Modernizing legacy systems: when to rebuild, refactor or replace?

In the technology landscape of many mature organizations, legacy systems are often the backbone of key business operations. These are applications and platforms that have faithfully served the company for years, sometimes even decades, processing critical data and supporting core processes. However, with advances in technology, changing market expectations and increasing pressure to innovate, these once-reliable systems are increasingly facing serious challenges. High maintenance costs, difficulties in integrating with modern solutions, scalability limitations, growing security risks, and lack of availability of specialists familiar with outdated technologies are just some of the issues facing chief technology officers (CTOs) and IT architects. At some point, the question inevitably arises: what’s next for our legacy system? Do we try to “patch it up” and prolong its agony, or make the bold decision to modernize? And if modernization, which path to take – refactoring the code, rebuilding the architecture, or perhaps a complete replacement with a new solution? Choosing the right strategy is a decision of great strategic, technical and financial importance. This guide aims to provide a decision-making framework and practical guidance to help IT leaders make an informed assessment of the available options and choose the optimal path for transforming their legacy systems.

Before an organization decides on a specific modernization strategy, it is crucial to thoroughly understand and diagnose the problems and risks associated with continuing to maintain a legacy system in its current form. Often the decision to modernize is postponed due to the perceived cost and complexity of the project, but ignoring the growing symptoms of legacy system “disease” can lead to much more serious consequences in the future. There are a number of clear signals that indicate that modernization has ceased to be an option and has become a pressing necessity.

One of the most acute problems is the rising and often unpredictable maintenance and support costs for legacy systems. The outdated technologies on which they are based require expertise that is increasingly scarce on the market, leading to higher rates for the few available experts. Maintaining old hardware infrastructure, if the system has not been moved to more modern environments, also generates high costs. In addition, fixing bugs and making even minor modifications to old, often poorly documented code can be extremely time-consuming and expensive.

Directly related to this is the problem of the lack of availability of qualified specialists capable of effectively managing and developing systems based on outdated programming languages, databases or platforms. Younger generations of programmers and IT engineers rarely learn these technologies, and experienced experts are gradually leaving the labor market. This leads to a situation in which the company becomes dependent on a small group of people with unique knowledge, which generates operational risks and increases costs.

Legacy systems also often face serious performance, scalability and reliability issues. Architectures and technologies that were sufficient at the time of their creation may not be able to meet today’s demands for volume of data processed, number of concurrent users or expected response time. Attempts to scale such systems can be extremely difficult and costly, and frequent failures and outages negatively affect business continuity and user satisfaction.

The growing security vulnerabilities and difficulties in ensuring compliance with current regulations and industry standards also cannot be ignored. Outdated software often contains known vulnerabilities for which manufacturers no longer issue security patches, making it an easy target for cyber attacks. Ensuring compliance with, for example, RODO/GDPR or other industry-specific regulations can be extremely difficult or even impossible for systems that were not designed with such requirements in mind.

Another major limitation of legacy systems is their low flexibility and difficulty in integrating with new systems, cloud applications or modern technology platforms. Lack of open APIs, outdated data formats or incompatible communication protocols make a legacy system a technological island, inhibiting a company’s ability to implement integrated solutions and exploit synergies between different systems.

All this translates into an inability to quickly implement new functionality and flexibly respond to changing business needs and customer expectations. In today’s dynamic world, where the ability to adapt and innovate quickly is the key to success, legacy systems often become a brake on growth, preventing the company from taking advantage of new market opportunities or competing effectively. Low technological agility (agility) is a direct consequence of having an outdated technology stack.

Finally, the negative impact of outdated systems on user experience (UX) should not be overlooked, both when it comes to external customers and internal employees. Unintuitive interfaces, slow performance, lack of responsiveness on mobile devices or limited functionality lead to frustration, decreased productivity and a negative perception of the entire company.

Analyzing the risks of continuing to maintain a legacy system without taking modernization measures is crucial. It is necessary to assess what the potential financial, operational, legal and reputational consequences are of continuing to operate with outdated technology. It is often found that the long-term costs of not upgrading far outweigh the costs of the transformation project itself.

