Countless CTOs at major investment firms face a shared frustration: the vast majority of their technology budgets are committed before strategic or innovative decisions can be made. Legacy infrastructure consumes those resources at the expense of exciting new projects or competitive changes. These systems deliver diminishing returns, creating a budget trap that leaves firms unable to invest in the capabilities that would actually set them apart.
More than a technology issue, this is a structural business problem. And it’s costing investment firms real competitive ground. In this article, we explore this challenge; we also identify strategic opportunities to help firms transition to becoming a forward-looking, innovation-driven organization.
Legacy Infrastructure Demands Too Much
The financial drain of legacy systems is built into the architecture of most investment firms’ technology environments. Legacy infrastructure requires constant maintenance, patches, workarounds, and specialized expertise to keep operating. Every year, the cost of keeping these systems alive tends to grow, while the value they deliver shrinks.
According to research from Consultancy.uk, 92% of financial services firms rely on legacy technology in critical parts of their operations. Many firms still maintain data on-premises with aging databases and integration systems that require constant attention. The problem compounds because legacy systems typically lack the efficiency of modern cloud-based alternatives, meaning they demand more staff, more power, and more money just to maintain the same level of service.
The four most damaging costs of legacy infrastructure are often hidden from view:
- These systems create operational inefficiencies. Manual processes, slower transactions, and ineffective workflows consume time and money daily.
- Data lives in silos across disconnected legacy systems. This makes it nearly impossible to gain the unified view of operations that modern decision-making requires.
- Outdated systems introduce security weaknesses that expose firms to mounting regulatory risk.
- Legacy infrastructure blocks the adoption of new capabilities entirely. Firms can’t implement modern analytics, AI-driven automation, or real-time risk management when their fundamental technology layer is built on decade-old systems. This is perhaps the most damaging of the four.
The result is a vicious cycle: legacy infrastructure demands so much maintenance investment that there’s no budget for modernization. Without modernization, the infrastructure remains outdated and expensive. The cycle repeats, year after year, while competitors move forward.
The Risk of Inaction with Legacy Infrastructure
The stakes of remaining trapped in legacy infrastructure are severe. While maintenance budgets grow, innovation budgets shrink. Firms that stay stuck lose the race for competitive advantage in multiple ways:
- Product Innovation Slows Down. When a technology budget is locked into maintaining legacy systems, product teams lack the resources and infrastructure to build new offerings quickly. Competitors with modern infrastructure can launch new investment products, enhanced client portals, and differentiated services in weeks. Firms with legacy constraints take months or longer.Â
- Talent Drain Accelerates. Modern software engineers and data scientists have choices about where to work. Few want to spend their careers maintaining outdated systems. Firms trapped in legacy infrastructure struggle to attract top talent, particularly in AI, cloud engineering, and data science roles, where competition for talent is intense. Over time, the team gets older, turnover increases, and institutional knowledge walks out the door.
- Operational Vulnerability Increases. Older systems are more fragile. They lack the redundancy and failover capabilities of modern cloud infrastructure. When something inevitably breaks, recovery takes longer. Meanwhile, regulatory requirements around operational resilience keep tightening. Firms with vulnerable legacy infrastructure face increasing regulatory risk and the potential for costly outages.
- Market Share Moves to Competitors. Ultimately, firms stuck in legacy infrastructure lose clients to competitors who deliver better experiences, faster innovation, and more sophisticated capabilities.
In asset management, where alpha and competitive advantage matter greatly, falling behind on technology means falling behind on performance.
Firms Moving Beyond Legacy Infrastructure Are Investing in AI
According to research from S&P Global, AI investment in banking is projected to account for roughly 20% of global AI spending by 2028. More importantly, firms deploying AI initiatives are pulling away from those that aren’t. 54% of financial services firms had already deployed AI initiatives in January 2025, creating a clear competitive divide between leaders and laggards. Many of those laggards are stuck precisely because their legacy infrastructure makes AI adoption extremely difficult.
Breaking the Cycle: Portfolio Rebalancing Strategies for Legacy Infrastructure Modernization
The path forward requires intentional rebalancing. CTOs need to shift spending gradually from legacy maintenance toward modernization and innovation, without destabilizing core operations. Here we share four steps to realizing your goals.
Step One: Understand Your Real Legacy Infrastructure Costs
Most firms don’t know exactly how much they’re spending on legacy systems because the costs are distributed across teams, vendors, and budget lines. Start by mapping where legacy infrastructure money actually goes. What percentage of staff time is spent maintaining old systems? How much licensing and support does legacy infrastructure require? What’s the opportunity cost of the capital tied up in maintenance? Once the true cost of legacy infrastructure is visible, the business case for modernization becomes obvious.
