The cost of legacy software in the UK: when and how to modernise?

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The cost of legacy software in the UK: when and how to modernise?

Legacy software costs have reached alarming levels for UK organisations across all sectors - but what can be done by those still using outdated solutions?

Published on 4th June 2025

The UK government alone allocates nearly half of its yearly tech budget – a massive £2.3 billion – just to keep outdated systems running. This isn’t just a government problem; businesses throughout the country face similar financial burdens from ageing technology.

These outdated systems have evolved into what many experts call a “ticking time bomb” for organisations that depend on them. The lack of flexibility and scalability creates serious operational constraints. What’s more, 90% of IT decision-makers acknowledge these legacy technologies actively prevent their organisations from innovating and operating efficiently. The financial strain goes well beyond basic maintenance—running a single legacy system costs approximately $30 million on average.

Security issues make the legacy problem even worse. Research shows around 32% of UK businesses have suffered cybersecurity breaches within the past 12 months, with outdated systems playing a major role in these vulnerabilities. The situation is deteriorating—the percentage of organisations implementing critical security updates within two weeks has fallen from 43% in 2021 to just 31% in 2023.

Most organisations currently spend between 60-80% of their IT budgets maintaining existing hardware and legacy applications. Yet studies indicate that retiring these outdated systems could slash hardware and operational expenses by 65%. In this article, we’ll examine when legacy software becomes financially unsustainable and how you can modernise your systems strategically to cut costs, enhance security, and fuel business growth.

Breaking Down the True Cost of Legacy Software in the UK

Legacy systems drain UK organisations’ finances at alarming rates. One-quarter of digital systems in central government departments are outdated, with some areas reporting figures as high as 70%. These aging technologies impose substantial costs that extend far beyond simple maintenance.

Annual £2.3B Spend on Legacy System Maintenance

The UK government allocates a staggering £2.3 billion—nearly 50% of its annual tech budget—solely to maintaining outdated legacy systems. This massive expenditure represents just the tip of the iceberg. Maintenance costs for these systems are significantly higher than modern alternatives, often tripling or quadrupling in comparison.

In 2024, NHS England reported 123 major system failures that disrupted patient care and forced staff to revert to manual, paper-based methods. Despite knowing the benefits of modernisation, organisations continue operating with inefficient systems. Take the UK’s Office for National Statistics (ONS), which recently announced slowing migration away from legacy systems due to budget limitations, even while acknowledging this would increase uncertainty related to future costs.

Hidden Costs: Downtime, Support, and Licensing

Direct maintenance expenses tell only part of the story. The hidden costs of legacy software create an even more troubling financial picture. System disruptions and downtime from outdated technology hit Fortune 500 business productivity to the tune of almost £1.19 trillion. In the UK specifically, 48% of workers waste three hours or more per day due to inefficient systems, costing the average UK business at least £28,000 annually.

What happens when your legacy programs depend on outdated operating systems? You’ll face expensive special licensing arrangements as vendors shift focus to newer systems. The Royal Navy learned this lesson the hard way in 2015, paying £7.15 million to continue using Windows XP after their legacy programs became dependent on older Windows products. Finding skilled professionals to maintain these systems grows increasingly difficult each year, forcing companies to either hire at premium rates or invest in extensive training programs.

Other hidden expenses include:

Extended vendor or third-party support for end-of-life systems
Integration challenges requiring costly middleware solutions
Security breach costs (averaging £7.5 million per incident in the US)
Employee dissatisfaction leads to higher turnover rates

Technical Debt and Its Long-Term Financial Impact

Technical debt, the “tax” companies pay on development to address existing technology issues, accounts for approximately 40% of IT balance sheets according to McKinsey research. Organisations typically pay an additional 10-20% to address tech debt on top of any project costs. The consequences are severe: companies in the bottom 20th percentile in terms of tech debt severity are 40% more likely to have incomplete or cancelled IT modernisations than those in the top 20%.

CIOs estimate that tech debt amounts to 20-40% of their entire technology estate value before depreciation. Even more concerning, 30% of surveyed CIOs believe more than 20% of their technical budget intended for new products gets diverted to resolving tech debt issues. This vicious cycle translates into enormous costs through lost opportunities and wasted resources.

Security and Compliance Risks of Legacy Technology

Legacy systems create security vulnerabilities that go far beyond simple operational problems. As these outdated systems age, they become increasingly attractive targets for cyberattacks, putting organisations at risk of both reputation damage and serious financial losses.

Unpatched Vulnerabilities in End-of-Life Systems

What happens when software reaches end-of-life (EOL) status? Vendors stop creating security updates, leaving known vulnerabilities permanently exposed. These exploits become common knowledge among hackers, who create specialised tools that make these systems easy targets even for criminals with limited technical skills.