Main strategies for modernizing legacy systems – an overview of options

Once the decision to upgrade a legacy system has been made, the next step is to choose an appropriate transformation strategy. There is no one-size-fits-all approach, and the optimal path depends on a number of factors, such as the technical state of the system, its business value, available resources and the company’s strategic goals. A popular way to categorize modernization strategies is the “6R” model (or sometimes “5R” or “7R,” depending on the source), which includes the following options, supplemented by several other frequently used approaches:

• Rehost (also known as “Lift and Shift”): This strategy involves moving an application from its legacy environment (e.g., old on-premise servers) to a new infrastructure (most often a public or private cloud in the IaaS model – Infrastructure as a Service) without making significant changes to the source code or architecture of the application itself. This is typically the fastest and least initially costly upgrade option, allowing the company to quickly take advantage of some of the advantages of the new infrastructure, such as greater scalability, reliability and potentially lower hardware maintenance costs. However, a “Rehost” strategy does not solve the fundamental problems of outdated application architecture, technology debt or functional limitations. It is often a good first step in a longer modernization journey, or a solution for applications that are stable, don’t require frequent changes, and whose main problem is outdated infrastructure.
• Replatform (sometimes referred to as “Lift and Reshape” or “Lift and Optimize”): This strategy goes a step further than “Rehost.” The application is also moved to a new platform (usually cloud-based), but at the same time some optimizations and modifications are made to better leverage the capabilities of the new environment, without having to rewrite all the code. Examples may include database migration to a managed database service in the cloud (e.g. Amazon RDS, Azure SQL Database), use of auto-scaling services, application containerization (e.g. using Docker) or integration with native cloud services (e.g. queuing systems, monitoring services). “Replatform” achieves some performance, cost and operational benefits with relatively moderate effort and risk compared to more invasive strategies.
• Refactor (Refactoring): Refactoring involves restructuring and optimizing existing application source code without changing its external behavior (functionality). The goal of refactoring is to improve the internal quality of the code – its readability, maintainability, performance, security, and to reduce technology debt. This can include, for example, simplifying complex code fragments, eliminating duplication, improving module structure or optimizing algorithms. Refactoring is often an incremental and iterative process that allows for evolutionary improvements to a system without a complete overhaul. This is a good strategy for applications that are still of business value but whose code has become difficult to maintain and develop. The disadvantages can be the time-consuming nature of the process, especially for large and complex systems, and the fact that refactoring by itself does not solve problems at the system architecture level.
• Rearchitect (Architecture Change): This strategy involves making significant modifications to an application’s architecture to adapt it to new requirements and take advantage of modern architectural patterns. The goal is usually to improve the scalability, flexibility, modularity and maintainability of the system. Examples might include moving from a monolithic architecture to a microservices architecture, implementing APIs to enable easier integration with other systems, or using new technologies and platforms (e.g., containerization with Kubernetes orchestration, serverless architectures). “Rearchitect” is usually a more complex and costly undertaking than refactoring, but it can bring much greater long-term benefits, especially for systems that need to be able to grow and adapt quickly.
• Rebuild (Rebuild from scratch): The “Rebuild” strategy is to completely rewrite an application from scratch, retaining (or possibly modifying and extending) its existing functional scope and specifications, but using modern technologies, programming languages, frameworks and architectural patterns. This is the most radical form of modernization, which allows for the complete elimination of technological debt, the creation of a system fully adapted to current and future needs, and the use of the latest technological capabilities. However, it is also the most costly, time-consuming and design risky strategy. The decision to rebuild is usually made when the legacy system is already so outdated and problematic that no other form of modernization will yield the expected results, and its business value still justifies such a large investment.
• Replace (Replacement): This strategy means taking a legacy system completely out of service and replacing it with a completely new solution. This can be an off-the-shelf (COTS) commercial off-the-shelf (COTS) software solution that covers the business needs previously met by the legacy system, or a new, dedicated application that can have a different functional scope, tailored to current requirements. Choosing an off-the-shelf COTS solution (e.g., a new CRM, ERP, HR system) can be attractive due to potentially faster implementation time and access to modern functionality, but involves adjusting business processes to the system’s capabilities or incurring costs for its castomization, as well as licensing fees. Building a completely new dedicated application is a large project, similar in scale to the “Rebuild” strategy. The decision to replace is often made when the legacy system is not only technologically outdated, but its functionality no longer meets current business needs, and the cost of upgrading or rebuilding it would be unreasonable.

In addition to these main “R” strategies, there are other, often complementary approaches, such as encapsulation, which involves “wrapping” the legacy system with a modern interface (e.g., API), allowing it to be integrated into newer applications without modifying the legacy system itself. An incremental, evolutionary approach is also popular (e.g., the Strangler Fig Pattern), where individual functionalities of the legacy system are gradually replaced by new modules or microservices until the entire legacy system is deactivated. This approach allows the risks and costs of modernization to be spread out over time.

Key criteria for choosing a modernization strategy – how to make the right decision?

