Dig Out of Technical Debt: Create A Perpetually Resilient, Recession-Proof Organization
- April 04, 2023
As young adults, most of us were warned about the dangers of debt. Funding a spending spree with high-interest credit cards, for example, can leave you with a mountain of debt that takes years to pay off, threaten your financial security and possibly derail your goals for the future. Similarly, many organizations today find themselves buried in debt, albeit a different kind of debt. The source of their problems is not just financial; it’s technical. As it’s known in IT circles, technical debt can be described as the consequence of remaining tied to outdated or inferior technology, equipment, software, platforms or processes.
As nimble, resilient, digitally enabled competitors innovate quickly and capture market share, companies saddled with technical debt remain stuck in the mud — devoting precious time and resources to supporting antiquated technologies.
Much like paying down a high-interest loan, the burden of technical debt keeps organizations from moving forward with digital transformation and delivering key capabilities that modern employees, partners, and consumers demand. Simplifying the complex web of legacy IT can help them modernize and enable a faster, more agile organization, well-positioned for the future.
How did we get this far in debt?
In a sense, many of today’s more significant, well-established enterprises have become victims of their own longevity. That’s because their operations were built, perhaps decades ago, on technological platforms that are now obsolete. While these systems may still “get the job done,” they are far inferior to modern technology offerings that can significantly enhance a company’s speed, flexibility, and scalability. The difference could be compared to a car from the 1980s that is still drivable but lacks the advanced fuel efficiency, responsiveness, and safety features of new vehicles.
The “old car” may represent outdated technologies in large companies. It could be a deeply entrenched operational system like ERP or CRM or a specialized application heavily coded in a now-dying programming language. It could be an over-reliance on mainframes and/or legacy data centers. Or it might not be a specific technology but old-fashioned ways of working holding the company back.
Continuing to support outdated systems and processes comes at a steep cost. Whether it’s the hard costs of equipment and licensing fees or soft costs like the countless staff hours that could be better spent. Ultimately, however, the opportunity cost of technical debt hurts companies the most. Bound to legacy systems, organizations are slowed down by inefficiencies and may miss out on chances to streamline their operations, beat competitors to market, and win new customers.
In NTT DATA’s Innovation Index study, business leaders stated that inadequate or outdated technology was the no. 1 challenge impacting their innovation efforts.
In other words, as companies continue to tinker with their “old cars,” competitors with state-of-the-art engines pass them by.
Tech debt takes many forms (and has many solutions)
Technical debt is a term commonly used in connection with software when developers must spend their valuable time reworking half-baked code that was rushed through development. The concept can also apply to any situation where a company is spending too much time or money servicing a technology they invested in long ago. Clients with technical debt have overcome their unique challenges and modernized their infrastructure in different ways.
- Arcosa
As part of a divestiture agreement from Trinity, Arcosa had to separate its data, finances, and operational information systems from Trinity with minimal business disruption. NTT DATA began with a detailed analysis of the complex Trinity/Arcosa IT landscape to rebuild and replicate. A key part of the separation was discovering the assets Arcosa really needed. We road-mapped, built, and deployed a modernized hybrid cloud infrastructure environment to support applications, data, and services. The robustness of the infrastructure allowed Arcosa to seamlessly pivot to remote work during the pandemic.
- Blue Cross Blue Shield Rhode Island
A legacy call center system, traditional development processes and manual workflows were hindering BCBSRI’s competitiveness. Staff struggled to get a complete picture of customers, and it took too long to process claims and launch new services and apps. NTT DATA brought in the right tools and techniques for BCBSRI to adopt DevOps, improve the quality and efficiency of delivering code, and re-engineer processes to identify waste and improve outcomes. By streamlining and modernizing its development processes, BCBSRI released three times the number of software releases in 12 months compared with previous years, and reduced application issues by 20 percent.
- Jackson National Life Insurance
Jackson wanted to accelerate digitalization and improve application development and quality assurance but also had scores of applications that needed updating. NTT DATA helped migrate more than 40 critical applications to modern code platforms, enhancing the user experience while reducing overall maintenance costs and creating a standard model for modernizing other applications.
Business Drivers for Modernization
Macroeconomic Headwinds
Downsizing or Talent Shortages
Legacy Skillsets
You can only ignore technical debt for so long: prep for uncertainty
It often happens that IT leaders are aware of the shortcomings of their legacy systems, but modernization may seem too complex and expensive to warrant the effort. It’s much easier and less expensive to “leave well enough alone.” But inaction is a risky strategy when dealing with technical debt. As with financial debt, one can only ignore the problem for so long; over time, the consequences of procrastination grow more severe.
