IT Strategy

Legacy technology is still costing businesses big time, Deloitte survey finds

A Deloitte survey found 82% of respondent companies had missed cost reduction targets; incapable technology infrastructure was the biggest complication.
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Challenges with technology infrastructure are the biggest barrier to enterprises looking to improve their margins by cutting costs, according to the 2024 edition of Deloitte’s MarginPLUS survey.

Deloitte polled nearly 300 business leaders on business margin improvement and technology transformation efforts, and found that 82% reported their companies had missed cost reduction targets. The number of respondents who named “challenges with technology infrastructure to meet new internal business conditions” as a barrier to success rose from 31% in the last edition of the survey to 50% in 2024.

Other top challenges in 2024 included being unable to rapidly change cost structures (48%), attract or retain talent (43%), or enable digital infrastructure to meet new external business conditions and scale (40%).

“Over half of the respondents said data and [generative] AI strategies was where their focus would be in the upcoming year for margin improvement strategies,” Annie Adams, a managing director in Deloitte’s mergers, acquisitions, and restructuring practice, told IT Brew. “Companies are really trying to figure out how to use data better.”

“They’re trying to do this while still maintaining and managing some, often legacy, systems that are getting old and antiquated or expensive to use,” Adams added.

Legacy technology—often defined as systems over a decade old—and associated technical debt can hinder everything from growth opportunities and cloud transitions to human resources and customer service functions. It can also be a major barrier to adopting new security technologies like zero trust.

However, organizations can also be slow to replace aging infrastructure because of both sticker shock and the difficulty of quantifying some trade-offs to continue using it, such as maintenance, tech support, and opportunity costs. A separate Deloitte survey of CIOs in 2023 found respondents spent an average of 55% of their technology budgets on sustaining existing business operations, while 26% went to enhancing existing functions and 19% to new technology.

Operational efficiency and AI were big talking points across earnings calls in the first few months of 2024, underscoring the degree to which cost cutting has become a priority for many enterprises.

Deloitte found companies are gravitating toward a more focused approach to cost control in 2024. Only three categories (data/gen AI, organization structure design, and process reengineering and automation) appeared on more than 45% of respondents’ choices of possible cost control efforts in the survey.

According to Adams, the rapid advancement of process automation methods, including AI, could explain why so many companies appear to be hitting a wall with their technology infrastructure at once—they’re rushing to catch up as the value becomes apparent.

“It’s really driving that focus. People haven’t figured out how to do that around existing processes and technologies,” Adams said.

Top insights for IT pros

From cybersecurity and big data to cloud computing, IT Brew covers the latest trends shaping business tech in our 4x weekly newsletter, virtual events with industry experts, and digital guides.