Choosing the most appropriate strategy for modernizing a legacy system is a complex decision that requires careful analysis of many factors and the involvement of various stakeholders in the organization – from technical teams to system business owners to management. There are no simple answers here, and each situation requires a customized approach. Below are the key criteria that should be considered during this decision-making process.

A sound assessment of the current and future business value of the legacy system is fundamental. How critical is this system to the company’s day-to-day operations? What is its direct and indirect contribution to revenue generation or cost reduction? What are the business consequences of its possible failure or unavailability? Will the functionality it performs still be needed and relevant to the company in the next 3, 5 or 10 years? Systems with high business value and a long-term perspective of use will justify greater investment in modernization (e.g., “Rearchitect” or “Rebuild”), while less intrusive strategies (e.g., “Rehost” or gradual extinction) may be more appropriate for systems with declining value or a short time horizon.

Equally important is a detailed assessment of the technical condition of the inherited system. What is the level of accumulated technological debt? What is the quality of the existing source code – is it reasonably readable, modular and amenable to modification, or is it a tangled, difficult-to-understand mass (“spaghetti code”)? Is there up-to-date and complete technical and functional documentation of the system? How complex and outdated is its architecture? What technologies (programming languages, databases, platforms) is it based on, and what is the availability of specialists familiar with these technologies? Systems in relatively good technical condition, with readable code and available documentation, may be candidates for refactoring or replatforming. Very technically degraded systems, based on completely obsolete technologies, are likely to require more radical strategies, such as refactoring or replacement.

It is also necessary to realistically assess the availability of internal resources and competencies necessary to carry out a modernization project. Does the company have within its ranks architects, developers, analysts and project managers with adequate knowledge and experience in modern modernization technologies and methodologies? Will it be necessary to involve external partners and consultants, and if so, to what extent? Lack of appropriate in-house expertise can significantly affect the choice of strategy – for example, prompting the selection of an off-the-shelf COTS solution as part of a “Replace” strategy, or the outsourcing of system redevelopment to a specialized external company.

An obvious but extremely important criterion is the available budget and acceptable time horizon for implementing a modernization project. The various modernization strategies vary significantly in terms of cost and time required for implementation. “Rehost” is usually the cheapest and fastest, while “Rebuild” or “Replace” (especially by building a dedicated application) are multi-year and very expensive undertakings. One should choose a strategy that is realistic to implement within one’s financial and time constraints, while delivering the expected business benefits.

The choice of modernization strategy must also be closely aligned with the strategic business and technology goals of the entire organization. How does the modernization of a particular system fit into the company’s long-term growth vision? Is it intended to support expansion into new markets, introduction of new products and services, improved customer experience, increased operational efficiency or digital transformation? Does the company seek to standardize its technology stack, migrate to the cloud, implement a microservices architecture? The modernization strategy should be consistent with these overarching goals.

An assessment of an organization’s risk appetite cannot be overlooked. Any modernization project, especially one with a large scope, carries certain risks – technological, design, financial, operational. Different modernization strategies are characterized by different levels of risk. For example, the “Rebuild” strategy is generally riskier than “Refactor.” It is necessary to choose an approach whose level of risk is acceptable to management and stakeholders, and to develop appropriate plans for mitigating these risks.

The anticipated impact of the modernization process on current business operations and system users is also extremely important. Will the upgrade require lengthy system downtime? What will be the consequences for users and how to manage the change process? Incremental, evolutionary strategies (e.g., “Strangler Fig Pattern”) may be preferred for critical systems where long outages are unacceptable.

To make the decision easier, you might consider creating a decision matrix in which individual modernization strategies are evaluated against defined criteria (e.g., business value, technical condition, cost, time, risk, compatibility with strategy). It can also be helpful to ask yourself a series of guiding questions, such as: What is the main problem we want to solve through modernization? Are we more concerned with quick, short-term benefits or long-term transformation? What are our key constraints? What is an acceptable level of operational disruption?

The process of planning and implementing a legacy systems modernization project – best practices

Regardless of the chosen strategy, the success of a legacy system modernization project depends largely on careful planning and professional management of its implementation. There are a number of best practices worth implementing to increase the chances of success.

Every modernization project should begin with a thorough diagnostic and analytical phase. This includes not only assessing the technical condition of the “AS-IS” system and its business value, as mentioned earlier, but also precisely defining the functional and non-functional requirements for the “TO-BE” system, analyzing dependencies on other systems, identifying key risks, and developing a preliminary business case for the project. Careful documentation of the existing system is extremely important, especially if current documentation is lacking – this may include reverse engineering of code, database analysis or interviews with long-time users and developers.

