Problems with legacy systems: risks, costs, and when to modernise

Legacy systems are costing UK businesses a staggering £45 billion annually in lost productivity. If your organisation is still running on outdated technology, you're not alone - but you might be paying a much higher price than you realise.

Here's a sobering reality check: 48% of UK workers waste more than three hours every single day dealing with inefficient legacy systems. That's not a typo. Nearly half of the British workforce is spending almost half their working day fighting against the very technology that's supposed to help them.

The problems with legacy systems go far beyond slow loading times and clunky interfaces. We're talking about security vulnerabilities that leave your business exposed to cyber attacks, compliance risks that could land you with hefty fines, and hidden costs that drain your budget year after year. In this guide, we'll explore the seven critical problems that legacy systems create for UK businesses and help you understand when it's time to modernise.

What is a legacy system?

A legacy system is any technology, software, or hardware that's become outdated but remains in use because it still performs essential business functions. These systems might have been cutting-edge when first installed, but technology moves fast, and what was revolutionary in 2010 can become a liability by 2025.

Legacy systems aren't always ancient. Sometimes software becomes "legacy" simply because the vendor has stopped supporting it, security patches are no longer available, or it can't integrate with the modern tools your business needs. Common examples include:

• Outdated operating systems - like Windows XP or older versions of Windows Server that no longer receive security updates
• Custom-built software - developed decades ago in programming languages like COBOL that few developers now understand
• On-premise databases - that can't connect to modern cloud applications or analytics tools
• ERP systems - from the 1990s and 2000s that lack mobile access or modern reporting capabilities

Shockingly, research by Baringa found that 16% of UK banks still run software from the 1960s, and almost 40% maintain code from the 1970s. Even more concerning, half of these banks rely on just one or two staff members - often approaching retirement - who understand how these systems work.

The 7 critical problems with legacy systems

Let's break down the seven most damaging problems that legacy systems create for UK businesses. Understanding these issues is the first step toward making informed decisions about your technology future.

1. Security vulnerabilities that put your entire business at risk

Outdated systems are a hacker's dream. Legacy software often runs without the latest security patches, leaving known vulnerabilities wide open for exploitation. Cyber criminals actively target these weaknesses because they know many organisations haven't updated their defences.

Remember the WannaCry ransomware attack in 2017? It devastated NHS services across England precisely because many systems were running unpatched, unsupported versions of Microsoft Windows. Hospitals cancelled appointments, ambulances were diverted, and patient records became completely inaccessible. The attack spread globally within hours, targeting organisations that hadn't applied available security patches.

The situation hasn't improved. In June 2024, Synnovis, a major pathology supplier for London hospitals including King's College Hospital and Guy's and St Thomas', suffered a devastating ransomware attack. The result? Over 10,000 outpatient appointments postponed, more than 1,700 elective procedures cancelled, and up to 300 million patient records potentially compromised.

2. Regulatory compliance risks and GDPR headaches

GDPR and the UK Data Protection Act set strict rules about how organisations handle personal data. Legacy systems, designed before these regulations existed, often can't meet modern compliance requirements - and the penalties for non-compliance are severe.

Many legacy systems inadvertently generate GDPR violations without organisations even realising. These older systems typically operate on a "one size fits all" principle, producing outputs that contain far more information than specific recipients actually need. This directly contradicts GDPR's data minimisation principle.

Common compliance gaps in legacy systems include:

• No support for multi-factor authentication
• Encryption that doesn't meet current standards
• Inadequate audit trails to demonstrate compliance
• No automated data retention management
• Inability to respond to subject access requests within regulatory timeframes

The Equifax data breach is a stark reminder of what can go wrong. In 2017, this credit reporting company suffered a massive breach exposing 148 million people's personal and financial information. The cause? A known critical vulnerability in legacy software that hadn't been patched. The resulting regulatory penalties and settlements exceeded $425 million.

3. Hidden costs that drain your budget

Here's an uncomfortable truth that catches many business leaders off guard: maintaining legacy systems typically costs three to four times more than running modern alternatives. The UK government, for example, spends a remarkable £2.3 billion annually - nearly 50% of its total technology budget - just keeping aging systems running.

These costs creep up in ways that aren't always obvious:

• Specialist expertise - finding programmers who understand COBOL or other legacy languages becomes increasingly expensive as they become scarce
• Hardware maintenance - spare parts for aging systems become rare and costly
• Integration workarounds - building custom connections to make legacy systems talk to modern tools
• Lost productivity - staff time wasted on manual processes and system limitations

This accumulated burden is what's known as technical debt. Research shows that UK CIOs estimate technical debt amounts to 20-40% of their entire technology estate value. Even more troubling, 30% of CIOs report that more than 20% of their budget intended for new products and innovation gets diverted to resolving technical debt issues.

One success story that demonstrates the value of modernisation: AESSEAL, one of the world's biggest mechanical seal manufacturers, invested heavily in upgrading their legacy systems. The result? A 77-fold increase in invoicing speed and annual sales exceeding £170 million.

4. Compromised data and poor decision-making

Modern businesses run on data. Accurate, real-time information drives everything from stock management to customer insights to strategic planning. But if you're relying on legacy systems with outdated data storage methods, you're essentially trying to navigate with a broken compass.

Legacy systems often create data silos - isolated pockets of information trapped in specific systems that can't communicate with each other. When your sales data sits in one system, your inventory in another, and your customer records in a third, getting a complete picture of your business becomes a nightmare of manual exports, spreadsheet reconciliation, and educated guesswork.

