Custom Software Modernization: Benefits, Process, and Best Practices

Introduction

There can be several reasons for a business to reach its threshold and come to a saturation point where growth is no longer visible. While some reasons might include inefficient workforce, huge competition, or lack of clarity in customer interests, outdated legacy systems and digital tools have also been identified as one of the biggest reasons. Most of the businesses don’t prioritize their software modernization, which leads to inefficient productivity, lost data, and manual workflow.

According to Mordor Intelligence, the custom software modernization market size is expected to be valued at $27.4 billion in 2026. The market is expected to grow with a CAGR of 19.86% to achieve the valuation of $67.9 billion by the end of 2031. Also, legacy systems cost businesses an average of $2.6 trillion annually.

The legacy system modernization ensures that your business harnesses the latest technological trends, carries capability to withstand security attacks, and brings value to your target audience.

What Is Custom Software Modernization?

Custom software upgradation or modernization is the process of updating, rebuilding, and refactoring a digital solution to make it more secure, efficient, and aligned with the changing business requirements. The process includes substituting the outdated architectures and frameworks with the latest and most efficient technologies. Legacy software modernization services ensure that the complete application is not discarded, thus, it also saves a lot of time and monetary resources. There can be several upgradations in the custom software modernization process-

• Upgrading only the library and framework.
• Changing the architecture of the application using microservice or cloud-native approaches.
• Upgrading code to enhance performance.
• Rebuilding the systems that can not be integrated with modern software.

Why Do Businesses Need Custom Software Modernization Today?

Businesses are continuously partnering with software development companies in the USA to update their existing software and make it capable of serving the changing business needs and customer expectations. Here are some of the core reasons that encourage businesses to modernize their custom software-

Performance Issues

There are several performance issues that affect the business workflow when the software is outdated. The performance issues can include system failure, slow response time, or even a blackout when the system is unable to handle the workload.

Security Inefficiency

The increasing cases of data breaches and hacking require businesses to keep their digital ecosystem safe with novel practices. Legacy systems are generally more at risk of data compromisation which encourages businesses to consider an update for their software.

Lack of Scalability

Software can reach its threshold of handling businesses and customer load if not updated frequently. The outdated systems often don’t align with the changing business needs and increasing workload, which increases the need for modernization.

Integration Challenges

The software works best when integrated to automate the workflow to ensure seamless data sharing. However, legacy systems are hard to integrate with modern solutions, which makes it challenging for businesses to leverage the complete potential of their digital ecosystem.

Technical Debt

Relying on the legacy systems to save costs often accumulates technical debt. Numerous workarounds, patches, and hotfixes lead to inefficient system adaptability and take a lot of development time. IBM research highlights that, when handled right, application modernization can lower application maintenance and operating costs by 50%.

High Maintenance Cost

Most organizations have to bear huge maintenance costs when not upgrading their solutions. The outdated systems require frequent repairs, expert assistance, and cause downtime, which directly impacts the business’s ROI.

According to statistics, US government agencies reportedly spent a staggering $337 million every year to maintain their legacy systems. 70% of IT budgets are spent on maintaining legacy systems.

Key Benefits of Custom Software Modernization

Hiring a custom software development company to modernize your solution undoubtedly requires certain investment. Continuous optimization involves monitoring performance and refining the application to ensure relevance to changing market needs.

Better Security and Compliance

Enhancing the existing solution improves the security by patching the vulnerabilities and implementing forward-facing security practices. Thus, businesses can protect their data from the chances of breaches and hacking.

Leverage Tech Trends

The evolving technologies have made it important for businesses to use AI and a smart tech stack to better understand customer demand, predict market emotions, and take data-driven decisions. Modernization of the legacy system brings all these capabilities into the digital ecosystem.

Increased Efficiency

The software, app, or website upgradation significantly enhances operational efficiency as solutions can manage more workloads. One can add cloud computing, a modern caching system, and load balancers to enhance the system’s performance and scalability. Improved performance and reliability can be achieved through faster load times, fewer crashes, and modern infrastructure after software modernization.

Better Integration

Timely upgradation of the software ensures that all the digital solutions built for the operations can collectively share data and work collaboratively to automate the overall process. It also helps to harness the power of Industry 4.0 technologies like AI, ML, NLP, and more.