Several business drivers are encouraging companies to front-burner their modernization efforts in the coming year. First, as of late 2022, many world economies teeter on the brink of recession. Challenging financial environments require companies to make sure-footed strategic adjustments in which technology plays a critical role. At the same time, automation will become a necessity as business leaders will be pressed to accomplish more with fewer resources. This may be due to downsizing in response to a recession and/or a shortage of available talent and skills. As older IT employees retire, finding replacements who understand legacy systems and programming languages will be especially difficult, making modernization all the more important.
Consumers and customers demand increasingly seamless, on-demand digital experiences, and aggressive digital savvy competitors are eager to meet their needs. The pressure is on enterprises to free themselves of technical debt and put innovation efforts into high gear.
A four-step process for digging out of debt:
When an individual accumulates substantial financial debt, they cannot simply wish it away. Instead, chipping away at the balance requires time, commitment, and a systematic approach. The same is true of technical debt. There may be a substantial list of outdated technologies the company needs to upgrade or replace, and the only way to get it all done is with planning and persistence. Here are four recommendations that can help.
- Assess the situation. Before an organization can start reducing technical debt, it is important to thoroughly account for its entire technology portfolio. IT, in unison with the business decision makers, needs to understand which applications and infrastructure are past their prime and hampering performance. Vital to accessing the situation, both teams need to know what it’s costing the company, directly and indirectly, to continue supporting these older technologies, and whether better alternatives exist.
- Target ‘high-interest debt.’ In financial terms, it’s always wise to pay off the balance with the highest interest rate first, thus preventing the debt from compounding uncontrollably. Similar logic applies to technical debt, as companies should start by identifying and modernizing the technologies whose limitations pose the greatest threat. In other words, IT leaders should ask themselves which aspect of their technology portfolio is dragging down performance the most or preventing them from achieving some important goals. Typical examples include applications that are outdated and in wide use around the company (an old application that nobody uses isn’t much of a problem). It could also be an application or a component of infrastructure that is prohibitively expensive to operate or maintain. Or an extremely time-consuming manual process that could be automated.
- Take it one step at a time. Related to paying down the “highest interest” debt first, IT teams should be careful not to get overzealous in their modernization efforts. Taking on too much at once can lead to accomplishing very little. One valuable exercise is to break down the list of potential projects into simple quadrants defined by the difficulty level and the potential positive impact on the company. Prioritize projects deemed relatively easy to complete that will make a significant impact; these are the “low-hanging fruit” projects that should encounter little resistance and produce quick wins. Follow those with projects that will make a similar impact but might require considerably more effort. Low-effort / low-impact projects fall to the bottom of the to-do list, while high-effort / low-impact projects are probably not worth pursuing at all.
- Commit to an ongoing process. Assessing and prioritizing projects to relieve technical debt shouldn’t be a one-time endeavor; it should become a way of life for IT. Like debt-related variable interest rates, some types of technical debt will become more urgent to address as market conditions and business goals change. For example, a company that decides to close its brick-and-mortar stores and focus solely on online sales will suddenly have dramatically different technology needs. Technical deficiencies that were once minor concerns could suddenly become critical priorities. Therefore, companies must not only work to remove existing technical debt but also take steps to avoid amassing more. A thorough approach will include periodically reviewing the company’s technology portfolio in light of its evolving business strategy and comparing it to the latest technology trends across the competitive landscape.
A modernization plan that pays for itself
Every business wants to streamline operations and drive out costs, especially with a challenging financial environment on the horizon. And many executives already understand that reducing technical debt is a prerequisite to those goals. The problem is that digital transformation comes with a hefty price tag (over and above the traditional IT operating budget). Business leaders holding the purse strings may be reluctant to fund new technology initiatives in uncertain times.
One increasingly popular solution to this financial impasse is known as a self-funding transformation. Here’s a simple overview of how it works:
- The IT team works with service partners to identify and resolve significant sources of technical debt;
- These targeted projects drive efficiencies and create cost savings, such as automating people-heavy processes or exiting a legacy data center;
- The dollars saved are reallocated toward new, value-adding technology initiatives, including app modernization, cloud migration, or improved analytics.
Simply put, leaving outdated technology behind unlocks the extra budget needed to propel the business forward through digital transformation.
Turning toward a debt-free, modern future
While a person deep in debt is accountable to the past and tied down by obligation, a debt-free individual enjoys the freedom of choice and the unencumbered power to determine how their money will be spent. In the same way, successful businesses require the means and flexibility to chart their own course for the future, not just financially but technologically as well.
As companies free themselves from technical debt and embrace all that modern technology offers, they open the door to a world of enhanced employee performance, faster innovation, increased customer loyalty, and greater resilience against market disruptions and uncertainty.
While the business case for modernization may be clear, the question remains whether companies have the in-house talent, skills, and experience to do it right. Because these projects often fall outside the operating budget of traditional IT, most companies benefit from partnering with a trusted service provider. With a proven, methodical approach, they can dig out of technical debt and turn toward a future of unbridled opportunity.
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