The Post Office Horizon scandal provides a devastating example of what happens when legacy system data can't be trusted. Between 1999 and 2015, more than 900 subpostmasters were wrongfully convicted of theft, fraud, and false accounting based on faulty data from the Horizon accounting system. The software was recording losses that never actually occurred. Some Fujitsu employees had discovered before rollout that the system could produce false data, but this was never made public. The human cost has been catastrophic: six former subpostmasters have died by suicide as a direct consequence, and approximately 10,000 people are now eligible for compensation.

5. Difficulty attracting and retaining talent

Today's workforce - especially Millennials and Gen Z - are tech-savvy and accustomed to modern digital tools. When talented candidates discover during interviews that your organisation runs on clunky, outdated systems, many will simply walk away to competitors with better technology.

The problems go beyond recruitment. Your existing team members become frustrated when they're forced to use inefficient tools that make their jobs harder than necessary. They watch colleagues at other companies using sleek, modern systems while they're stuck with software that looks like it belongs in a museum.

There's also a knowledge risk. Half of UK banks admit they rely on just one or two staff members, often at or near retirement age, to understand their legacy systems. When these specialists retire, they take critical institutional knowledge with them. If your business depends on a system that only one person truly understands, you're sitting on a ticking time bomb.

6. Poor customer experience that costs you business

Customer expectations have shifted dramatically. People now expect seamless online transactions, personalised recommendations, and instant responses. Legacy systems simply can't deliver these experiences.

Think about your own behaviour as a customer. Research shows that users have extremely limited patience for slow-loading websites. If your customer-facing systems don't respond quickly, or if your user journey has friction points caused by backend limitations, you're losing business. Your competitors with updated systems are ready to pick up those frustrated customers.

Netflix provides the classic example of getting this right. They recognised the shift in customer preference toward streaming and invested heavily in updating their systems and business model. They're now the streaming platform everyone knows. Blockbuster, the former video-rental giant, failed to see the same opportunity. They didn't update their systems. They compromised their business model. They lost customers. They went bankrupt.

Nearly 50% of all UK public services remain unavailable online, forcing citizens to apply for support in person or by phone. For businesses, this kind of limited digital access would be commercial suicide in today's market.

7. Integration nightmares that block innovation

Modern business tools are designed to work together. Your CRM should talk to your email marketing platform, which should sync with your analytics, which should feed into your reporting dashboards. Legacy systems, built in a pre-API world, often struggle to integrate with anything modern.

A recent survey found that 90% of IT decision-makers acknowledge that legacy technologies actively prevent their organisations from innovating and operating efficiently. When your core systems can't connect to cloud services, automation tools, or modern analytics platforms, you're locked out of the innovations that could transform your business.

The Easter 2025 ransomware attack on Marks & Spencer demonstrated how vulnerable interconnected systems can be when security isn't maintained. Attackers compromised M&S through a third-party supplier, deploying ransomware that forced the retailer to revert to pen-and-paper tracking systems. Staff were even manually checking refrigerator temperatures because automated monitoring systems were offline. The incident is expected to cost M&S approximately £300 million in lost profit.

When should you modernise your legacy systems?

Not every old system needs immediate replacement. Some legacy technology continues to serve its purpose effectively. The key is understanding when the balance tips from "working fine" to "actively harmful."

Here are the warning signs that it's time to act:

Your options for legacy system modernisation

Modernisation doesn't always mean ripping everything out and starting from scratch. Gartner research indicates that "big bang" replacement approaches are often too costly, risky, and time-consuming. Instead, consider these approaches:

Retire - Sometimes the best solution is simply switching off systems that no longer serve a business purpose. This removes maintenance burden and security risk in one stroke.

Replace - For systems that are genuinely beyond saving, a managed migration to modern alternatives may be the answer. The TSB Bank migration disaster (which cost over £200 million and resulted in £48.6 million in regulatory fines) shows why this needs careful planning - but also why getting it right matters.

Refactor - Update the internal code and architecture while preserving the overall system. This can extend useful life without the disruption of full replacement.

Rehost - Move existing systems to modern cloud infrastructure without fundamental changes. This can improve performance and reduce maintenance burden.

Replatform - Change the underlying technology stack while keeping the business functionality. This offers a middle ground between refactoring and replacement.

The UK cloud migration services market is growing rapidly, valued at £470 million in 2024 and projected to reach £1.9 billion by 2030. Many organisations are finding that hybrid approaches - maintaining some on-premise systems while gradually adopting cloud services - offer the best balance of risk and reward.

How to get started

The first step is understanding what you're working with. A thorough assessment of your current technology estate will help you identify which systems pose the greatest risk and which offer the best return on modernisation investment.

Key questions to answer:

• Which systems are business-critical?
• What security vulnerabilities exist?
• Where are the skills gaps in your team?
• What's the true cost of maintaining each legacy system?
• Which systems block integration with modern tools you need?

Modernisation may seem daunting, but the costs of inaction are clear. UK businesses are losing billions to legacy system inefficiency, security breaches, and missed opportunities. The question isn't whether to modernise, but when and how.

Need help assessing your legacy systems or planning a modernisation strategy? Our Software Engineering team specialises in helping UK businesses transition from outdated technology to modern, efficient systems. Give us a shout for a free, no-obligation consultation to discuss your specific situation.

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