The consequences can be devastating. EOL software remains defenceless against newly discovered threats, with no patches forthcoming. This security gap makes these systems prime targets, especially as attackers actively scan networks looking specifically for outdated technology. The scale of this problem is significant—a 2023 report from the European Union Agency for Cybersecurity (ENISA) found that over 60% of cyberattacks against European businesses exploited known vulnerabilities in unsupported software.

The financial impact is substantial. The Ponemon Institute found that in 2023, organisations using outdated or unsupported software faced an average data breach cost of £3.53 million. Beyond the immediate breach costs, companies with vulnerabilities in unsupported software experienced an average of 8.3 days of downtime, creating significant losses in both productivity and revenue.

GDPR and CCPA Non-Compliance Due to Outdated Software

Legacy systems often create serious compliance problems with modern data protection regulations. These outdated systems frequently cause unintentional GDPR violations, as tech analyst Auger noted when calling for “increased vigilance,” pointing out that many companies violate regulations without even realising it. Basic GDPR principles become difficult to implement when legacy systems generate standardised instructions containing excessive information.

The penalties for non-compliance are severe. Under GDPR, organisations face tiered fines up to £15.88 million or 4% of annual turnover (whichever is greater) for violations such as processing data without proper customer consent. Additionally, GDPR requires that consent be explicitly given rather than assumed through failure to opt out, and customers must maintain the “right to be forgotten”—requirements that legacy systems typically struggle to support.

Even organisations trying to implement compensating controls like network segregation still face significant compliance challenges. As one expert bluntly stated, “Being out of support will definitely affect your compliance with things like the Cyber Essentials scheme, ISO 27001, and the GDPR and DPA—the PCI DSS too”.

Case Example: Microsoft Midnight Blizzard Breach

The January 2024 Microsoft breach demonstrates how even sophisticated organisations can be compromised through legacy components. The Russian state-sponsored actor Midnight Blizzard (also known as Nobelium) began their attack in November 2023 by using a password spray attack to compromise a legacy non-production test tenant account.

From this initial foothold, the attackers accessed corporate email accounts belonging to Microsoft’s senior leadership team and employees in cybersecurity and legal departments, stealing emails and attached documents. The incident clearly showed how attackers can exploit legacy components to bypass otherwise robust security measures.

Microsoft admitted the breach “highlighted the urgent need to move even faster” and committed to “apply current security standards to Microsoft-owned legacy systems and internal business processes, even when these changes might cause disruption”. Following the breach, Midnight Blizzard ramped up their attack volume, with password spray attempts increasing by as much as 10-fold in February compared to January 2024.

This high-profile incident shows how legacy systems often become the weakest link in an otherwise strong security posture. It underscores why organisations must prioritise modernising outdated technology before it becomes a security liability that attackers can exploit.

Operational Limitations and Productivity Loss

Legacy systems create problems that go far beyond financial and security concerns. These outdated technologies severely hamper workforce productivity and operational effectiveness, with tangible impacts on daily business operations across multiple dimensions.

Employee Frustration and Workflow Inefficiencies

Have you ever watched employees struggle with slow, outdated systems? The productivity costs are staggering. Nearly half (46%) of UK workers believe their employer lags behind in adopting modern workplace technology. This frustration translates directly to lost time—slow computers cost employees up to 5.5 days annually in lost productivity. Even more concerning, 48% of UK workers waste three hours or more per day due to inefficient systems, costing businesses approximately £28,000 yearly.

This dissatisfaction doesn’t just affect daily operations. It drives talent away from your organisation. About 30% of workers consider seeking new employment when workplace technology doesn’t meet their expectations. Additionally, 60% of employees report experiencing frustration with software systems in the past two years, with 56% wishing management would simply revert to previous systems.

Data Silos and Poor Integration with Modern Tools

Legacy systems typically operate as standalone solutions, creating disconnected information repositories that prevent effective collaboration. These data silos fragment workflows and make routine tasks unnecessarily time-consuming. Organisations report spending just 19% of their time actually analysing data for its intended purpose, while wasting a whopping 81% on searching (20%), preparing (37%), and protecting (24%) that same data.

The integration problem compounds these inefficiencies. Without proper integration capabilities, legacy systems cannot effectively communicate with modern tools like cloud platforms and API-driven architectures. Research shows these process inefficiencies can cost companies 30% of annual revenue and waste 26% of an employee’s workday.

Customer Experience and Brand Reputation Impact

Poor customer experiences often trace back directly to outdated technology. In a recent survey, 63% of respondents identified long wait times as a major pain point, while 51% expressed frustration with repeatedly providing identical information to different representatives.

The impact on customer perception can be devastating—43% of customers would rather clean a toilet than call customer support, largely due to the horrible experiences created by outdated technology. These legacy systems frequently produce inconsistent user experiences that erode trust and drive customers away. In fact, 37% of customers confirmed they would switch to competing businesses that better meet their service expectations.

The bottom line? Organisations using modern, integrated systems report 10% higher customer loyalty and engagement rates than those relying on outdated technology. This difference directly affects your bottom line and long-term business sustainability.

