When will the day of reckoning arrive for your organization’s technical debt?
While the CEO may be focused on shiny new technologies, most IT organizations still live with many legacy systems and processes that are draining, if not dangerous – not only in terms of mounting costs but also increased risk exposure. What’s more, many of these software and infrastructure situations can stand in the way of opportunities for digital transformation.
In lean years with tight funding, IT may have ignored issues or applied clunky fixes in infrastructure and application maintenance – and the impact of those fixes can remain hidden for years. However, as these systems underperform, stop working altogether, or otherwise stand in the way of company goals, it’s becoming clear to IT leaders that this so-called technical debt needs to be addressed sooner rather than later.
Indeed, in many organizations, technical debt is now such a sizeable off-balance sheet liability that it must be accounted for to the business, says Dion Hinchcliffe, vice president and principal analyst at Constellation Research. Veteran CIO and current chief digital officer and CTO for senior living provider Affinitas Life Wayne Sadin has gone so far as to describe the scale of technical debt in most companies as a larger liability than that which lurked in the financial statements of Enron or Worldcom two decades ago.
What’s holding you back?
It’s tricky to convince business leaders or board members to pay down technical debt when they’re more focused on what’s next than what’s holding the organization back.
However, CIOs can harness that desire for transformation to illuminate the technical debt issue. A legacy of short-sighted choices is standing in the way of organizations moving toward the future. Some of this aging hardware and software proves unfit as a foundation for modern business systems and processes. Building real-time mobile apps on top of decades-old architecture requires, at minimum, some significant remediation. In addition, some companies are spending the bulk of their budgets keeping these neglected IT systems up and running, leaving little left over for innovation.
[ Read also: AT&T CIO Pam Parisian: How to gain speed and cut technical debt. ]
The solution is to account for technical debt – locating it, categorizing it, and determining the cost of eliminating or reducing it. It’s not an easy – or even perfect – process, but it can be done. There are ways to calculate not only the expense but also the potential benefits of addressing technical debt to align investments with digital business goals.
5 steps to reduce and manage technical debt
Sadin shared five steps CIOs can take to begin measuring and managing their technical debt load:
1. Conduct an inventory of the IT stack
This is the first thing Sadin does when taking on a new IT leadership position: Account for every piece of infrastructure and application in the environment in order to get the lay of the land.
2. Calculate the costs of updating systems
Some aspects of technical debt are relatively easy to determine, such as the cost of bringing a general ledger suite up to date. Custom-built software can be more difficult to quantify, but IT staff or auditors can help you understand the issues. In some cases, IT leaders may determine that it makes more sense to keep the debt on the books if a certain system is associated with a business unit that is going to be divested or the cost of remediation outweighs the benefits.
3. Play the risk card
Technical debt significantly increases the risk of a cyber breach or attack. The good news is that most executive teams and board members are now acutely aware of the importance of mitigating cyber risk, and CIOs can tie the issue of technical debt to this critical business priority.
4. Dig into opportunity costs
“The more insidious problem, however, is not that risk which knocks you in the head,” says Sadin, “it’s the things that technical debt prevents.” Quantifying the progress that technical debt could prevent is harder to do.
However, IT leaders who understand future business direction can conduct gap analyses to help put some numbers around this issue. If a company wants new IoT functionality, for example, the IT leader can work with those in architecture to quantify the cost of upgrading foundational systems to support that strategy. If there is no clarity around the business’s future technology demands, IT leaders can conduct research into trends in adjacent industries, to project what some of those might be and how well suited the IT environment is to support those emerging technology options.
5. Have the difficult conversations
This is perhaps the hardest part, because few executive teams or boards will want to hear that their plans for a new virtual reality function will require an additional multi-million-dollar investment, or that they need to make a significant investment to bring the ERP suite to the current release.
However, having the hard numbers makes it at least easier to understand. “It’s an uncomfortable discussion and the board is going to want to know how we got here,” Sadin says. “But it needs to be discussed at the C-suite and board level, and the discussion should be focused on risk and opportunity.”
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