach, cloud, or microservice support.

Instead, many organizations choose to lean on a trusted software partner to assist in application modernization. Look for an agency who specializes in digital transformation, with the expertise in re-engineering technology, systems and processes following a variety of modernization approaches. In order to maximize time-to-market of your modernization project, look for a team that leverages Agile and DevOps practices.

7. Observe and Optimize

Once any project is underway, it is important to iteratively test and optimize on the changes and improvements to the application as well as to ensure there are no hiccups in the transition around software licenses, hosting, or connectivity to other services or databases. Plan for ongoing modernization efforts to ensure the application keeps up with changing needs.

App Modernization the Agile Way with Net Solutions

Net Solutions is your digital transformation partner, with proven experience in legacy application modernization leveraging our Agile development process:

app modernization the agile way

1. Define goals

Examine how the existing legacy system meets or does not meet the problems (user stories).

2. Establish scope

Prioritize the user stories that should be solved, aligning with a modernization approach.

3. Craft requirement

Develop or brainstorm an approach, choose new architecture, technologies, frameworks, languages, microservices. Assign product owners, scrum masters, designers, developers and testers.

4. Development phase

Build user stories or follow development plans in time-boxed sprints.

5. Test and deliver

Test after each user story or each major development step (in lighter modernizations), identifying any bugs or impediments to progress. Track changes toward a smooth rollout of the completed application, fully integrated and connected.

6. Training and support

Provide ongoing support for the new application and support continued innovation and modernization.


While many organizations are well on their way to digital transformation, legacy application modernization continues to be a roadblock. Up to three quarters of legacy system modernization projects fail to be completed, through a lack of clarity or rushed discovery phase.

Digital transformation and legacy application modernization can be a complex process, which is why you need a trusted partner with solid experience to help make your transformation a success.

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