Of course it's an outdated system. "Outdated" = "used to be popular in the past and isn't now". And for a good reason. They are playing with 2 central strikers and no wingers. Countering that is pretty easy => 3 man backline. Keeping the numerical advantage at the back, allowing to field another attacking player. Pedro and Navas wouldn't allow the fullbacks to venture forward (which they rarely do anyway in Italy's system). That would leave Balotelli and Cassano isolated upfront against 3 centrebacks (Pique, Ramos, Martinez for example). While Busquets would shadow Montolivo. That would kill all of Italy's attackings sources while at the same time allowing Fabregas (at the top of the diamond), Navas, Pedro and a CF to attack.
The only reason Prandelli's system works is because at international level no one will utilise a 3 man backline and he knows it. Pretty much no national team is familiar with such a system. Except the Spanish (most of all Barcelona) players ...
Löw took out a winger (Müller) to get in another midfielder against Italy's 4 man midfield. Wrong move. He should have taken out a fullback to add another midfielder. Germany unnecessarily had 2 spare men at the back the whole time. Lahm was surplus to requirements.