The value of legacy software assets

There are many definitions of what legacy software is. Declan Good describes a legacy application as “any application based on older technologies and hardware, such as mainframes, that continues to provide core services to an organization.” But it is definitely undeniable that legacy software is a very valuable asset, even though balance sheets rarely show this accurately. Legacy applications, like other intangible assets, are hard to emulate by competitors, so they represent key differentiators and a source of competitive advantage. Typically, significant investments in intellectual capital have been implanted in the legacy systems over the years (information about products, services, customers, suppliers, operations, processes, etc.), constituting the back-bone of many companies. However, those investments have commonly been booked as expenses, basically comprised by the salaries of all those involved in the development, maintenance and enhancement of these applications.

Every change in a business process, caused by both internal and external demands, is usually reflected in the supporting software systems. Therefore, legacy applications are an ever-growing asset distributed all over the firm, where companies have been adding layer after layer to these systems while losing track of its size and value. Furthermore, due to personnel changes and poor documentation, the code base and functionality of many of these legacy software assets are often feebly understood.

Legacy software assets usually get less attention than new projects, since the benefits derived from the latter are most tangible, their costs are better defined and there’s a natural excitement around them. Management tends to focus strongly on limiting the resources allocated to projects related to legacy applications, looking at these systems as something that has been depreciated off the books and which costs must be reduced.

However, the indisputable business value of these software assets, along with the operational risks and opportunity costs associated with a lack of continuous development and maintenance, reinforces the need of providing more attention to these critical applications. What’s more, this is no longer optional in some cases, as some industries are being forced by compliance issues and other regulations.

That’s when the concept of legacy system modernization emerges as the most viable and cost-effective path to preserve the business knowledge present in these assets and enhance their functionality, avoiding the technological obsolescence dead-end trap. The decision can be justified by many factors, like vendor dependence, lack of programmers for older languages, technological constraints and legal/regulatory compliance requirements, all of which decrease an organization’s agility, boost operating costs and tend to destabilize its competitive position. But in today’s fast-evolving, highly competitive markets, the alternative is to drop behind and go out of business. So this might be a good time to assess your investment in legacy applications.

“To succeed in today’s environment, corporations must seek the most cost-efficient operations and the maximum agility of their businesses. We cannot ignore the invaluable knowledge and financial resources we have so dearly invested in our strategic software processes.
The blistering pace of technological change poses constant challenges for the modern enterprise. No one can afford to reorganize the computing infrastructure every time a new technology comes along. All, however, dream of moving their information systems with the maximum freedom to obtain the best of the new technologies and a real interpretation of the open systems concept benefits.

ArtinSoft was founded precisely with the aim of eradicating software obsolescence to enable enterprises and IT specialists to smoothly and rapidly evolve with the latest technologies. Our continued research and development drive envisions a society where software evolution is part of the applications life cycle. This freedom from information technology lock-ins assures the longevity of IT investments to continue benefiting from revitalized systems.”

Dr. Carlos Araya
President and CEO ArtinSoft