The $11 Million Question: Is Your Factory's Legacy Tech Draining Your Future?

NUREMBERG, GERMANY – November 26, 2025 – For industrial leaders, the hum of machinery has long been the sound of productivity. But new research suggests a silent, costly problem is hiding within that noise. A global study unveiled today by Schneider Electric reveals that the rigid, proprietary automation systems running countless factories are quietly draining competitiveness, costing a typical mid-sized industrial organization an average of $11.28 million annually.

This staggering figure, representing 7.5% of revenue for mid-sized firms, comes from a comprehensive report by the global analyst firm Omdia, titled “Open vs. Closed: The $11.28M Question for Industrial Leaders.” The research, which combined C-suite interviews with a broad quantitative survey, quantifies the often-overlooked financial burden of legacy technology. For large enterprises, the average annual losses climb to a dramatic $45.18 million. The impact is even more acute for smaller manufacturers, who risk losing up to 25% of their yearly revenue to these hidden inefficiencies.

These are not abstract numbers; they are the tangible costs of operational friction, unexpected downtime, costly compliance retrofits, and delayed production—all stemming from automation systems designed for a world that no longer exists.

The Hidden Tax on Industrial Competitiveness

Traditional industrial automation was built on a foundation of proprietary, hardware-defined systems. While reliable for static, predictable production environments, their rigidity has become a significant liability in today's dynamic market. The Omdia study breaks down the $11.28 million annual cost into four critical areas where these closed systems fail to perform.

The largest portion, $6.1 million, is lost to a lack of Operational Agility & Resilience. In an era of shrinking product lifecycles and volatile supply chains, the inability to adapt quickly is crippling. The research found that over 77% of companies require physical, hands-on modifications to their hardware to implement functionality updates. With modification costs ranging from $25,000 to over $250,000 per hour, responsiveness comes at a steep price. This is compounded by hardware fragmentation; most companies manage between two and ten different vendor platforms, creating a complex web of dependencies that stifles integration and slows innovation.

Another $2.28 million is consumed by poor Optimization & Efficiency. The complexity of managing multiple, siloed hardware platforms creates a significant maintenance burden and exacerbates the industrial skills gap. With 30% of technical issues requiring specialized vendor support, companies find themselves overly dependent and their own workforces strained. This fragmentation hinders the implementation of modern predictive maintenance strategies, leading to more frequent and costly downtime.

Proprietary systems also create data silos, costing companies $1.2 million in Preventable Quality Failures and Costly Data Maintenance. The study reveals that only 28% of industrial firms can access critical operational insights in real time, with half reporting that up to 39% of their most important data is unavailable when needed. This lack of visibility prevents quick issue resolution and undermines data-driven decision-making.

Finally, $1.7 million is spent on Sustainability & Compliance Costs. As environmental regulations tighten, closed hardware systems often require expensive, full-scale retrofits to meet new standards, turning compliance into a recurring capital expenditure rather than an integrated operational function.

A Paradigm Shift to Software-Defined Agility

The report argues that the solution lies in a fundamental paradigm shift: moving from closed, hardware-centric models to open, software-defined automation (SDA). This approach decouples the control software—the brains of the operation—from the underlying hardware. The result is a more flexible, scalable, and future-proof architecture that empowers manufacturers to thrive amid constant change.

This is not merely a theoretical concept; it is the practical backbone of the next wave of industrial innovation, often discussed within the framework of Industry 4.0 and the Industrial Internet of Things (IIoT). By embracing open standards, companies can integrate best-of-breed solutions from multiple vendors, breaking free from proprietary ecosystems. This interoperability is being championed by industry-wide groups like the Open Process Automation Forum (OPAF), which is developing standards to ensure different systems can communicate seamlessly.

“This research echoes what our customers tell us every day: industrial systems must adapt as fast as their markets,” said Gwenaëlle Avice Huet, Executive Vice President of Industrial Automation at Schneider Electric, in the press release. She noted that smaller enterprises, in particular, “stand to gain the most in annual savings that can be reinvested in innovation and growth.”

Indeed, the entire industrial automation sector is pivoting. Major players like Siemens, with its open Xcelerator platform, and Rockwell Automation, with its increasing support for OPC-UA standards in its PlantPAx system, are all moving toward more software-centric, interoperable solutions. This industry-wide trend confirms that open automation is not a niche idea but the emerging standard for modern manufacturing.

Navigating the Path to Modernization

While the benefits are clear, the transition from decades-old legacy systems to a modern, open architecture is not without its challenges. The migration itself presents significant hurdles that business leaders must navigate strategically. The initial investment in new software, integration services, and potential hardware upgrades can be substantial. Furthermore, the convergence of Information Technology (IT) and Operational Technology (OT) requires a new blend of skills, demanding significant investment in workforce retraining to bridge the gap between factory floor expertise and software proficiency.

Cybersecurity is perhaps the most critical risk. While closed systems offered a degree of security through obscurity, open, connected platforms expand the potential attack surface. Integrating standard IT components and cloud services into the industrial control environment requires a robust, defense-in-depth security strategy to protect critical infrastructure from increasingly sophisticated threats.

There is also the risk of operational disruption during the transition. A phased implementation, beginning with pilot projects or non-critical assets, is often the recommended approach to prove value and mitigate downtime. Companies must also grapple with the complexity of integrating new systems with legacy equipment and migrating historical data without compromising its integrity.

As Anna Ahrens, Principal Analyst at Omdia, stated, “In a world where product lifecycles shrink, supply chains fracture, and talent gaps widen, agility and flexibility aren’t optional. They are survival.” Her warning underscores the urgency: “Every quarter a business delays addressing the cost of closed automation ecosystems is another $1M+ in lost value.” The path forward requires careful planning and investment, but for industrial companies looking to compete in the 21st century, the cost of inaction is a price they can no longer afford to pay.