Legacy IT: The Silent Parasite Draining Innovation from Telecoms
Embracing Modernization: A Strategic Imperative for Telecoms
According to a report from Dell, more than 70% of software used by Fortune 5000 companies was developed 20 or more years ago. And despite of these platforms releasing upgrades (what release version are they on now???), they are still simply legacy, there is no way around the bush. They are built for a different world, to support business models of the 1980s, and despite investing so much in their evolution, they are still rigid, difficult to adjust to new business models and surely very costly. Certainly they were not built for the cloud and all the business benefits it brings. What is interesting is that these platforms have telecom companies believe that they are indispensable. They leave out of costly licences, imposed upgrades and making you believe that you need painfully expensive consultants with rare skills. Does that sound like the logical future forward?
Meanwhile, so many exciting new customer service and data-use cases scenarios are becoming appearing. Enabled by exciting technology, most recently by AI/ML assisted applications and business processes, opportunities to win customers cost effectively abound. The urgency for modernization in telecoms, requiring a dramatic shift from legacy system incremental upgrades, patchwork fixes and overlays, has never been clearer. So why wait? Let`s analyse the not-so-hidden costs of legacy tech.
The Cost of Inaction
Telecom companies that cling to legacy systems incur high operational costs and face increased security risks, both of which can severely impact their bottom line and market position. Legacy systems consume 60-80% of IT budgets just for maintenance, leaving a scant remainder for innovation or improvements. Furthermore, these outdated systems are vulnerable to security breaches, which can be extraordinarily costly. The average cost of remediation from a single ransomware attack can reach up to $1.85 million.
Moreover, the indirect costs associated with legacy systems—such as lost opportunities for innovation and poor customer experience—can further exacerbate the financial strain. Organizations find themselves paying exorbitantly for technical support and compliance with outdated systems.
1. Security Risks
Cyberattacks in 2024 are averaging 1 every 39 seconds or 2,200 a day. Legacy systems, where up to 80% of customer data is kept, are especially vulnerable. With outdated technology that is either no longer supported or has security patches not implemented, it is an invitation to hackers – “44 percent of exploits target a vulnerability that is two to four years old.”
Legacy system security risks can have a huge impact when they affect customer data. In 2024 AT&T announced that it had discovered a dataset on the dark web that contained account information on 7.6 million current AT&T account holders and 65.4 million former users.
It is not known if the breach “originated from AT&T or one of its vendors”, the company said.
“To the best of our knowledge, the compromised data appears to be from 2019 or earlier and does not contain personal financial information or call history.”
While the AT&T data breach may have been from 2019, 2024 has been a big year for hackers attempting to hack into telecom companies, due to their rich databases of personal user information. Frontier Communications, an ISP covering over half of the United States experienced a cyberattack. They instituted “containment measures” that included “shutting down certain of the Company’s systems.” The shutdowns caused operational disruption that the company said “could be considered material.” Having to turn off systems like Frontier had to do demonstrates the significant cost of data breaches. Legacy systems are often make these telcos open targets.
In addition to the risks from hackers, companies now face regulatory pressures relating to governmental agency data breach reporting requirements that the patchwork collection of legacy systems, with homegrown customizations, may struggle to comply with.
“The Federal Communications Commission updated its data breach rules for the first time in 16 years in December, expanding regulations on how telecommunication companies report cybersecurity incidents.FCC Chairwoman Jessica Rosenworcel argued that the rules the agency created more than 15 years ago are no longer compatible with a modern world where telecommunication carriers have access to a “treasure trove of data about who we are, where we have traveled, and who we have talked to.”
2. High Operational Costs
A patchwork of custom-designed operational systems, while they may be the perfect solution at the time, can often turn into a mess when scaled up. A Total Economic Forum study by Forrester showed that retiring old legacy systems could reduce hardware and operational running costs by 65%. This comes from a variety of sources including, lower software licencing and subscription costs from retiring pieced-together software solutions, reduced hardware upgrade/replacement costs due to fewer in-house hardware needs, lower IT troubleshooting costs, better IT control over data workflows, and more tools for enterprise architects to work with to optimize data operations.
3. Lost Opportunities
McKinsey & Company states, data-driven organizations are 23 times more likely to acquire customers, 6 times as likely to retain customers, and 19 times as likely to be profitable.
Continuing to utilize legacy systems that are unable to integrate with modern technologies allow compentitors to gain ground. Many technologies that rely on digital data systems (ERP, CRM, Data Centers), have been developed in the cloud. By not making the move to modernize and adopt many of these upgrades, opportunities are left behind.
Customer-experience based user interfaces can smooth out the buying process and boost revenues. Big Data analytics and AI can cross-reference various data sets quickly and easily to uncover operational insights as well as offer up service plan options, custom-tailored to the buyer profile. And finally, better operational performance and targeted systems improvement can be had by leveraging many of the cloud software options available.
