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  • Writer's pictureMichelle Tan

Digital Transformation: Why and how Modern CEOs should challenge Legacy Systems

In the dynamic landscape of today's business world, you, as a CEO, hold the power to drive change and lay the groundwork for your company's sustainable growth. One pivotal decision lies in addressing the obstacle of legacy systems. These systems, made up of outdated software, hardware, or methodologies, may once have been indispensable, but in the current digital age, they are increasingly presenting obstacles to progress.

Understanding the burden of legacy systems

Legacy systems can be a real drain on resources. Customised and tweaked over years to fit specific business needs, they evolve into complex IT environments. Their maintenance demands specialised IT knowledge and can be incredibly costly. To put it in perspective, a report from Gartner (via Wired), approximates that companies can spend up to 75 percent of their total IT budget just to maintain and run existing systems and infrastructure, leaving a mere fraction available for digital innovation.

Additionally, legacy systems also struggle to meet the demands of today's digital business environment. Designed in an era where today's volumes of data, processing speeds, or integration requirements were unthinkable, they often stumble under the demands of modern business operations. This lack of agility and scalability can become a barrier to innovation, slow down processes, and increase the risk of errors, limiting your company's ability to adapt and thrive.

Aged legacy systems also carry considerable security risks. As they become older, they also become more susceptible to cyber threats. This risk is far from trivial - Cybersecurity Ventures predicts that by 2025, cybercrime will cost the world $10.5 trillion annually, marking a 15% year-on-year increase from 2020. With this in mind, the weaknesses inherent in legacy systems become an urgent issue, needing to be addressed as part of a comprehensive cybersecurity strategy.

Embracing the New Era of Opportunities with Digital Solutions

Transitioning from legacy systems to advanced digital platforms doesn't merely alleviate the challenges; it unlocks a wealth of opportunities. Next-generation systems come laden with advanced features designed to enhance efficiency, foster innovation, and drive business growth. The integration of technologies like artificial intelligence (AI) and machine learning (ML) can streamline operations, enhance decision-making, and provide invaluable predictive analysis.

In contrast to their older counterparts, these newer systems are designed with scalability and integration at the forefront, providing the ability to grow with your business and connect seamlessly with other digital platforms. They can handle real-time data processing and analytics, equipping your business with insights crucial for strategic decision-making. Additionally, modern systems offer robust cybersecurity features, thereby providing enhanced protection in today's digital landscape.

Adopting these systems often leads to an improved user experience for both employees and customers. They are typically more intuitive, responsive, and efficient, significantly enhancing the user interaction. Transitioning from legacy systems, therefore, is not merely an IT upgrade; it's a transformative step that can fuel performance, stimulate innovation, and provide a significant competitive edge.

Making the Leap

The decision to migrate from a legacy system to a modern platform is indeed a significant step. In essence, you're not just replacing old technology; you're transforming the very foundation on which your business operates. Yet, several forward-thinking CEOs have already made this leap and are reaping the benefits of their strategic decisions.

Lego, the Danish toy company, is another excellent example of a successful transition from legacy systems to modern platforms. In the early 2000s, Lego was facing serious financial difficulties due to complicated supply chains and a vast, hard-to-manage product line. Its survival was in question.

Part of Lego's turnaround strategy was a radical digital transformation. The company had a patchwork of outdated, custom-built IT systems that were hindering its operational efficiency. Recognizing the need for change, the company made a decisive move to implement SAP, a leading enterprise resource planning (ERP) system.

The migration from the legacy systems to SAP was a huge undertaking. The transition required significant investment, careful planning, and overcoming resistance to change within the organisation. Yet, the company's leadership understood that this was a necessary step to streamline operations and regain profitability.

The results of this digital transformation were remarkable. By replacing its legacy systems with a unified, modern ERP solution, Lego was able to drastically simplify its supply chain, improve demand forecasting, and increase operational efficiency. Furthermore, the new system allowed Lego to be more responsive to market trends. They could quickly adapt their product offerings based on real-time sales data, helping them avoid overproduction and wastage. This shift from legacy systems played a crucial role in Lego’s return to profitability and growth.

