Legacy systems: modernize or replace?

Legacy systems are both a strategic asset and a significant challenge for companies seeking innovation. Responsible for sustaining essential processes and business rules, these systems often become barriers to innovation, requiring difficult strategic decisions: is it more worthwhile to modernize or replace?

In this article, we will understand the risks and opportunities involved in this decision-making process and how artificial intelligence applied to legacy modernization can change the game and make this decision easier.

What are legacy systems?

Legacy systems, while representing valuable assets for sustaining critical processes and preserving the organization's accumulated knowledge, face the challenge of keeping up with technological advancements and new business priorities. They often exhibit characteristics such as:

• Limited integration with modern solutions;

• Dependence on specific knowledge;

• Lack of documentation;

• High operation and support costs;

• Low scalability.

According to Rômulo Cioffi, Chief AI and Innovation Officer at Squadra:

"Legacy systems typically tell the company's story, but they can also compromise its future."

Modernize or replace, how to decide?

As the market accelerates its digital transformation, legacy systems become both a foundation for business continuity and a challenge for adopting new technologies essential for innovation.

Research indicates that 53% of companies report difficulties integrating old systems with modern solutions, and over 60% of IT budgets are allocated to their maintenance.

Given this scenario, the decision between modernizing or replacing should be guided by a thorough technical and strategic analysis.

With over 38 years of experience, SQUADRA has observed that modernization, enhanced by the use of generative artificial intelligence, offers, in most cases, a safer, faster, and more sustainable path, capable of preserving accumulated knowledge while simultaneously creating space for innovation.

AI as an accelerator for legacy modernization

Understanding the potential for generative artificial intelligence to improve various aspects of our deliveries, Squadra created Genius, a multipurpose platform powered by AI and developed to optimize workflows and accelerate the development cycle of digital platforms and solutions for our clients.

And one of Genius's purposes is precisely to enhance legacy modernization. In a recent project for a major national railway company, the use of Genius led to significant productivity gains compared to the classic approach:

• 60% more productivity in the discovery phase;

• 60% more productivity in the design phase;

• 30% more productivity in the build phase;

• 40% more productivity in the QA phase;

• 60% more productivity in the deploy phase.

Modernizing is not just about updating technology. It's about preserving what works, transforming what limits, and delivering more value to the business. And with these hyper-productivity gains that AI provides, it becomes the safest, fastest, lowest-risk, and lowest-cost path for companies.

Replacement may be necessary in some scenarios, but it is rarely the ideal starting point, especially when time, resources, business rules, and accumulated knowledge are critical.

And at Squadra, our commitment is to deliver value. Technology serves strategy, not the other way around. Value First. Powered by AI.

Want to transform your legacy systems into strategic assets? Talk to Squadra and discover Genius. We have the knowledge, technology, and methodology to make the transformation happen safely, progressively, and with a focus on results.