Rotary Club members who donate $1,000 or more to the Rotary Foundation get a lot of special attention. They are named Paul Harris Fellows in honor of the organization’s founder. They receive a certificate and an elegant lapel pin. It’s an important award in the Rotary world, and one that has been around since 1957. But recently it had become the source of a lot of unhappiness.
“We were hearing incessant complaints from [donors] because recognition would sometimes arrive two to three months after they made the contribution,” says Rotary International CIO Peter Markos. “This is a big recognition in our clubs, so they were looking for something more like two to three weeks.” The culprit was Rotary’s badly outdated processes and technology. “We couldn’t do it in less than six to eight weeks, and sometimes twelve,” Markos says.
Any CIO in a large organization that’s more than 20 years old will understand his dilemma. “I don’t think Rotary is different from a lot of other organizations in that we have systems that have been around for a while,” Markos says. “Some were built to fill a need 15 years ago when they couldn’t find a product in the marketplace. Then they cobbled other things on until it became a maintenance nightmare.” So two years ago, the organization began work on a three-year plan to replace its older technology with more modern alternatives, and to simplify its systems as much as possible. That has resulted in many changes–beginning with much faster recognition for Paul Harris Fellows. “We’ve implemented a solution with a guaranteed [result in] 10 days,” Markos says. “We’ve been meeting that.”
It’s an increasingly common story. “The legacy life cycle
is coming to a quick end,” declares Stephen Andriole, a former CTO and CIO, and now the Thomas G. LaBrecque professor of business technology at Villanova University. “The data we collect suggests that a combination of cloud [computing] and the decline of legacy maintenance and support is leading more organizations to make the transition more quickly.”
Fear of disruptors
Factors such as the rise of cloud computing, the growth of shadow IT, and the challenge of maintaining old technology are certainly driving the rush to mothball outdated systems. But there’s an even bigger motivator: Legacy technology is hobbling innovation at many organizations. That’s frightening to C-suite executives who have seen disruptors bring momentous change to a number of industries–Netflix in the video rental market and then broadcast TV, Uber in the taxi business and Airbnb in the hotel industry, to name a few. Business leaders may be wondering if their industries or companies are next. If so, there may be little they can do to defend themselves if they depend on systems from yesteryear.
“These disruptive models are all greenfield-built,” says Donovan Neale-May, executive director of the Business Performance Innovation (BPI) Network, an organization for executives involved in innovation and business transformation. “Business leaders have zeroed in on the fact that there’s a lot of wealth creation going on by companies that are not limited by older, less adaptable, moribund technology.”
A recent BPI Network survey of 250 business leaders shed stark light on their frustration. While 70 percent of the respondents reported that tech has become far more important to their businesses, only 46 percent rated the level of innovation in their companies’ IT groups as good or very high. And only 43 percent said their IT groups are doing a good job of becoming a strategic, responsive and valued business partner.
These executives are keenly aware when their infrastructure is dated, and they’re at least as unhappy about it as IT is, Neale-May says. “There’s a plethora of new technologies, such as adaptive analytics, that are providing business intelligence. But you can’t use them with legacy infrastructure. We want to make smarter, better, quicker decisions but we can’t because the old technology is plodding along.”
Preventing the cool stuff
It should thus come as no surprise that C-level executives are more receptive to legacy replacement projects than ever before. In fact, rather than having to sell the CFO or CEO on why replacing older infrastructure is a worthwhile investment, CIOs are fielding C-suite requests that they do so.
“The business units’ CEOs are driving the move to get rid of legacy,” says Clay Johnson, global CIO of GE Power & Water. “They ask, ‘How do we go faster?’ We need to move from an industrial business to a digital industrial business. We have to get IT to be faster. We have to do things differently.”
One of two scenarios typically drives legacy replacement, says Andrew Horne, IT practice leader at CEB (formerly called the Corporate Executive Board). In the first, “a nimbler competitor begins to emerge and the business leaders come to the CIO and say, ‘Let’s match this,'” he says. The CIO then explains that matching the upstart would take two years because the competitor started from scratch while the established company will have to build onto the systems it already has. “That’s not a great message,” Horne says.
The second scenario begins with a shadow IT initiative, when the marketing department or some other business unit sets up a new system on its own. This is not uncommon these days: “We’re seeing [non-IT] business leaders get much more involved in technology than they’ve ever been,” Horne notes. At some point, that business group turns to the IT department for help and the project stalls. “The roadblock IT puts up is that we have to integrate this with our existing system,” he says. “It’s becoming much more apparent to business leaders why legacy technology is a problem: It prevents you from doing the cool stuff you want to do.”
