Is Technology Debt Handicapping Your Organization?
Transforming Banks for a Digital Future: The Winners, The Losers, and the Strategies to Beat the Odds
Many think of tech debt as just annual run cost, but it also includes the inefficiencies, duplicate processes and extra work created by outdated architecture.
By Abizer Rangwala
In today’s quickly changing landscape, companies are focused on the quest to innovate, gain a competitive advantage and drive an increasingly critical digital agenda. However, many C-suite executives underestimate the true cost of their technology estate and the drain of legacy systems on IT budgets.
In some companies, a typical IT budget may allocate up to 90 percent to just maintaining the current state. That leaves only 10 percent for innovating and developing new capabilities. While most executives (85 percent according to Accenture Strategy research) believe that legacy hinders their ability to move to a more digital model, their organizations are not equipped to embrace this as an issue beyond IT.
Technology debt can—and should—be measured and tracked the same as any other liability to the business. Many think of technology debt as just annual run cost and the sunk costs of hardware, software and code, but it’s much more than that. It also includes the inefficiencies, duplicate processes and extra work created by outdated or out-of-control technology architecture.
These hidden costs might come in the form of different people performing the same tasks on different platforms, the rework necessary to transfer data from one system to another, or inefficiencies created through manual processes that could be automated. It’s the combination—and compounding effect—of application, architecture and infrastructure debt that adds up to the full scope of technology debt.
In order to combat technology debt, organizations must take a step back and plan strategically across all technology platforms, processes and people. Here’s a four-point plan for doing that:
Replace "buy and hold" with "asset light" when it comes to technology investment. Digital platforms are connecting customers, suppliers and technology service providers, and that means the days of the IT empire are over. By losing the buy-and-hold mentality and replacing it with an asset light, pay-as-you-go model via cloud, mobile and as-a-service offerings, businesses can be nimble, streamlined and on the forefront of innovation.
Isolate technology debt and focus on paying it down through a "good debt/bad debt" approach. Focus on making payments on the most critical technology debt—the kind that presents the most risk to business growth and digital transformation. Separating that “bad” debt from forward-looking investments allows organizations to make progress on shedding poor assets. This practice of isolating bad debt into separate entities with specific goals and investment profiles has proven successful in banking and other industries.
Keep moving on the digital front by investing in digital plays or greenfield programs, while winding down debt. Innovation should not stop while technology debt winds down. Digital investments can accelerate progress without the cumbersome drag of legacy.
At the same time, companies are finding ways to tap into the data history that legacy often holds. Accenture Strategy research shows that 91 percent of executives have identified some legacy components that could be used to support digital objectives, with 37 percent saying they can integrate legacy with new technology most of the time.
Realign ownership for tech debt across the entire C-suite, and rethink the CIO’s role to get everyone vested in the debt vs. innovation decisions. Just as all parts of the business are focused on innovation and the digital agenda, leadership should share responsibility for technology debt.
An enterprise could distribute ownership of technology asset portfolios across the organization. This approach puts CIOs in a service broker role. From there, the CIO has oversight for managing versus owning the capabilities and services to transition effectively to the digital world, with the full awareness of the rest of the leadership team.
A multi-speed IT strategy allows companies to take these steps to eliminate unnecessary technology costs, while continuing to pursue innovation and other strategies for growth. But remember, paying down technology debt is not a one-and-done effort: Companies need to revisit decisions periodically to ensure that technology debt doesn’t creep back up.
Abizer Rangwala is a managing director at Accenture Strategy. He specializes in partnering with organizations to identify and capitalize on opportunities to utilize technology to maximize their business potential and reposition IT for the digital era. He is based in Boston.
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