Source: Ministry of Economy, Trade and Industry, “DX Report: Overcoming the ‘2025 Digital Cliff’ of IT Systems and Full-Scale Deployment of DX (Summary)”

Definition and characteristics of legacy systems

A legacy system is an information system built on outdated technologies, architectures, processes, or operating models that has become difficult to maintain, modify, or integrate with other systems. These systems are often based on mainframes or office computers from the 1980s and are widely known as part of the “2025 Digital Cliff” issue because rising maintenance and operating costs can hinder DX initiatives. As a result, legacy system renewal, or modernization, has become an important management priority for many companies. What matters is not the age of the system itself, but whether it limits business agility or competitiveness.

Typical characteristics of legacy systems: features and definition

• Outdated programming languages and frameworks (COBOL, VB6, older Java, proprietary FW)
• Hardware, OS, and middleware with ended vendor support (EoL)
• Insufficient documentation and knowledge silos (limited personnel, dependence on tacit knowledge)
• API integration with external systems and SaaS is difficult
• Even minor changes have unclear impact, driving up testing workload and cost
• Security patches cannot be applied, delaying vulnerability remediation
• No Support for Modern Browsers, Devices, or Cloud Environments

Common examples of legacy systems

In real-world business settings, systems like following often apply. Examples by area

• Core systems (business systems such as sales, inventory, and accounting)
• Batch and online processing on mainframes
• Internal web systems built on proprietary frameworks

Common warning signs

• "Only one person can make system changes"
• "It does not run on the latest browsers, so the company uses IE compatibility mode"
• "Changing wording on reports takes weeks to months"
• "Every data integration requires custom batch processing or manual work"

"It still works, so it is fine" can become the most costly assumption. Here is what can happen across business, IT, and security.

Business risks (lost opportunities and reduced competitiveness)

If services and channels cannot be expanded quickly in response to market changes, lost opportunities will continue to accumulate.

• Blocks DX: API integration difficult; connection to SaaS or external data impossible
• Lack of Support for New Models: Delays in Launching Subscriptions, D2C, and Online Ordering
• Barriers to data utilization: lack of real-time analytics and company-wide data integration delays decision-making
• As result, companies miss virtuous cycle of better customer experience, higher operational efficiency, and sales growth

Higher workload and costs for IT department

Teams become stuck in reactive operations, leaving no room for proactive IT investment.

• Aging maintenance staff and retirement risk make handover difficult and create black boxes
• Impact is hard to assess, making large-scale testing necessary even for minor changes
• Operating and maintenance costs rise year after year, while new feature development stalls (rising TCO)
• Mini case: maintenance costs increase every year, yet users say “nothing has changed”

Security and compliance risks

Single major incident can cause losses exceeding savings.

• Vulnerabilities Cannot Be Addressed Because OS or Middleware Is No Longer Supported
• Incomplete logs and inadequate encryption hinder investigation and reporting when incidents occur
• Difficult to comply with regulations in finance, healthcare, personal information protection, and other areas

First step is not assigning blame, but understanding why issue occurs within system. This also serves as persuasive evidence.

Make decisions based on facts, not intuition. Use the following checklist to screen your current situation.

Technology and architecture checklist

If three or more of the following apply, your system is likely becoming increasingly legacy.

• Whether OS and middleware in use remain supported
• Ease of hiring and developing talent for key languages and frameworks
• Whether System Architecture Diagrams and Design Documents Are Up to Date
• Whether automated testing (unit/E2E) and CI/CD are in place
• Whether external integration via API possible (not dependent on batch processing or manual work)
• Whether Cloud Support Is in Place, Including Scalability and Availability Design
• Whether Security Patches Are Being Applied in a Planned Manner
• Whether auditing, logging, and encryption meet required standards
• Whether Operational Standardization, Such as Containerization and Virtualization, Is Progressing
• Whether functions are overcrowded in single monolith

Operations and business checklist

Review also from perspective of operational burden and business impact.

• Minor report changes take weeks to months
• Business Operations Are Being Adapted to System Constraints
• More Than Six Months to Add New Services or Channels
• Change impact analysis and acceptance testing are consistently excessive
• Security and audit response feels more burdensome than at other companies
• Vendor quotes rise year after year, while cost-effectiveness remains unclear

Score Guide: 0–2 items = minor issues, 3–5 items = moderate issues, 6 or more items = major issues. If you feel more detailed diagnosis is needed, consider assessment by a specialist.

Goal: “Keep Evolving Without Breaking or Stopping.” Practical Answer: Phased Approach.

How to avoid jumping straight into a full replacement

Big-bang approach carries high failure risk in timeline, cost, and user adoption. Phased modernization is more practical: analyze current state, build roadmap, start small by priority, and accumulate impact and learning.

Common approaches to legacy system modernization

Legacy system modernization can be grouped into four main approaches, depending on objectives and constraints such as business impact, cost, and risk.

Steps for phased modernization

Role allocation: business units define requirements and value hypotheses, IT oversees architecture and quality management, and partners drive design, implementation, and automation platforms.

Successful companies share a well-balanced approach across management and frontline teams, as well as internal and external resources. Focus on the points that work in practice.

Engage management and business departments

Treating it not as IT-only topic but as management issue is key.

• Messaging focus: risk reduction (security and business continuity) × growth opportunities (new services and data utilization)
• Clear KPIs: development lead time -30%, operations workload -20%, incidents -50%, change frequency x2, and more
• Facilitating decision-making: use PoC to visualize impact and phased investment to reduce uncertainty

Balance between in-house development and use of external partners

Keep core expertise and operations design in-house; use external partners for implementation, testing, and 24/7 operations.

• Benefits of Offshore/Nearshore: Cost Optimization, Access to Large-Scale Resources, and Advanced Technology Support
• Collaboration model example: establish requirements and quality management in Japan, with implementation and automation handled by overseas team
• SMILE provides structure combining quality and speed through Japanese-speaking PM/BrSEs and Vietnamese development teams.

"Start small, validate, and expand in phases." SMILE combines DX support with offshore development to guide low-risk, high-efficiency modernization.

SMILE strengths: combined DX support and offshore development

• Strengths: Japanese market expertise × development capabilities based in Vietnam. End-to-end support from upstream design to development, testing, and operations
• Team structure: Japanese-speaking PM/BrSE plus specialist teams for cloud, Web, mobile, and AI
• Value: Balance cost and quality; validate through PoC, then maximize ROI through full-scale rollout

Start small with a legacy assessment and PoC support to evaluate impact and risk.

Legacy system assessment and roadmap development service

Assessment and proposal process

• To drive system modernization reliably and effectively, our company
• We conduct assessments and reviews through a clear, step-by-step process.
• This enables us to manage risk properly while proposing the best approach for your business goals.

Deliverables