Once the optimal modernization strategy has been selected, a detailed project plan should be developed that includes a work schedule, resource allocation, budget, definition of milestones and deliverables, as well as a risk management and communication plan. For large and complex modernization projects, an iterative and incremental (agile) approach is often recommended to deliver business value in shorter cycles, gather user feedback early on, and respond flexibly to changes. Instead of trying to modernize the entire system in one go (the “big bang” approach, which is very risky), it is better to divide the project into smaller, manageable phases or modules.

Effective risk management throughout the project life cycle is critical. Modernization projects are often fraught with many uncertainties – technical, organizational, business. Potential risks must be regularly identified, analyzed and evaluated, and plans for their mitigation must be developed and implemented.

Continuous and transparent communication with all project stakeholders – from the board and business sponsors, to the development and operations teams, to the end users of the system – is also extremely important. Regular communication about progress, problems encountered and decisions made builds trust and commitment and helps manage expectations. The modernization process often involves changes in the way users work, so effective change management within the organization, including appropriate training, support and communication, is also key.

Finally, be sure to select the right tools and technologies to support the modernization process. These can include code analysis tools, data migration platforms, development and testing environments, deployment automation (CI/CD) systems or tools to monitor the performance and stability of the new system.

ARDURA Consulting – partner in strategic modernization of legacy systems

Modernizing legacy systems is one of the most difficult, yet most important challenges facing today’s IT departments. It requires not only deep technological knowledge, but also strategic insight, the ability to manage complex projects and the ability to communicate effectively with the business. ARDURA Consulting, with its unique combination of expertise in strategic consulting and implementation of advanced technology projects, is the ideal partner to support your organization at every stage of this transformational journey.

Our experienced consultants and architects help clients conduct a sound diagnosis of their legacy systems, assessing their technical condition, business value and associated risks. We support you in choosing the optimal, tail or-made modernization strategy – whether it’s refactoring existing code, migrating to a modern platform, completely overhauling the architecture, or completely replacing the system with a new solution. We do not impose ready-made schemes, but always strive to find the approach that best suits the specific needs, goals and capabilities of a given organization.

ARDURA Consulting also offers comprehensive support in planning and managing the entire modernization project, from developing a detailed schedule and budget, managing the project team (internal and/or external), and overseeing the implementation, testing and deployment of the new system. Our project management methodologies, based on industry best practices (including Agile and DevOps), ensure transparency, risk control and focus on delivering business value.

What’s more, thanks to our strong competencies in software development and implementation of modern technologies, we are able not only to advise, but also to actively participate in the implementation of the technical part of the modernization project – from code refactoring, to designing and building new architectures (e.g. microservices), to data migration and systems integration. Our goal is to provide you with modern, efficient, scalable and secure solutions that will serve your company for many years to come and become the foundation of its further growth and innovation.

Conclusions: Modernizing legacy systems – a challenge that is becoming a transformational opportunity

Modernizing legacy systems is undoubtedly a complex and challenging endeavor. However, it is also a unique opportunity to fundamentally transform an organization’s technology and business. It’s an opportunity to shed the ballast of technology debt, increase agility and operational efficiency, improve security, open up to new market opportunities and, most importantly, deliver a much better experience for both customers and employees. The key to success is a strategic approach, careful planning, selection of the right modernization strategy and professional implementation of the project, preferably in collaboration with an experienced partner who can combine a technological perspective with a deep understanding of business objectives.

Summary: Key questions before deciding to upgrade legacy system

The decision to upgrade a legacy system is one of the most important technology decisions an organization can make. To make an informed choice of strategy, it is useful to ask yourself the following key questions:

• What is the real business value and strategic importance of the system to the company now and in the future?
• What is the actual technical condition of the system, the level of its technological debt and the associated risks (performance, security, maintenance costs)?
• What are the main problems and limitations of the current system that we want to solve through modernization?
• Which modernization strategy (Rehost, Replatform, Refactor, Rearchitect, Rebuild, Replace) best suits our goals, capabilities and risk appetite?
• What are the anticipated costs, lead times and potential benefits (financial and strategic) associated with each of the options considered?
• Do we have adequate resources and internal competence to carry out the project, or will we need external support?
• How will the upgrade affect the company’s day-to-day operations and how to manage the change process for users?
• How will the new, modernized platform support our organization’s long-term growth and innovation strategy?

Providing solid answers to these questions, based on in-depth analysis and data, is the foundation for making the right decision and the success of the entire modernization project.