“Based on our data, the only companies that are trying to keep legacy systems alive are those that absolutely, positively, only see IT as a cost center,” Andriole says. But even some of them are changing their ways. For example, Land O’Lakes, traditionally treated IT as a necessary expense, to be reduced as much as possible, but then, “around 2008, our company really started on a strategic growth path after several years of shedding businesses and rebalancing our portfolio,” says Michael Macrie, senior vice president and CIO. “It became clear that legacy technology was a real barrier to continued growth.”
Though that realization occurred before Macrie joined Land O’Lakes, he’s well aware of the problems that drove the food maker to change its approach to IT. “For instance, we had no mobile capabilities,” he says. “We had phone systems that literally would cut out. We were on a desktop platform that was fairly unsupportable and could not run the latest software our business wanted to deploy. To address everything required the mind shift that technology was a key enabler and not just a cost to be minimized.”
Heading to the cloud
Land O’Lakes made that mind shift and from 2010 to 2014 engaged in a project called Bedrock to move its core systems off of legacy technology. As many of those systems as possible were moved to the cloud, Macrie says. “Cloud-first wasn’t part of the original plan. But halfway through, we realized the value and speed to market [enabled by software as a service],” he says. “The changes we wanted to implement were being enabled much more quickly in areas where we used SaaS technology. So [starting in 2012] we instituted a SaaS-first and mobile-first culture in IT.”
Thanks to that approach, the IT group has enjoyed a good deal of post-project success, according to Macrie. “We’re seeing significant increases in user adoption, increased customer satisfaction, and quicker time-to-value for implementations and conversion projects,” he says. “We’re seeing reduced costs in the initial implementation and sometimes in ongoing expenses.” And IT is devoting a lot less effort to maintenance, with much of that work now being done by cloud providers. “The things we do [in IT] can have more strategic impact,” says Macrie.
At GE Power & Water, IT has made a similar push to the cloud over the past year, according to Johnson. Ordinarily, “I would have to update all the hardware and software every couple of years. As we move applications to the cloud, we let providers do that for us,” he says. GE Power & Water is also consolidating its many different platforms and applications. Those two moves combined–cloud plus consolidation–have let GE Power & Water reduce its spending on IT server infrastructure by 20 percent (that’s $19 million) in the past 18 months, Johnson says.
Increasingly, such an approach is the norm. “Moving to the cloud is absolutely the preferred methodology to get off legacy systems,” Andriole says. “Maybe 95 percent of those still dealing with legacy systems are moving to the cloud.”
This is partly because objections to public cloud deployments are waning. “A few years ago, there were perhaps three concerns about the cloud,” Horne says. “One was, this is such a big company that we can run our private cloud more cheaply. Increasingly, that’s not the case and even the largest companies don’t have the scale that the largest cloud providers do.”
A second concern was that cloud computing was an emerging market and the vendors lacked maturity. But now there are well-established cloud providers that can address the concerns of large enterprises. For example, some countries don’t allow companies to store people’s personal information beyond their borders. That kept some data out of the cloud because some systems are hosted in other countries. But now there are cloud providers whose services don’t cross international borders.
The third concern was that the cloud wasn’t secure. That led some companies to adopt no-cloud policies for their most sensitive information. That attitude is changing. “Many CIOs realize that their security budgets and security sophistication are dwarfed by Amazon” and other large providers of cloud services, Horne says. “Some of it gets political. It’s less about security and more about, if something does go wrong, who’s to blame? If I’m a CIO, is it easier to explain if something went wrong internally or with a vendor who ultimately I’m responsible for? Those who are politically savvy know which is more survivable in their organizations. But for scalability, efficiency, security and reliability, they’re quickly coming around to the view that the cloud is at least as good as anything they could do in-house.”
Creating an integration layer
Of course, a cloud deployment isn’t the only option. Some CIOs are creating an integration layer instead, allowing legacy platforms and applications to work with modern systems. And some are replacing older systems with more modern ones that are still hosted on-premises.
When Discover Financial Services set out to expand its offerings beginning in 2007, the company’s legacy technology was an obvious impediment, according to executive vice president and CIO Glenn Schneider. “As with many others who’ve been around for years and have multiple generations of technology in their data centers, the question was, how do we leverage that?” he says. The company’s move into the banking business, with IRAs, CDs and many other types of accounts, made its banking platform an obvious choice for an update. “Our mission is to be the leading direct bank and payments platform,” Schneider says. “We are all online, so to create competitive differentiation, we felt the necessity to start at the foundation level itself and create a new platform.”
