A recent study by the Financial Conduct Authority (FCA) has highlighted a significant reliance on legacy technology within the financial services sector. Simon Langdown, of business transformation specialist Essenkay, has warned that operating with these systems can be harmful to your business, and that these challenges may not be confined just to the financial sector.
While firms are increasingly turning to cloud technologies for their operations, a large portion of UK businesses across sectors such as manufacturing, engineering, logistics, and professional services continue to operate on legacy systems. When the time comes for transformative work, that often comes with a hidden cost.
A recent Financial Conduct Authority (FCA) study revealed that 92% of financial services firms still rely on legacy technology, and 78% of their data remains housed in on-premise infrastructure. According to Simon Langdown, co-founder and senior financial consultant for all implementations at Essenkay, this challenge is by no means limited to finance and could become a wider liability amid growing economic pressure.
“Legacy systems may seem to ‘just work’, but over time they quietly restrict business productivity, create blind spots in operations, and even open up cybersecurity vulnerabilities,” Langdown commented. “As economic conditions tighten, continuing to operate this way isn’t just inefficient, it’s risky.”
Considering what the business transformation expert firm has encountered, Langdown explained four key hidden costs of legacy systems.
1. Hidden operational inefficiencies
“From inaccurate stock records in manufacturing to disjointed supplier data in logistics, older systems make it harder for teams to respond quickly and make informed decisions. Many employees end up relying on manual workarounds, costing time, increasing the chance of human error, and dragging down productivity,” Langdown noted.
Cloud-based ERP platforms like Microsoft Dynamics 365 Supply Chain Management are designed to address these issues, though. He also stated they often have tools that allow real-time visibility across departments, smarter stock management, and fewer manual interventions.
2. Data silos and displaced information
The Essenkay expert then warned that without a modern ERP system in place, critical business data often becomes displaced across spreadsheets, servers, and outdated platforms, leading to inconsistent reporting and slower decision-making.
He added, “In contrast, Dynamics 365 centralises data access, helping leadership teams base decisions on a single version of the truth. Whether it’s cash flow forecasting for professional services firms or production scheduling for manufacturers, centralising operational data can drive measurable gains in responsiveness and efficiency.”
3. Cybersecurity weaknesses
“Cyber threats are escalating,” Langdown went on. “With 50% of businesses reporting attacks each year, a reality highlighted by the recent M&S breach. Legacy infrastructure, particularly in manufacturing and logistics, often lacks modern security controls. Older barcode scanners, Industrial IoT devices, and even banking platforms are frequently cited as easy targets for bad actors.”
Again, however, he explained that secure cloud infrastructure can help close these gaps through features like multi-factor authentication and automatic updates that keep defences current without increasing IT burden.
4. Missed opportunities
He concluded, “Beyond the operational risks, technology experts at Essenkay say that outdated systems can stop businesses from seizing new growth opportunities. Without the right tools to analyse financial, operational, or customer data effectively, companies are likely missing patterns and insights that could guide smarter investments or process improvements.”
For instance, AI-driven forecasting and predictive analytics within some programmes can help a manufacturer reduce inventory waste, or support a logistics firm in anticipating seasonal demand fluctuations.