Better Customer Experience

Custom software modernization brings a new and intuitive user interface that allows customers to easily access the information and features that they need. Thus, usability, functionality, and overall interaction improve, ultimately enhancing the customer experience. A better user experience (UX) can result from software modernization, reducing friction, increasing adoption, and enhancing team productivity.

Cost Efficiency

It has been reported that legacy software modernization reduces operational expenses, increases productivity, and reduces downtime. It helps businesses cut costs, increase revenue, and generate a significant return on investment. Organizations that modernize their legacy systems reduce their IT costs by an average of 30%. At the same time, modernization projects exhibit a $2 million average ROI for large enterprises.

Scalability

Scalability for future growth is a key benefit of modernizing custom software, as it allows for a flexible, modular architecture that supports business expansion. Thus, businesses don’t have to worry about the capabilities of their tech ecosystem when targeting new markets and audiences.

Types of Custom Software Modernization Approaches

There are seven modernization strategies recommended by Gartner, often referred to as the “7Rs,” that help bring about different types of changes to the system. Each of the approaches is different in terms of implementation complexity and thus has a different impact on the business processes.

Techniques involved in legacy system modernization include refactoring code, migrating to the cloud, or re-architecting systems into microservices. Legacy software modernization strategies are-

1. Retraining

The retraining strategy is basically the “wait and see” approach that works well for companies that have recently upgraded their systems and thus don’t need the immediate upgrades. The biggest reason for this is that another software modernization might not provide a good ROI yet. However, it is highly recommended that businesses not leave their software untouched for a very long time.

2. Rehosting

The “rehosting” strategy is also referred to as “lift and shift,” which means migrating an older system to a new environment without making significant changes in the codebase. This approach is mainly adopted by organizations to leverage new technologies in their infrastructure for better availability, disaster recovery, and scalability. Rehosting is the simplest way to move from on-premise to cloud, allowing organizations to quickly take advantage of modern infrastructure benefits.

3. Replatforming

This strategy is a step further from the simple rehosting. It basically covers the moderate adjustments in the codebase of the software so that it can better align with the environment. Replatforming ensures a smoother IT infrastructure modernization to enhance the overall performance of the system while providing simplified maintenance.

4. Refactoring

Refactoring is another strategy for tech modernization that helps to restructure and optimize the existing code without disturbing or changing the external functionality of the software. The strategy is adopted by the businesses to reduce their technical debt and make the database more maintainable.

5. Rearchitecting

Software development companies in the USA choose re-architecting when they have to redesign the entire architecture of the application and adopt modern patterns like serverless computing, microservices, and event-driven architecture. Microservices architecture breaks down monolithic applications into self-contained units that can be deployed, scaled, and updated independently.

While refactoring focuses on enhancing the code quality, re-architecting focuses on changing the way the application is structured and deployed. Rearchitecting involves modifying the software’s structure to fit modern architectural patterns like microservices or serverless computing.

6. Rebuilding

Rebuilding means developing the software from the ground up, using modern languages, frameworks, and platforms to gain complete control over architecture and performance. It focuses on building a particular feature or function from scratch while also maintaining the original business rule and scope. It is often used as an incremental legacy system modernization where the custom software development company will take a particular functional block, rebuild it with a new stack, and deploy it as a standalone service.

7. Replacing

Replacing involves developing a completely new system to replace the old one when it can no longer meet current business needs. With this approach, the businesses have to completely discard their existing solutions while building the new one from scratch that better aligns with changed business needs, customer expectations, and brings new tech capabilities into the system.

Step-by-Step Custom Software Modernization Process

The software modernization process is similar to that of the development process, where you partner with a custom software development company, evaluate the prototyping, build backend and front-end, test the software, and deploy it to the system. However, software modernization requires more planning and brainstorming as it needs to identify and eliminate the challenges being faced with the legacy system.

Software modernization is about preserving what is good and working for the businesses, upgrading what has scope for improvement, and replacing what can not be fixed. Here is the ideal process that you should ensure before taking the final decision about custom software modernization-

1. Evaluate Your Existing System

The first thing that you need to do for software modernization is to evaluate your existing business. You must have the details, like whether it is an on-premise system or a hybrid setup, and whether it is a monolithic, service-oriented, or modular architecture. At the same time, you should also have an idea about the bottlenecks, like crashes, response times, and downtime.