For example, he says, one goal was to give customers immediate access to their newly opened online accounts, instead of having them wait 24 to 48 hours for batch processing. Discover wanted to streamline its call center processes, too. “The old application had several screens open simultaneously in order for a rep to service a call, and there was some screen scraping involved,” Schneider says. The company wanted customer service reps to be able to handle most calls from a single screen, so they could respond to customers more quickly.
Because financial data is so sensitive and is subject to so much regulation, Discover chose to replace its legacy platform with newer, licensed software from a different vendor that is hosted on-premises. “That decision was primarily because the [new software’s] architecture was very open,” Schneider says. “It allowed us to connect our applications from our card business and lending business and our banking business into one platform. It allowed us to create a seamless experience across all channels.” Plus, the new software lets Discover quickly add or change features, functionality and products.
The platform is configured for dedicated servers–for now. “We’re working with the vendor as we speak to get it cloud-based in the near term,” Schneider says. When that happens, he plans to host the new platform in a private cloud that will remain within Discover’s data centers, at least for now.
“It gives us better cost savings than where we were. [But] it’s not as good savings as if we were out in a public cloud,” Schneider says. But once the platform has a cloud configuration, Discover will have the flexibility to move it from private to public cloud, if that move is supported by a cost-benefit analysis. “Whether you’re in a private or public cloud, you can pick it up and put it in any cloud you want.”
Adjusting entrenched behaviors
The biggest obstacles to replacing older systems are not technological but human. As Horne puts it, “the use of legacy systems creates legacy behaviors.” So any move to replace outdated technology must take into account how that move will affect entrenched business processes and how people do their jobs.
Needless to say, most users don’t like change, so changes to business processes brought on by updating old systems are liable to meet resistance. How should CIOs cope?
One approach is to make sure that new customer-facing and employee-facing applications are as intuitive as possible. “I tell my developers, ‘If you go to the Apple App Store and download an app, will you expect someone to have to train you on it?'” says Brian Flynn, executive vice president and global CIO of Crawford & Co., an independent provider of claims management services. “That [ease-of-use] is what we need to deliver into the marketplace, and it needs to be substantially better than what they used to have, because they need an incentive to go to this new platform.”
It’s also imperative to have strong and vocal support from business leadership, CEB’s Horne notes. Beyond that, he suggests paying attention to the pace of change to make sure no group within the organization gets overwhelmed. “You have to understand the total amount of change happening within the company and how much change people can take at one time,” Horne says. “If you’re switching out several systems, don’t switch them for the same group all at once. Stagger it instead.”
Perhaps most important, make sure that people whose jobs are affected by a legacy replacement fully understand the reasons for that replacement. For instance, Markos says, most of Rotary International’s legacy upgrade process has been an easy sell for users who now find themselves using applications that work faster and give them better functionality. “The business had been dealing with a lot of pain, so most of the time they were very enthusiastic about learning the new system,” he says.
One exception was data entry. “We had a data-entry system that was originally optimized for data-entry employees’ needs but not for the broader organization,” Markos says. The new system tripled the time it took to enter data, but it made that data dramatically more useful to Rotary International at large. “We said, ‘We know you care about speed, but we’re focusing on increasing the value of the data to the rest of the organization,'” he says. “They were receptive as long as expectations were adjusted relative to their performance. They had the context of the big picture.”
Horne suggests taking this a step further by connecting with business users who could become evangelists for new systems. “There’s a mind shift happening–from change as a top-down initiative to creating peer networks of people who have an understanding of the new technology,” he says. “When a change happens, people want information about it. Traditionally that information is provided top-down. But we’re seeing some companies allowing employees to create networks and giving them access to peer groups across social media and the Web so they can understand what’s going on for themselves.”
The peer groups should also include IT employees and people who can explain why the changes are needed. “It may be just that the technology is out of date, but usually there’s a strategic [business] reason for replacing a legacy system,” Horne says.
That way, “employees get it, and they’re not waiting to be invited to a meeting about how this is happening,” Horne explains. “You’re creating a more agile and change-ready organization. And if you have that, when change comes along, people can take that change in stride.”
Continue reading for free
Create your free Insider account or sign in to continue reading. Learn more