Living with a legacy - legacy systems - The Soft Machine - Column

Chief Executive, The, Dec, 1996 by Thomas L. Pettibone

Your top competitor introduces an innovative new service and quickly captures 10 percent more market share - at your expense. Ironically, you were first to think of this idea, months ago, and since then your programmers have been feverishly working on it. What happened? You didn't have a deliberate, proactive process to maintain, renew, and replace your legacy systems.

Just as America's roads and rails define the routes by which goods are distributed, so do your core computer systems define the ways and methods by which your employees run your company, including how a warranty claim is processed, a purchase order is created - or a vendor's invoice is paid. That means you cannot view such systems simply as a costly nuisance, to be examined and fixed only when broken. Not only that, but senior management - particularly the CEO - must get involved in assigning priority, funding, and timing to ongoing systems renewal. This responsibility cannot be delegated to just the CIO, because it's not about computers and software; it's about how the company operates.

"Although emerging technologies bring new opportunities to create new types of business solutions, the reality is that legacy systems hold the major key to future success," say Christopher Slee and Malcolm Slovin, partners at Waltham, MA-based Computer Sciences Corp.

Legacy systems are the tools your employees use to do their daily work. That means you have a huge (and growing) investment in your ever-depreciating legacy systems, not only in terms of hardware, software, and networks, but also in terms of people. According to a 1995 American Banker/Tower Group technology survey, 46 percent of legacy banking systems are growing at a rate of 5 percent or more per year.

Granted, legacy systems are expensive to maintain. Like buildings, they don't physically "wear out," but as manufacturing techniques and tools improve, it becomes more and more costly - and risky - to adapt them to changes in your business. 1960s and 1970s programs, written in older languages such as Assembler, RPG, PL/1, and COBOL, must be deciphered and modified, line by line. Newer languages are much more flexible and easier to change - just like preassembled windows, doors, and roof trusses.

According to the American Banker/Tower Group technology survey, 20 percent of banks maintain systems that are 15 to 20 years old, and 46 percent still operate systems that are 20 to 25 years old. Maintaining mainframe computers accounts for $17.4 billion, or more than 60 percent of funds budgeted for bank technology.

Another legacy problem is that of interoperability. Often, hundreds of programmed interfaces to other systems must be modified when you replace a core system.

In addition, few people know the program code in the portfolio. Over the years there have been so many modifications, adaptations, and patches by different programmers, that whatever documentation exists does not represent what is under the covers - not unlike trying to find wiring schematics (and all the modifications) for a 50-year-old building. The authors of 30 years ago are retired and golfing in Florida. Experienced programmers are reluctant to touch these programs for fear of triggering complete systems collapse.

"Legacy applications are the ultimate repositories of business knowledge," says Hans Peter Evers, CEO of Netherlands-based Ernst & Young LLP's Re-Engineering Products Division. "This knowledge has been tuned and refined over time to meet the exact requirements of the corporation. Building new applications means capturing and reimplementing this knowledge. As legacy applications are often the only source of documentation for existing business rules, any new project requires a thorough understanding of the existing application."

Clearly, there is no silver bullet solution to the legacy dilemma. But CEOs can start by keeping in mind three things:

1. Renewing and replacing legacy systems must be tackled methodically, just like the maintenance and upgrade of plants and equipment.

2. Your staff needs to prepare a detailed inventory of your systems, and management must determine the useful life of their system(s).

3. Schedules and funding for renewal or replacement should follow the analysis.

Like it or not, legacy systems are the engine of your company. Failing to maintain or formulate plans to replace them can result in derailment - both in terms of profits and future competitiveness.

Thomas L. Pettibone is partner and managing director of New Canaan, CT-based Transition Partners Co., an information technology management consulting company.