With computers and technology advancing at an incredible rate, it is extremely important to do updates on existing devices and upgrade them when manufacturers end support on them. On average, technology has become obsolete in as little as 3 years. Support for those products also ends, which includes things like security updates and bug fixes. The most important being security fixes because this leaves you vulnerable.
One such example is the iPhone which is currently running iOS 5 with 6 due out later this year. As of 6/26/12, there are currently 141 vulnerabilities for that operating system. You can check the national database here:
http://web.nvd.nist.gov/view/vuln/search-results?query=apple+ios&search_type=all&cves=on
The other important reason to do the updates, is highlighted in my post here: http://www.atchan.com/2010/12/iphone-upgrade-warning.html
When you upgrade and migrate to your new device, it is best to keep up with incremental updates. As shown in my previous post. If you upgrade from iOS 1.1 to 3.1, there are A LOT of changes in how the data is handled. Things are improved, changed and fixed in each revision. If your data didn't do the natural progression of versions 1 to 2 to 3, you will lose that data. Software is designed to follow an order of progression, if you deviate, it will cause problems for you because the only way for them to keep track is through their revisions. Anything else creates too many variables that no one can track. Of course, you should always back up your data, but that is a totally separate post.
This also leads to another point. Large corporations, in an "attempt" to save money by pushing off "costly" upgrades and updates, actually pay much more, in most cases more than double, in the long tern when you are forced to upgrade when it comes to end of life support. Examples include additional hours required in attempting to keep the old data, problems that arise when attempting to connect older systems to newer systems, additional resources (hardware, 3rd party software, consultants) to bridge the time needed while the integration is tested, employee training, and down time related to problems in the upgrade. All these are additional costs that aren't calculated and end up costing so much more.
Software companies design the upgrade process into the newer products from the previous revision, not from older versions. For example, they will provide support for your migration from version 4 to 5, but as for version 3 to 5 you are on your own or will need to purchase 3rd party software specifically written to migrate that data and it is not always perfect because their software is based on a properly configured system. Which is NEVER the case because something is configured either differently or wrong.
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