Another example is that of DBS Bank, a leading financial services group in Asia. In 2009, the bank embarked on a significant digital transformation journey, moving away from its legacy systems and adopting a cloud-first approach. DBS, recognized as the 'World's Best Digital Bank' by Euromoney, began its digital transformation journey in 2014 with the vision to become a "22,000-person start-up". Faced with cumbersome legacy systems, DBS embarked on an ambitious plan to reinvent its IT infrastructure and overhaul its organisational culture.

The bank invested heavily in upgrading its technology stack, building agile, modular systems to replace the patchwork of legacy solutions. By developing APIs to enable seamless integration, implementing cloud solutions for scalability, and adopting big data analytics, DBS transformed its operations to become more customer-centric and data-driven.

DBS's focus on digital transformation paid off handsomely. In 2019, it achieved a record-high net profit of SGD 6.39 billion, up 14% from the previous year. The bank also saw its customer satisfaction scores rise to an all-time high, with digital customers proving more engaged and more profitable than their peers.

This allowed the bank to reduce IT costs, improve operational efficiency, and launch digital innovations faster. The bank's digital transformation success was acknowledged when it was named the World's Best Digital Bank by Euromoney in 2018 and 2021.

Such examples demonstrate how leading the digital transformation can result in operational efficiency, cost savings, increased agility, and new growth opportunities. Although these companies differ in their size and industry, their successful digital transformations share common elements: a clear strategy, a culture ready for change, investments in the right technologies, partnerships with experts, and regular monitoring of progress.

This underscores that transitioning from legacy systems is not just an IT upgrade, but a transformational journey that can unlock new levels of performance and innovation. As a CEO, your role in navigating this change is pivotal. By starting this journey today, and partnering with experts like PICOS Global, you'll be better prepared to face the challenges and opportunities of the digital age.

Crafting a Strategy for Success

Taking inspiration from the success stories of companies like Lego and DBS Bank, it's clear that a well-planned strategy is vital to a successful transition away from legacy systems. As a CEO, here's how you can pave the way:

1. Develop a Clear Strategy: Start by identifying your business needs and strategic goals, just like Lego did when they centralised their global IT operations. Identify areas where legacy systems are hindering progress and where new technologies could create value. From there, establish a clear, detailed roadmap for transformation, prioritising projects based on their impact and feasibility.

2. Foster a Digital Culture: DBS Bank's success in digital transformation can be attributed to their organisation-wide cultural change. Encourage an environment that embraces learning and adapting to new technologies. Your employees are the key drivers of this transformation. Involve them in the process, help them understand the benefits, and provide the necessary training and support to make the transition smoother.

3. Invest in the Right Technology: Investing in the right technology is a fundamental part of this process. Lego not only increased its operational efficiency but also created a new revenue stream by choosing the right technology. Align your technology choices with your specific business objectives, look for flexible, scalable solutions that can grow with your business and adapt to future changes.

4. Partner with Experts: Partnering with digital transformation experts can provide invaluable guidance, helping you avoid common pitfalls and maximise your return on investment. Companies like PICOS Global offer comprehensive services, supporting you from strategic planning to implementation and beyond.

5. Monitor Progress: It's vital to keep track of your progress, regularly evaluating the outcomes of your digital transformation initiatives against your set goals. Use data-driven insights to refine your strategy as needed, ensuring your transformation efforts continue to align with your evolving business objectives.

Embracing digital transformation means recognizing that it's a continuous journey, rather than a one-time project. Start taking those strides today. Consider the opportunities that partnering with experts like PICOS Global can provide, and set your sights on the horizons of innovation and growth that modern technology offers. By making the bold decision to challenge legacy systems and embrace change, you'll be setting your organisation on a path towards resilience and success in the digital era.

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