Many manufacturers today unknowingly spend more than 20% of their innovation budgets maintaining legacy systems – resources that could fuel transformation. According to McKinsey, 30% of CIOs say this exact portion of their technical budget is diverted to fixing existing tech instead of driving innovation.
While competitors invest in AI-driven predictive maintenance and real-time supply chain orchestration, some manufacturers are spending that same money keeping legacy systems limping along. This highlights why legacy system modernization has become mission-critical. These inefficiencies show up in daily operations: warranty claims take days instead of hours to process, customer order cycles that fail to meet customer expectations, quality management improvements get trapped in disconnected applications, and supply chain systems fail to communicate with modern ERP platforms. These aren't just inefficiencies; they're strategic liabilities that prevent you from competing effectively.
Three converging forces creating unprecedented urgency
Manufacturers are facing simultaneous disruptions that demand rapid change to avoid losing ground every quarter.
- Autonomous and electric vehicle transition: The shift to all-electric drivetrains requires transformed supply chains, new quality management approaches, and redesigned warranty systems that can handle completely different component ecosystems. Autonomous driving is becoming a reality, presenting both opportunities and new challenges in R&D, new technology partnerships, and post-sale customer services.
- Intensified supply chain pressures: After years of significant supply chain disruptions, resilient and adaptable networks are essential. When a critical supplier faces disruption, can your systems identify alternatives and reroute production in hours instead of weeks? Legacy systems lacking real-time visibility or rapid supplier shift capabilities are no longer just inefficient— they hinder agility. Legacy system modernization enables manufacturers to respond to market volatility faster and with more precision.
- Accelerating Industry 4.0 revolution: Modernized operational systems are no longer optional. If your systems lack support for AI, IoT sensors, digital twins, and real-time analytics, you fall behind competitors who already leverage these technologies. Staying competitive means modernizing legacy systems to enable smarter, faster decision-making across every part of your operations.
From days to minutes: How one manufacturer saved $53M
Imagine connecting an engineer, dealership technician, and vehicle with the exact problem the moment it's written up – not days later or after multiple handoffs, but instantly.
That's exactly what one major North American auto manufacturer achieved, saving $53 million annually with 400% faster processing.
"Every day, the sooner that you know about a problem, you can save one day's worth of bad production. Using our new system, we were able to connect an engineer to a dealership, to a technician, to a vehicle that had that exact concern, the minute it was written up on the service drive."
This process redesign transformed service operations from reactive warranty processing to proactive problem-solving, turning what was once a cost center into a competitive advantage.
The smart way to modernize: Start small, build momentum
The need for modernizing legacy systems is clear but does not need to be overwhelming. Here is the approach that works: Do not try to transform everything at once. Start with a low business value application to test your implementation and rollout process.
Why low business value? Because you want to learn without risking critical operations. Test your migration approach, validate integration patterns, train teams, and refine processes on something that won't disrupt your core business if issues arise.
Once you have proven the approach works, build a pipeline of legacy technology to upgrade opportunities. Prioritize based on business value, technical complexity, and strategic impact. Each modernization becomes a learning opportunity that improves your next deployment.
Advantages of this incremental approach:
- Reduced risk – Test and refine on non-critical systems first.
- Faster time to value – Deploy improvements in weeks instead of tackling a large, complex application with multiple layers.
- Built-in learning – Each deployment teaches you something that makes the next one smoother.
- Continuous improvement – Your team gets better with each application moved to updated infrastructure.
- Sustained momentum – Quick wins build organizational confidence and support for broader change.
The manufacturers seeing the biggest returns are not the ones attempting massive "big complex" transformations, but those taking a disciplined, pipeline-based approach to modernizing legacy systems that compounds improvements over time.
How Pega enables this approach
Pega's approach aligns perfectly with this incremental strategy. Pega Blueprint™ uses AI to analyze legacy assets and auto-generate modern applications, applying best practices to modernize processes rather than simply recreating old workflows in new environments.
The platform's integration capabilities ensure new applications connect seamlessly with remaining legacy systems, allowing legacy system modernization one application at a time without disrupting your broader technology ecosystem. Instead of months of traditional development, you can deploy new capabilities in weeks.
When you move quickly with this approach, you will not just keep up, but you will gain a competitive edge and build a foundation for continuous transformation.
Ready to identify your starting point?
Manufacturers seeing the biggest returns are not waiting for perfect conditions – they are starting now with low-risk applications that deliver quick wins. Use Pega Blueprint™ to evaluate which legacy applications offer the fastest path to results.
For a deeper dive into how AI is transforming legacy system modernization across industries, see:
The AI-driven approach to transforming legacy systems
Break free from legacy: Rethink and retire your tech debt
Streamline automotive operations. Optimize customer service.