What is a Legacy System and How Can it Impact Your Business?

If you’re running your own small business, then chances are you are relying on tools and systems that have been a part of your operations for some time. There may be a few reasons for avoiding an update, such as operational familiarity and budgeting constraints. But if these tools and systems are outdated or no longer supported, then they may be what is known as a legacy system.

What is a legacy system?

A legacy system is any older software, hardware or IT infrastructure that is still being used, even though newer technology is available. These systems might still run perfectly well, but they often lack the performance, flexibility, and security of more modern solutions.

Think about IT legacy systems like an old car. It might get you from A to B, but it’s slow, costly to maintain, prone to unexpected breakdowns, and incompatible with modern technology. Sure, you can keep driving it. But it’s not built for where you’re heading in the future.

Examples of legacy systems in small business

“But I don’t have any legacy systems to worry about,” you may think. “I recently upgraded my IT network and starting using cloud technology.”

Upgrading an old IT network (like your computers, printers, servers, routers, etc) is one way you can make your business operations smoother, faster and more secure. However, there are many other forms of technology that you may have overlooked that could still be holding your business back and leaving you vulnerable to cyberattacks.

These may include:

• An old point-of-sale (POS) system that doesn’t connect to your inventory software.
• A customer relationship management (CRM) tool that only runs on one desktop computer.
• Outdated industry-specific software that no longer receives updates from the developer.
• Paper-based processes backed by minimal or no digital support.
• Excel spreadsheets that manage your accounts instead of cloud-based bookkeeping tools.

Starting a business is hard work, and it takes time, effort and money. When most business owners first start out, they probably purchased the best tools and software that they could afford at the time. However, just as a business will evolve over time, so too does technology.

Why updating your legacy systems matters more than ever

Legacy systems can create real challenges as your business grows. These impacts could affect your business not only financially, but could also damage your reputation.

Negative impacts on performance and growth

Legacy systems could potentially slow down your business and your team with clunky, complicated workflows that compensate for old systems and outdated features. This could make it hard for team members, suppliers and third parties to communicate with the business and one another.

Customers may also find it difficult or frustrating to get what they need, especially if your website, booking system, payment system or other customer-facing technology is out of date.

Inability to integrate new technology

Outdated systems could limit your ability to integrate new technology if you’re looking to scale or start implementing tools like AI.

Many of today’s technologies (like cloud-based software, mobile apps and AI-powered tools) are built with integration in mind. They’re designed to connect easily with other systems, automate tasks and share real-time data. Legacy software systems, on the other hand, were built in a very different era, often before these technologies existed. This can make it extremely difficult to successfully integrate modern technology.

Increased cybersecurity risks

One of the major drawbacks of legacy systems is the increased risk of cybersecurity issues.

Older systems were often built before today’s advanced cyber threats existed. Just look at the new, sophisticated ways cybercriminals are targeting Aussie small businesses, including AI-driven cyberattacks. This means that older systems lack the modern security features needed to protect your business.

Many legacy IT systems are no longer supported by the original software providers, so they no longer receive critical updates or security patches. This can leave the door open for cybercriminals to exploit known weaknesses.

Other cybersecurity risks caused by legacy systems include:

• Outdated encryption protocols: Older systems may not use current encryption standards, making it easier for hackers to intercept data.
• No multi-factor authentication (MFA): Legacy software systems often lack built-in MFA, making it easier for unauthorised users to gain access.
• Vulnerable endpoints: If your team accesses legacy systems remotely or through mobile devices, weak entry points can expose your entire network.

A real-world example of a legacy system failure

Legacy systems can cause major problems for small business owners. This is just one real-world example of a legacy system causing a major (and avoidable) headache for a real estate agency.

The owner of the real estate agency discovered that they were unable to log into their own website using their admin account. Similarly, they were unable to access WordPress. The owner of the agency contacted their software provider to find out what the problem was. The software provider responded that a data breach had occurred, which resulted in the agency’s account being accessed through their system directly.

The software provider was unable to defend against this data breach because the agency was using an old legacy system that no longer received updates. Because of this security issue, the software provider advised that they would close the agency’s account in 30 days because they could no longer provide adequate support or security due to the legacy product.

However, because of the data breach, the real estate agency’s clients were unable to login into the site and no new customers could access the website to create new listings. The cybercriminals also deleted more than 200 listings and flooded the website with old listings.

Left with no other choice, the real estate agency had to approach a software development company to rebuild their website entirely from scratch. The cost of the rebuild was approximately $40,000.

Fortunately, as the agency held Cyber Liability insurance, their insurer paid $51,000 to cover the costs of the website rebuild as well as forensics to investigate the cyberattack.

How to move from a legacy system to a new system 

Upgrading from a legacy system to a modern solution can feel overwhelming, especially if you’re not particularly tech-savvy. The right plan can help make the process much more manageable. By taking it step by step, you can reduce risk, manage costs and make sure your business continues to run smoothly and profitability throughout the transition.

1. Start with a legacy system assessment 

Before you upgrade, you need to know exactly what you’re working with. A legacy system assessment is a simple evaluation of your current software and IT infrastructure to identify what’s outdated, what’s still functional, and what needs replacing.

Ask the following questions to help get you started:

• Is the system still supported by its developer?
• Can it integrate with modern tools or cloud platforms?
• Is it secure, or does it leave your business vulnerable to cyber threats?

Another great way to understand what systems and tools need to be updated is to speak to the people who use them every day: that is, your employees and clients. They can point out inefficiencies, bottlenecks and frustrations that might not be obvious at first glance.

2. Choose the right modern system for your business needs

Choosing the right system depends on your business size, industry and day-to-day operations.

A new system should support your current needs and make it easier to scale in the future. Whether you’re upgrading your point-of-sale system, customer relationship management platform or accounting software, a modern, secure platform can help future-proof your business and reduce reliance on outdated tech.

3. Plan your data migration

Data migration from a legacy to a new system means safely transferring your business data from the old platform to the new one.

Planning your data migration is one of the most important steps and should be handled with care. A poorly managed migration can lead to lost or corrupted data, service disruptions, or compliance issues. Start by following these simple steps:

1. Back up everything before you begin. Always keep a copy of your data in case something goes wrong.
2. Clean up your data by removing duplicates or outdated information.
3. Map out the data transfer, so you know where everything is going in the new system.
4. Test the migration with a small batch first before moving everything over.

So, when is the right time to upgrade a legacy system?

Making the decision to upgrade an old legacy system isn’t always easy, especially for time-poor business owners with limited budgets. But if the business’s systems are beginning to feel more like a burden then a benefit, then it may be time to reassess.

Upgrading from a legacy system to a new system should be thought of as a strategic business move. This is one way SMEs can set their businesses up for future success with the right tools to support growth, efficiency and security.

The provision of the claims examples are for illustrative purposes only and should not be seen as an indication as to how any potential claim will be assessed or accepted. Coverage for claims on the policy will be determined by the insurer, not BizCover.

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