4. Compliance Risks
Over the last several years data security has become a worldwide regulatory concern. As a result, website privacy and data sharing acknowledgements and governmental crackdowns on communications companies have increased the stakes for telcos. Legacy system modifications to meet new regulatory requirements often seem like a good fix that minimizes short term risk. But the compounding effect of regulatory changes and the volumes of data that must be incorporated into the rules designed by regulators often break down over time.
Added to that complexity is the impact of AI, especially Generative Artificial Intelligence, that can dramatically increase the risks due to the speed and flexibility with which AI integrations can impact systems. While many IT teams are evaluating the use of Gen AI in their systems, legacy system may not be able to keep up with the technology. Transitioning over into digital systems will likely be the answer.
The challenge here is often not the technical challenges of transitioning, but often is the perceived short term impacts that CEOs often weigh heavily. Despite that, “61% of telco leaders believing regulatory risks will significantly impact their business’s performance over the coming year.” - CEO Outlook Pulse
5. Outage Risks
A silent killer that shows up often at inopportune times are legacy system problems that go often unnoticed until they create a major impact. That was demonstrated with the AT&T system outage in 2024. This outage was not based on a cyberattack, but due to a “technical glitch” due to their rapid network expansion.
"Based on our initial review, we believe that today’s outage was caused by the application and execution of an incorrect process used as we were expanding our network, not a cyber attack," AT&T stated.
While it is somewhat comforting to customers that AT&T did not get hacked, having phone service down for much of the day due to legacy system problems is cause for concern for both customers as well as IT management teams.
Corporate Giants Leading by Example
Several high-profile companies have demonstrated the benefits of breaking away from legacy systems:
Amazon and Apple are prime examples of companies that have continually embraced disruptive technologies to redefine their industries and maintain market leadership. Amazon's evolution from a bookstore to a global e-commerce powerhouse and Apple's reinvention of personal technology with the iPod and iPhone illustrate the power of embracing new technologies.
UnitedHealth Group leveraged AI to transform healthcare, enhancing how data is utilized across its operations, thereby significantly improving service delivery and operational efficiency.
Patagonia replaced their decades-old, legacy homegrown set of business systems, that included customizations only a few longtime employees understood (opening the company up to significant business risk), with cloud-based Microsoft Dynamics 365 ERP platform (passing on SAP).
“Without question, when I consider the costs of implementing Microsoft Dynamics AX and what we will get out of it in terms of future scalability and profitability, I realize the more good we can do for the environment. We now have a platform to expand our mission. We furnished the company with a level of scalability and profitability we did not have before. After years of growth in the single digits, we are now achieving double-digit, top-line growth.” – Rose Marcario – CEO, Patagonia (ret.)
The Need for a Paradigm Shift in Telecom
Telecom companies face a particularly acute need to modernize due to the evolving landscape marked by increasing customer expectations for digital-first interactions and the rise of technologies like eSIM. This modernization can’t just be patching and laying over upgrades onto legacy systems. The sector is ripe for transformation, with opportunities to reduce costs, enhance service delivery, and improve customer satisfaction through digital solutions.
Innovation Culture as a Catalyst
Companies with a strong culture of innovation are twice as effective at scaling the impact of their digital transformations as those without. These companies are more likely to invest in cutting-edge technologies and prioritize spending that accelerates competitive differentiation and supports sustainable business models.
Conclusion: A Call to Action
For telecom executives, the message is clear: the time for transformation is now. CEOs, CIOs, and CTOs must take bolder actions and challenge the urge to just implement another upgrade project on top of a legacy system; they must consider adopting new cloud modern technology approaches (cloud computing, AI, and advanced data analytics). Embracing these changes can lead to significant cost savings, more robust security measures, and, most importantly, improved customer satisfaction and loyalty. Technology migrations can no longer be viewed as just about keeping up with competitors, now is the time to redefine the market and lead it.
As demonstrated by leaders across industries, from Apple to UnitedHealth, adopting innovative technologies and fostering a culture of innovation can catalyze significant business growth and efficiency. For telecoms, moving away from parasitic legacy systems to more dynamic and flexible technological frameworks is not just a necessity but a strategic imperative that will define their future success in the digital age.
About triPica
triPica, a pioneering SaaS BSS provider, founded in 2016, is revolutionizing the digital customer experience for telecom and utility industries with the agility and innovation of a startup. It is developed from the customer experience down and built for the cloud. Recognized globally, triPica has garnered accolades including the triple award at the MVNO World Congress 2023 and a TM Forum award for its exceptional BSS platform. One of triPica clients, Bouygues Telecom was selected as a Finalist for Gartners’s Eyes on Innovation award, for its 2nd Brand Source using innovative approach and technology. This cloud-native platform empowers service providers to rapidly launch digital offers within just four months and scale up to a complete transformation of their operations.