Step Two: Identify Modernization Opportunities That Reduce Costs
The best modernization projects both provide long-term benefits and reduce costs in the near term. Cloud migration, for example, typically reduces infrastructure costs by moving from expensive on-premise hardware to consumption-based cloud spending. Consolidating multiple legacy databases into a single modern data platform eliminates vendor sprawl and reduces maintenance overhead. Retiring redundant legacy systems frees up both budget and staff capacity. The goal is to find modernization projects that improve the balance sheet while also freeing up budget for innovation.
Step Three: Rationalize Vendors and Reduce Sprawl
Many firms accumulate legacy infrastructure through acquisitions, mergers, and point-solution purchases over decades. Vendor rationalization (i.e., consolidating tools and eliminating redundancy) is one of the fastest ways to reduce legacy infrastructure cost. Fewer vendors means lower support costs, simpler operations, and easier integration.
Step Four: Shift Incrementally, Not Dramatically
CTOs can’t turn off legacy infrastructure overnight without disrupting critical business operations. Instead, successful modernization uses a phased approach. Run new capabilities alongside legacy systems for a defined transition period. Move one business unit or one data set at a time to the new infrastructure. Build redundancy and failover capabilities so that the business never depends on a single system. This gradual shift allows the organization to test new infrastructure, build team confidence, and catch problems before they become critical.
Research shared by The Banking & Finance Post shows how powerful modernization can be. One case study found that firms using AI-powered modernization tools achieved 200% faster development cycles and 85% faster client onboarding, while reducing operational costs simultaneously.
Making the Business Case: How to Frame Legacy Infrastructure Modernization to Finance and the Board
CTOs often approach modernization as a technology initiative. But boards and CFOs think in terms of financial impact. Here are some strategies you can adopt to make the business case.
- Frame Modernization as Cost Reduction. Legacy infrastructure modernization typically delivers immediate cost savings. Cloud infrastructure is usually cheaper than on-premise hardware once you account for power, cooling, space, and staff. Consolidating vendors reduces ongoing support costs. Retiring redundant systems eliminates licensing fees. Calculate the total cost of ownership for legacy infrastructure, including all the hidden costs, and compare it to the cost of modern alternatives. The gap is usually substantial.
- Connect Modernization to Revenue Growth. More importantly, modernization creates the conditions for revenue growth. Firms that modernize can innovate faster, build new products, and reach clients more quickly. When the board understands that modernization both reduces costs and creates infrastructure for competitive advantages, support becomes easier to secure.
- Address Risk Management. Boards care about risk. Frame legacy infrastructure modernization as a risk mitigation strategy. Older systems are more vulnerable to security breaches and operational failures. Regulatory requirements around operational resilience are tightening. Modernization reduces regulatory risk by replacing fragile systems with resilient, monitored infrastructure.
- Show the Opportunity Cost. Finally, help the board understand what the firm is giving up by staying stuck in legacy infrastructure. Budget lost to substantial maintenance costs is taken away from innovation, client services, and taking advantage of market opportunities. The cost of inaction is often higher than the cost of modernization.
Getting Started: Quick Wins and Pilot Projects
The best way to build momentum for legacy infrastructure modernization is to identify quick wins. These are high-impact, low-risk projects that demonstrate ROI quickly and build organizational confidence.
Good pilot projects for legacy infrastructure modernization share several characteristics. Typically, they do the following:
- Address a real pain point the business feels every day
- Involve a defined subset of data or users to contain the risk
- Deliver measurable results early
- Reduce costs or improve efficiency in ways the organization can measure
- Use modern infrastructure and methodologies that the team can apply to future projects
Examples include migrating a single portfolio system to the cloud, consolidating client data from multiple legacy databases into a modern data platform, or retiring an overlapping legacy system entirely. Each delivers quick value while building the team’s experience with modern infrastructure.
Conclusion: Breaking Free from Legacy Infrastructure
Legacy infrastructure comes with a competitive cost that continues to grow over time. The path forward begins with understanding the true cost of legacy infrastructure, identifying opportunities for modernization that reduce costs, and building organizational momentum through quick wins. CTOs who take these steps can gradually shift budget from maintenance toward innovation, creating the technology foundation that drives competitive advantage.
The firms breaking free from legacy infrastructure now will have not only better technology, but also the budget, team skills, and agility to win in an increasingly competitive market. For investment firms, that’s the real opportunity: modernizing to compete.
Optimize Your Infrastructure with Option One Technologies
Ready to understand the true cost of your legacy infrastructure and identify modernization opportunities? Option One Technologies works with investment firms to develop practical technology modernization strategies that reduce costs while building the foundation for innovation. Contact us today to explore how we can help your firm break free from legacy constraints.
