The Hidden Costs of Legacy IT Systems – And How to Escape Them

Many businesses continue to rely on outdated IT systems, often under the assumption that maintaining them is more cost-effective than upgrading. However, legacy systems have hidden costs that accumulate over time—draining budgets, reducing efficiency, and increasing security risks. This article explores these hidden costs and outlines steps businesses can take to transition to modern, compliant, and secure IT infrastructure.

The True Cost of Legacy Systems

At first glance, legacy systems are a cost-saving measure. However, a closer look reveals that these outdated systems introduce several financial, operational, and regulatory risks.

Rising Maintenance Costs

Older systems require specialised support, expensive spare parts, and ongoing maintenance, all of which become costlier as time passes. IT teams spend more time patching and repairing these systems, diverting resources from innovation and growth.

Key Financial Insight:

  • Maintaining on-premises IT infrastructure can cost twice as much as cloud solutions over five years due to hardware, software, maintenance, and staffing costs (Gartner) – Source.
  • Businesses moving to the cloud can reduce IT operating costs by up to 55% compared to legacy systems (Accenture).
  • Security Vulnerabilities

Closeup data wires and cables connected to hardware mainframe in dark network server room

Legacy systems are prime targets for cybercriminals. Unsupported software lacks essential security updates, exposing businesses to data breaches, ransomware attacks, and compliance violations. Businesses in the UK and EU must adhere to GDPR and Digital Operational Resilience Act (DORA) requirements to protect customer data and maintain operational resilience.

Key Financial Insight:

  • On average, a data breach costs businesses ÂŁ3.8 million per incident, with legacy systems being a major contributing factor (IBM Cost of a Data Breach Report).
  • Cloud solutions reduce IT maintenance costs by 60% compared to legacy infrastructure, allowing businesses to reinvest in cybersecurity and resilience (AWS).

Compliance Risks

Regulatory frameworks such as FCA SYSC 6.1 & 13.7, MiFID II, and DORA require financial institutions to have robust, secure, and reliable IT systems. Legacy systems often fail to meet these requirements, resulting in potential fines, reputational damage, and loss of customer trust​.

Reduced Productivity & Innovation

Slow, inefficient systems hamper employee productivity, generating frustration and lost revenue. Legacy infrastructure often lacks integration capabilities, making adopting modern technologies such as cloud computing, AI, and automation difficult.

Key Financial Insight:

  • Moving workloads to the cloud can reduce the Total Cost of Ownership (TCO) by 30-40%, improving productivity and scalability (McKinsey & Company) – Source.

Hidden Opportunity Costs

Every pound spent maintaining an outdated system is a pound not invested in digital transformation. Modern cloud solutions—such as Microsoft Azure and Microsoft 365—offer scalability, improved security, and compliance alignment​.

Escaping the Legacy System Trap

Recognising the risks of legacy systems is only the first step. Businesses must take decisive action to transition to modern, resilient IT infrastructure.

Conduct an IT Audit

Assess your IT infrastructure to identify risks, inefficiencies, and compliance gaps. This audit should cover:

  • Security vulnerabilities
  • Integration limitations
  • Compliance misalignment with FCA, DORA, and GDPR​.
  1. Develop a Migration Strategy

A phased migration plan helps minimise disruptions and ensures a smooth transition. Consider:

  • Cloud adoption (Microsoft Azure, AWS, Google Cloud)
  • Hybrid models for gradual migration
  • Security and compliance alignment (e.g., Azure Blob Storage for SEC Rule 17a-4(f) compliance​).
  1. Implement Robust Cybersecurity Measures

Protecting your data is critical. Ensure:

  • Multi-Factor Authentication (MFA)
  • Encryption for data at rest and in transit
  • Regular security audits as per CIS Microsoft 365 and Azure Benchmarks​

Train Employees

Technology alone is insufficient—staff must understand cybersecurity risks and best practices. Regular training helps mitigate risks associated with human error.

Work with Experts

Navigating IT compliance and digital transformation requires expertise. Bentlebury specialises in regulatory IT compliance for financial services, helping businesses transition to secure, compliant, and efficient IT solutions. Learn more at bentlebury.com.

Conclusion

While maintaining legacy systems may seem cost-effective, the hidden financial, security, and compliance risks far outweigh the perceived savings. Studies show that cloud-based solutions can:

✅ Reduce IT costs by 30-55% – McKinsey

✅ Decrease maintenance expenses by 60% – AWS

✅ Improve compliance alignment with FCA, DORA, and GDPR – Gartner

Transitioning to modern IT infrastructure is an investment in efficiency, security, and long-term growth. Start your IT transformation today to ensure resilience and regulatory compliance in an increasingly digital world.

Sources:

  1. Accenture – Cloud First Strategy
    https://www.accenture.com/gb-en/insights/cloud
  2. McKinsey – Cloud Transformation
    https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/cloud-adoption
  3. Gartner – Cloud Cost Analysis
    https://www.gartner.com/en/insights/cloud-computing
  4. AWS – Total Cost of Ownership (TCO) Analysis
    https://aws.amazon.com/tco/
  5. IBM Cost of a Data Breach Report
    https://www.ibm.com/reports/data-breach
  6. Optimize IT Infrastructure to Maximize Workload Performance - Aberdeen Group paper | TechRepublic: https://www.techrepublic.com/resource-library/whitepapers/optimize-it-infrastructure-to-maximize-workload-performance-aberdeem-group-paper/