Define Technical Goals

The very next step is defining the technical goals that align with the business objectives. If you don’t have a clear idea about the reason for modernization, it might be challenging to weigh the benefits and ROI. Thus, make sure that you have a clear goal like reducing costs, enhancing performance, strengthening security, or meeting the new regulatory standards.

Choose the Right Modernization Approach

Once you have a clear goal in mind, choose the right modernization approach that can bring maximum value in the least time and resources. Deploying the random modernization approach might result in a long upgrade cycle, inefficient results, and a lot of time and investment wastage.

Curate Modernization Roadmap

Consult with the right software development company to curate a well-structured roadmap to ensure that the modernization process doesn’t turn into chaos. You can structure a good roadmap by prioritizing applications, facilitating phased implementation, and taking care of risk management, budget planning, and internal and external resources availability.

Plan for Data Migration & System Integration

The next step talks about planning the entire data migration process to ensure that the new system can work collaboratively and accurately. For the same, you have to conduct processes like data cleansing, migration, business continuity, and integration testing.

Strengthen Compliance and Security

You should ensure that new software complies with the legal and security requirements from the first day. It should have the capability to deal with new security risks, API vulnerabilities, and misconfigured cloud environments. For the same, you can rely on practices like encrypting sensitive data, conducting vulnerability testing, ensuring regulatory compliance, and adopting DevSecOps.

Adoption with Change Management

The new system might be unfamiliar to the employees, which might impact the firm’s productivity. Thus, ensure that you implement the new system with a good change management plan. Provide hands-on training, roll out the changes in phases, offer real-time support, communicate the benefits of the new system, and conduct the mutual training programs. Breaking the project into manageable stages prevents a ‘big bang’ release.

How AI Can Improve Custom Software Modernization Outcomes

Artificial intelligence has been playing a core role in helping the custom software development companies in the USA to accelerate the modernization process by accelerating legacy code analysis, documentation, reducing migration time, and much more. Here are some of the core ways that AI enhances software modernization outcomes-

• AI tools help to scan the complex legacy systems to identify the hidden discrepancies, documentation, business logic, and much more. It further leads to the accurate translation of legacy code into modern language.
• Generative AI allows developers to transform monolithic code into modern architectural patterns.
• AI bots have proven to be highly useful in detecting bugs and vulnerabilities, improving the testing coverage by more than 40%.
• Artificial intelligence helps to analyze workload and suggest the best cloud-native environment that elevates overall efficiency.
• Technologies like machine learning monitor the security threats to detect anomalies and ensure compliance with regulatory standards.

Best Practices for Successful Custom Software Modernization

• A comprehensive audit must be conducted for the legacy system that helps to identify the technical debt and security risks. It ensures that modernization aligns with final business goals.
• Make sure that you identify the most critical applications delivering the most value to the businesses. These applications must be prioritized during modernization.
• Ensure that you choose the right software modernization approach- Retain, Rehost, Re-platform, Refactor, Rearchitect, Rebuild, or Replace.
• Increase the scalability and agility of the solution by using containerization, CI/CD pipelines, and microservices.
• The modernized software must be implemented in the organization with a suitable change management plan that clearly communicates the benefits to the stakeholders.
• Data standardization and compatibility must be validated during the migration. Ensure that you embed compliance, privacy, and security checks during the process.
• Modernization is not something that has to be done and forgotten. Thus, ensure that you keep it as an ongoing process using performance metrics to guide iterative improvement.

Challenges in Custom Software Modernization and How to Overcome Them

There are several challenges that software development companies might face during legacy system modernization. If not addressed properly, these challenges can significantly impact the efficiency of the outcomes.

Thus, you must hire an experienced development company like The NineHertz that understands the particular challenges and knows the mitigation strategies.

