Hidden Costs and Challenges of Legacy Systems

A legacy system is one that is considered to be out of date in terms of technology or software, but still used by insurance firms, as it serves the purposes for which it was created. Obsolete systems are no longer supported or maintained, with the potential for development being severely constrained. The inadequacies of some legacy systems lead to additional hidden costs including licensing and employee training, in-house technical support, and system management.

Some legacy systems still in use today were created over a decade ago and are no longer supported.

They are written in ancient programming languages, use obsolete network infrastructures and hardware, and are incompatible with emerging technologies like cloud computing and the Internet. As a result, controlling and sustaining such systems becomes prohibitively expensive.

The issue isn’t just technological. Many legacy systems were built as unique solutions, requiring additional management and support personnel training.

Legacy systems were not meant to integrate with cutting-edge technologies such as cloud computing, artificial intelligence (AI), and the Internet of Things (IoT). Thus, connecting legacy systems with current environments necessitates a multi-layered architecture comprised of middleware and connectors constructed on top of the underlying technology.

Eventually, if the system is not properly maintained, it becomes too slow and complex to work smoothly, incurring additional expenditures with each subsequent update and integration endeavour. This is not to suggest that maintaining such juggernauts entails perpetual cash outflows. For example, the US government invested over $100 billion in IT and cybersecurity in 2021, up from around $90 billion in 2019. Over 80% of the money was spent on system operation and maintenance, including obsolete software. According to the US Government Accountability Office (GAO), more money is still being wasted on outdated IT systems.

How keeping legacy systems affects your costs

Additionally, keeping legacy infrastructure incurs additional environmental expenses due to the increased energy consumption required to operate long rows of older-generation servers on your firm premises. Migrating to the cloud or upgrading to newer hardware generation may be a solution to offset this additional expense.

Legacy systems that are inefficient lack adaptability and scalability, resulting in missed business opportunities.

Staying up to date with software

There comes a moment in your business’s lifespan when fresh software integrations are no longer sufficient because your old system simply cannot keep up with the speed of your operation. It not only results in efficiency losses but also acts as a roadblock to future corporate growth. While your competitors shift to the cloud, taking advantage of micro-services, containers, and reusable code to save time and money, you continue to patch in circles.

Ageing systems also limit your access to emerging technologies such as machine learning, artificial intelligence (AI), the Internet of Things (IoT), and augmented reality (AR), which can assist you with data analytics, user engagement, payment processing, and customer service automation, among other things. They just cannot scale effectively or quickly enough to avoid having a negative influence on your business. Modernisation of your system can assist you in avoiding these undesirable consequences.

Cardinal cuts hidden costs and challenges

At Cardinal, we are driven to address the inefficiencies of the industry, leveraging technology to seamlessly connect all players in the short-term insurance value chain. With our updated technology software and digital transformation geared solutions, Cardinal can help streamline your processes through innovation and forward-thinking.

If you are interested in a demo of our software, or would like more information regarding our products, services, and offerings, please contact us here.


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