What are the hidden costs of maintaining legacy systems in FP&A?
FP&A teams have long relied on legacy systems. But as the associated costs climb—from maintenance requirements to operational inefficiencies—more finance and IT leaders are rethinking the status quo.
Learn about legacy systems in FP&A.
When organizations rely on systems that result in limited, stale data and regular maintenance timeouts inevitably, they may ask: Why are we still using these things? Clunky and outdated legacy systems are costly in more ways than one, yet many companies and functions—financial planning and analysis (FP&A) included—still cling to them.
Why? Inertia and familiarity certainly play a part. But finance and IT leaders increasingly recognize that sticking with the status quo of brittle, outdated legacy systems comes with significant costs, from the money and time consumed by maintenance and upgrade requirements to the financial risks associated with out-of-date security protocols and inaccurate reporting.
In fact, technology debt—including the time required to service disparate legacy systems—was one of the top challenges CFOs identified when surveyed about the main barriers to realizing value from the IT function.
Legacy systems don’t only consume internal time and budget. Such systems can also be a costly impediment to pursuing innovation and flexibility.
30% of organizations still use spreadsheets as their main budgeting and forecasting tool.
Outdated legacy systems can’t deliver the automation and insights that businesses need, and many legacy applications are difficult to integrate with technologies such as analytics and mobile.
Nearly 60% of financial services CTOs surveyed by Forrester say their legacy tech stack is too costly and inadequate for modern applications. And, in a separate Deloitte survey, 57% of business leaders say lack of business agility is a problem with legacy systems.
For FP&A teams looking to deliver the analysis and decision-ready insights that CFOs and other C-suite leaders increasingly expect, the costs of clinging to brittle, outdated legacy systems are too significant to ignore.
Understanding legacy systems in FP&A.
Many legacy systems used by FP&A teams were built decades ago—not designed to handle the volume and veracity of financial data today’s teams must manage, nor the analytics capabilities their work now requires. Finance functions often adopt one-off applications and turn to separate analytics tools to address the limitations of such legacy systems. The result is a brittle patchwork of siloed, fragmented data that can take significant time and attention to navigate.
While spreadsheets are commonly used by finance professionals to organize data, they may not always offer the best clarity in today’s complex financial landscape. In fact, 30% of organizations still use spreadsheets as their main budgeting and forecasting tool—a percentage that remains unchanged from 2014. Yet static spreadsheets present their own peril, as they impede real-time collaboration and amplify the risk of working with outdated or stale data.
Legacy systems are more vulnerable to security issues and come with a compatibility cost.
As CFOs assume a more strategic position within many organizations, the expectations around FP&A’s role are likewise ascending. But more often than not, legacy FP&A systems act as bottlenecks and barriers rather than strategic enablers.
Why businesses still rely on legacy systems.
Legacy systems endure for varied and in many ways, understandable reasons. They’re familiar, comfortable, and entrenched—and companies have adapted their workflows around them. And because everyone knows these systems inside and out, change can seem insurmountable or unnecessary.
Companies are also concerned about the costs and complexity of transitioning to these systems. But fear of the unknown holds organizations back, resulting in stunted insights, restricted agility, and curtailed growth.
The true cost of maintaining legacy systems.
Legacy systems often bring economic and operational costs that only climb higher the longer you stick with them. In part, that’s due to supply and demand: as new options enter the market, the skills required to operate old systems become harder to find, driving up the time and money needed to invest in them. IT departments already allocate more than 55% of their tech budgets to maintaining business operations but just 19% to developing innovative solutions, according to a Deloitte survey.
Legacy systems are also more vulnerable to security issues and come with a compatibility cost of having to retrofit these systems with new security updates. The mismatch in technology requires new code, middleware, and custom solutions, all of which come at a price. Then, there’s the cost of cybersecurity breaches themselves—$4.45 million in 2023, which doesn’t include reputation damage.
Productivity also suffers under legacy systems. Older systems require more maintenance and downtime, and employees must spend more time on mundane tasks, such as data reconciliation. In modern FP&A systems, these tasks are automated, leaving employees free to pursue more high-value activities, such as financial analysis.
One overlooked challenge CTOs face when replacing legacy FP&A systems is employee resistance.
As the data governance and EPM manager at Doctolib noted after the fast-growing European e-health service replaced its legacy FP&A system with a modern solution, “My colleagues now spend far less time data crunching and can devote more time to business partnering and insightful analysis. This is not only more fulfilling for the team but also far more productive and delivers tangible benefits to the business.”
How to transition from legacy systems.
While replacing a legacy system might seem daunting, it’s often a beneficial step forward for your organization. Whatever your reason for hesitating, it’s smart to be cautious, as there are important things to consider before beginning any modernization process.
Modernizing legacy systems can be done in many ways. Some companies update everything all at once. Others prefer a more phased approach, allowing for incremental adjustments. The best approach for your company will depend on need, risk tolerance, and resource availability. You’ll need to work with other company leaders to devise a data migration plan for the safe and accurate transfer of historical data and ensure compatibility with any other enterprise systems in use.
One overlooked challenge CTOs face when replacing legacy FP&A systems is employee resistance. Change can be hard, and new systems are intimidating.
To help instill confidence among hesitant employees, establish robust training programs that include dedicated hours for hands-on training, easily accessible troubleshooting guides, and open channels of communication for individual support. It also helps to appoint “change ambassadors” who can help champion the new system and promote its benefits, such as the opportunity to upskill.
Companies that have made the leap to a modern FP&A system are quick to report a return on their investment. It only took British multinational optical retail chain Specsavers 2 months to fully implement an updated FP&A system. The company now spends far less time creating budgets across its 60 locations. Leaders also have a better understanding of different cost drivers, helping to identify opportunities for organizationwide growth.
Modernizing ERP and accounting systems.
Legacy ERP and accounting systems work well until they don’t. Spreadsheets were a perfect solution for the dial-up days of the twentieth century but they aren’t built to keep up with the rapid pace of today’s business transactions.
Modern FP&A tools offer unparalleled features that legacy systems can’t compete with.
Modern systems such as Workday Adaptive Planning, which ingests and analyzes events as soon as they occur, are better equipped to handle today’s business environment. They also integrate with a wider variety of data sources than old ERP systems, granting FP&A teams and company leaders a more holistic view of the business.
While transitioning from legacy systems can be challenging, the process paves the way for easier updates in the future. Workday cloud-based solutions allow for greater flexibility and scalability and simplify the process of adapting to evolving business needs. If you’re ready and willing to invest in a modern ERP system, the returns will come and, even better, expand over time.
The future of FP&A: beyond legacy systems.
Modern FP&A tools offer unparalleled features—real-time analytics, cloud compatibility, user-friendly dashboards, and operational efficiencies—that legacy systems can’t beat. With modernization, preparation is half the battle. To get started, audit your current FP&A system, paying special attention to capability gaps. Once you’ve identified a replacement system that meets your most pressing FP&A needs, establish safe and secure processes for data migration and integration with existing ERP systems. Before going live with the new system, you can test your data in the new system to check for problems.
As FP&A systems continue to evolve at a rapid clip, the gap between the haves and have-nots will widen. Innovations in AI will bring already slow legacy solutions to a halt. But organizations that embrace the future head-on will be rewarded with game-changing technology such as real-time insights and predictive analytics and the power to revolutionize every part of their business.
Ready to leave legacy systems behind and revolutionize your FP&A practices? Discover how Workday can be your partner in this transformative journey.