When to Modernise? Key Triggers and Risk Indicators

How do you know when it’s time to update your legacy systems? Identifying specific warning signs early can prevent severe business impacts down the road. Nearly 80% of organisations now worry about vendor lock-in risks, showing growing awareness of the dangers lurking in outdated technology.

Unsupported Software and Vendor Lock-in

Vendor lock-in happens when businesses can’t easily switch to new products or services without paying substantial costs. This dependency creates major business vulnerabilities—vendors might suddenly raise prices, alter product offerings, or worse, completely stop supporting critical systems. The banking sector faces particular challenges, with roughly 94% of U.S. financial institutions rely on legacy core systems. UK financial services show similar concerning patterns.

When software reaches end-of-life status, organisations face tough choices: pay premium rates for extended support, accept growing security risks, or undergo disruptive migration. Companies running defunct technology inevitably hit compatibility walls when trying to connect with modern tools, creating what industry experts call “integration mazes”.

Increased Incident Response Time and Costs

Legacy systems frequently suffer from slow response times, crashes, and unplanned downtime that disrupt essential workflows. One financial services firm using outdated transaction processing systems experienced repeated outages that delayed customer payments and damaged trust.

Research shows organisations using legacy incident management systems struggle with:

Inability to Scale or Meet New Business Demands

Legacy applications weren’t built to handle the dynamic scalability that today’s businesses require. As organisations grow, these systems buckle under increasing data volumes and transactions, creating performance bottlenecks. If your company faces frequent crashes, slow response times, or compatibility issues, these are clear signals that modernisation can’t wait.

How to Modernise Legacy Systems Safely and Strategically

Modernising legacy systems isn’t something you can approach haphazardly. Success requires thoughtful planning that balances costs, risks, and business continuity. With the right strategy, you can transform those outdated technologies into competitive advantages without disrupting your core operations.

Phased Migration vs. Full Replacement

Most organisations find incremental modernisation offers better risk management than complete system overhauls. The “Strangler pattern” provides a practical approach for gradually replacing legacy components while keeping operations running smoothly. This method allows new and legacy systems to work side by side during transition periods.

Full replacement becomes necessary when systems are severely outdated or fundamentally incompatible with modern business requirements. While rebuilding from scratch carries higher costs and risks, it can deliver superior long-term results for systems that are beyond incremental improvement.

Cloud Adoption and Hybrid IT Models

Moving to cloud environments creates both scalability and cost benefits through several approaches:

Rehosting ("lift and shift"): This simply migrates applications without changing their code, primarily switching the underlying infrastructure.
Replatforming: Here you move applications while making minor optimisations to take advantage of cloud capabilities.
Refactoring: This involves restructuring code to improve efficiency without changing core functionality.

Hybrid IT models have proven especially effective for many organisations. By combining on-premises legacy systems with cloud technologies, businesses can maintain critical legacy functions while gradually adopting modern infrastructure. About 74% of organisations manage these hybrid environments either in-house or with managed service providers.

Third-Party Support and Cost Optimisation

Independent support providers offer viable alternatives to expensive vendor maintenance for legacy systems. These services typically deliver similar support at significantly reduced prices. Organisations can access:

This approach extends the useful lifetime of legacy systems while organisations develop comprehensive modernisation strategies, ultimately reducing the pressure for rushed migrations.

The Path Forward for Legacy Modernisation

Legacy systems place a heavy burden on UK organisations. The UK government’s annual £2.3 billion expenditure on maintaining outdated technology highlights this financial drain. These systems also create significant security vulnerabilities, with about 32% of UK businesses experiencing cybersecurity breaches within the past year.

The operational inefficiencies make matters worse. Nearly half of UK workers waste three hours daily due to outdated systems, costing businesses around £28,000 annually. Customer experience suffers too—43% of customers would rather clean a toilet than deal with customer support hampered by legacy technology.

Organisations need to recognise warning signs before these issues escalate. Unsupported software, slower incident response times, and inability to scale all indicate the need for modernisation. The question isn’t whether to modernise, but how to approach this transformation strategically.

For many organisations, phased migration offers a balanced approach. The “Strangler pattern” allows gradual replacement of legacy components while maintaining business continuity. Cloud adoption through re-hosting, re-platforming, or refactoring provides scalability benefits without complete system rebuilds.

Though legacy modernisation requires initial investment, the long-term benefits far outweigh these costs. Organisations that retire outdated systems can cut hardware and operational expenses by up to 65%. Security risks decrease substantially as modern systems provide regular updates against emerging threats.

Start your modernisation journey with a thorough assessment of current systems, followed by a strategic plan that balances immediate needs with long-term goals. Whether you choose phased migration, cloud adoption, or third-party support during transition, each approach offers viable paths away from the mounting costs of legacy technology.

The time to act is now. Every day spent maintaining outdated systems diverts resources from innovation and growth. Through strategic modernisation, your organisation can transform legacy burdens into competitive advantages that drive business success in an increasingly digital marketplace.