Despite the growing availability of advanced cloud technologies, a large portion of UK businesses across sectors such as manufacturing, engineering, logistics, and professional services continue to operate on legacy systems, often at 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 business transformation specialists 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,” said Simon Langdown, co-founder and Senior Financial Consultant for all implementations at Essenkay. “As economic conditions tighten, continuing to operate this way isn’t just inefficient, it’s risky.”
According to Simon, the hidden costs of legacy systems include:
- 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.
Cloud-based ERP platforms like Microsoft Dynamics 365 Supply Chain Management are designed to address these issues, with tools that allow real-time visibility across departments, smarter stock management, and fewer manual interventions.
- Data silos and displaced information
Without a modern ERP system in place, critical business data often becomes displaced across spreadsheets, servers, and outdated platforms, leading to inconsistent reporting and slower decision-making.
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.
- Cybersecurity weaknesses
Cyber threats are escalating, with 50%¹ 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.
Microsoft Dynamics 365, built within Microsoft Azure’s secure cloud infrastructure, helps close these gaps through features like multi-factor authentication and automatic updates that keep defences current without increasing IT burden.
- Missed opportunities
Beyond the operational risks, 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 Dynamics 365 can help a manufacturer reduce inventory waste, or support a logistics firm in anticipating seasonal demand fluctuations.
To learn more about the hidden costs of legacy systems and how to undertake a digital transformation, please visit: https://www.essenkay.co.uk/insights/hidden-costs-of-not-implementing-microsoft-dynamics-365/
