Modernizing legacy systems is a major IT commitment, but significant cost savings, greater agility, and lower long-term risk are the rewards.
by Tony Kontzer
IT modernization is a fast-growing IT concept based on the idea that in order to remain efficient and competitive, companies need to replace restrictive legacy technologies with newer, openstandards–based technologies while retaining the business content stored in those legacy systems. The process can be complicated but the ultimate goals of IT modernization projects are significant IT cost savings, greater agility, and lower long-term risk.
Oracle is helping customers focus on IT modernization with its no-cost service dubbed Oracle Modernization Insight. The service features a team of Oracle modernization experts to work with a customer to formulate a realistic plan for establishing a standards-based, process-driven service-oriented architecture (SOA) environment. Part of the service features customer education about how Oracle products can support even the most demanding business processes.
Office Depot is just one example of a firm engaged in IT modernization. It is the process of establishing global business processes and creating a set of software that it can use on a global basis. The firm has already decided that SOA is vital because it will allow the company's future applications to make use of a common set of features or functions.
German insurance provider WGV Group has reinvented its IT strategy by migrating away from a combination of outsourced applications and mainframe-based legacy infrastructure. It now uses Oracle JDeveloper and Oracle Application Development Framework combined with Oracle Database to support a new generation of SOA-enabled applications for core activities such as policy generation and claims processing.
When Office Depot replaced its merchandising system in 2005, swapping an aging homegrown application for the Oracle Retail Merchandising System (formerly Retek), it was just the tip of the iceberg. The migration from a legacy application to the more-open architecture of Oracle's software helped Office Depot significantly increase competitiveness, grow top-line revenue, and slash IT costs; but just as important, it opened the company's eyes to the need for a more-expansive IT modernization project. Now the US$15 billion-a-year retailer is taking stock of its entire application portfolio and its underlying technology infrastructure and is intent on modernizing aging systems and doing away with redundant ones.
Modernization is a fast-growing IT concept that's based on a fundamental reality of doing business in the twenty-first century—namely, to remain efficient and competitive, companies need to replace restrictive legacy technologies with newer, open standards-based technologies while retaining the business content stored in those legacy systems. Many large companies still depend on mainframes or, in the case of Office Depot's old merchandising applications, outdated application development platforms such as Sybase PowerBuilder that have been in place 15 years or longer. What's more, few programmers possess the skills needed to handle the code rewrites to adapt those technologies to changes in the market.
However, once they switch out their hard-coded mainframe environments with standards-based application infrastructures, companies typically realize significant cost savings, reduced dependence on hard-to-find programming skills, and newfound flexibility and agility. Such is the potential of IT modernization—something that became abundantly clear to Office Depot during the company's merchandising system upgrade.
"That upgrade has led to a much broader modernization effort that we have underway today," says Mike Kirschner, vice president of IT for the Delray Beach, Florida-based office supplies giant. "We have a lot of local systems or regionalized systems now, so one of the things we're trying to do is create a set of software that we can use on a global basis. That's going to require retiring some legacy components in some cases. In other cases, it's not just legacy systems. We have to make choices to retire even some of the more-modern software just because we don't need two copies of different software doing the same thing."
Kirschner and his team are turning over every rock—from enterprise resource planning and finance to shipping and fulfillment—to prepare Office Depot for the fast-changing business environment needed to remain competitive for the next decade. "Some applications, such as human resources, where we recently upgraded from a homegrown application to [Oracle's] PeopleSoft, are fine. For other applications, we clearly need an exit strategy and a new application," he says. And just as Office Depot needed to move away from relying on PowerBuilder, the company is taking a hard look at what kind of infrastructure its next-generation applications will run on. The company's new merchandising system runs on the Sun Solaris Operating System, making use of a newly deployed Oracle database. Although Office Depot hasn't committed to any new technology purchases, that foundation, along with the company's focus on working with vendors that support open standards, gives Oracle a clear advantage. But there's still a lengthy process ahead.
"The first thing we're trying to do is establish what our global business processes are. How do we want to run our business—not just how do we run it today in North America or Europe, but how do we want to run it tomorrow on a global basis?" says Kirschner. "As we prioritize our needs, we'll figure out what application areas to focus on. We'll also do an analysis around where our pain points are with our legacy applications." Only then will Kirschner's team make technology choices and begin modernizing additional applications.
One thing Kirschner is certain of: an SOA will be a vital piece of the puzzle, allowing the company's future applications to make use of a common set of features or functions. "If you just face the fact that you need to have integrations, you want to figure out how to best support those integrations in a reliable, secure, and scalable fashion," he says. "We think service-oriented architecture is a good pattern to use for those integrations."