Challenge 1: Legacy infrastructure dependencies

Legacy systems often operate on outdated hardware that is difficult to maintain and scale. They can not be easily integrated with the modern platforms and APIs, and the maintenance is very costly. At the same time, as the demand from the customers grows, it becomes even more challenging to make the required improvements.
Mitigation
Workload containerization is one of the best mitigation strategies that helps to make legacy systems more flexible and easier to manage across cloud environments. At the same time, a strangler-fig pattern can also be used that focuses on the gradual replacement of legacy systems while ensuring a smooth transition.

Challenge 2: Legacy Code Complexity

The codebase used in the legacy software lacks a modular structure and proper documentation. Thus, any changes are more prone to unexpected failures and costly downtime. The situation also leads to longer development cycles, which further delays the innovation and time to market.
Mitigation
The automated static analysis can be used to map the hidden dependencies and help the developers understand the codebase. At the same time, isolating and refactoring the high-value modules must be prioritized, which brings stability and reduced failure risks.

Challenge 3: Knowledge Loss

When the employees carrying the core knowledge of the business leave, the valuation information about the legacy system is also at stake. In such a case, there are risks of slow response to regulatory changes, an increase in onboarding time, and chances of incorrect modification.
Mitigation
The knowledge-transfer interviews must be scheduled to document their knowledge about the legacy system and forward it to the new employees. Similarly, reverse-engineering the undocumented components to create the comprehensive documentation helps ease future development.

How AI Can Help Reduce Risks in Custom Software Modernization

There are numerous ways that AI helps reduce risks and streamline the custom software modernization process-

1. Code Transformation

AI-powered tools help to analyze the codebase in legacy software systems and refactor it to align the solution with modern requirements. For example, generative AI has the capability to transform the existing codebase into cloud-compatible code, requiring little or no manual intervention.

AI-powered Data Integration

AI significantly helps to integrate the legacy systems with the modern platforms by smartly consolidating different data sources. The practice ensures the seamless data flow and improves interoperability across businesses.

Predictive Maintenance

Even if modern systems are not provided with periodic maintenance, they might turn out to be inefficient in performing the tasks. Thus, artificial intelligence helps to leverage predictive maintenance features, where it helps to predict failures or malfunctions before they happen. Thus, the mitigation strategies can be deployed before it turns into downtime.

Automated Testing

Traditional testing methods are very slow and mostly insufficient. Thus, artificial intelligence helps to accelerate the testing process by identifying the issues with code analysis, analyzing code vulnerabilities, and automating testing scripts. It allows businesses to ensure exhaustive testing coverage promptly with resources.

Industries That Benefit Most from Custom Software Modernization

There are several industries with high regulatory and operational complexities that benefit most from software upgradation. While some are obliged to legacy software modernization due to defined law, others have to go through the upgrade to ensure that they align their steps with the changing customer preferences.

Here is the list of industries along with how they are leveraging the software modernization-

Future Trends in Custom Software Modernization

The new technologies have been changing the tech modernization landscape while making things more efficient for the business owners and easier for the developers. Here are some of the trends that might be witnessed in software upgradation in the near future-

AI-Driven Modernization

Technologies like predictive analytics, automated decision making, and natural language processing are becoming the center point of software modernization. AI tools are further assisting in several processes, like code generation, debugging, and testing, which accelerate the development cycles.

Serverless and Cloud-Native Architecture

Organizations are continuously migrating from the server infrastructure to serverless architecture in the modernization process. While the migration helps to save costs, it also increases the scalability, along with enhancing the overall performance.

Low-Code/No-Code Integration

New modernized software is now mostly built with hybrid approaches where the complex systems are coded manually, while the frontend and less complicated systems are being developed using the low-code frameworks.

Advanced User Interface

Establishing the interaction between the user and software using the voice commands is becoming the focus point of software modernization. For the same reason, technologies like large language models and natural language processing are being deployed.

Conclusion: Is Custom Software Modernization Worth the Investment?

Custom software modernization is not a choice but a crucial practice for any organization focused on automating operational processes, enhancing customer experiences, and achieving competitive advantages. Several modernization approaches allow businesses to choose one according to their defined goals and requirements.

However, the efficiency and outcomes of software updation are highly dependent on the custom software development company that you choose. The NineHertz has more than 15+ years of experience in helping enterprises across the globe to upgrade their legacy software systems and implement novel technologies. Sign up for a free consultation session with our experts to get a personalized implementation strategy for your business.