Technical debt isn't just an expense to be paid, it's a barrier to innovation. Find out how you can empower your organization with the latest technology by clearing out your tech debt.
"Technical debt," a phrase originating in the coding world, refers to the expenses and other issues that arise from short-term thinking when it comes to planning and managing your IT landscape. Financial costs aside, by posing an obstacle to innovation, tech debt also imposes an opportunity cost on your organization.
If you want to take advantage of innovative new enterprise technologies like generative artificial intelligence (AI), machine learning, and the cloud, you will need to ensure an excessive level of tech debt isn't locking you out of these important market differentiators. Mapping and tracking tech debt across your IT landscape using a tool that's designed for that purpose is the first step to dealing with it.
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In the meantime, let's look more closely at what technical debt is, why it's a barrier to innovation, and how you can overcome it.
What Is Technical Debt?
Whether you're developing software or an IT infrastructure, every time you make a choice based on speed and expediency, rather than sound architectural or long-term system resiliency, you incur technical debt. Eventually, you will have to pay for these decisions by, in the best case, having to spend resources reworking your systems, or, in the worst case, through system failure.
Focusing specifically on an organization's IT landscape, tech debt can take many forms:
- multiple, redundant applications supporting the same business capabilities
- overly customized applications requiring ongoing maintenance and updates
- legacy applications serving a specific business purpose that are no longer supported by the vendor
- outdated versions of supported applications
It isn't difficult to understand how companies get into tech debt. It's complicated, time-consuming, and expensive to replace highly customized, mission-critical applications or rationalize your application portfolio after a merger or acquisition, .
Sticking with sub-optimal solutions because replacing them is expensive is completely understandable. Unfortunately, there are both literal and figurative prices to pay for sparing yourself short-term expense:
- system outages that erode business performance and customer confidence
- ongoing maintenance costs, taking the form of staff time and professional service fees
- lost productivity of IT staff who have to spend too much time just keeping the lights on
- employee churn due to frustration with workplace tools
- lost revenue as customers move to competitors offering a better digital experience
These and other issues contribute to the total 'technical debt' that your organization will need to 'pay' as you work to optimize your IT landscape. Attaching a clear, financial price to this debt can allow you to benchmark where you are and track progress as you move forward.
What Technical Debt Is Costing You
Of course, this isn't a perfect world, and a certain amount of technical debt is not only expected, but unavoidable. The trick is being mindful about it and making conscious decisions regarding the debt you find acceptable and the debt you want to avoid.
Sadly, a lot of the technical debt out there falls into the 'unacceptable' category. In fact, McKinsey estimates that technical debt could be eating up to 60% of your IT budget and 50% of your technical teams' time.
Stripe estimates that this amounts to a USD 3 trillion impact on global GDP, and that was before the pandemic forced enterprise technology to pivot to a remote working model overnight, creating tremendous amounts of tech debt along. the way. So, how did we get to this point?
The inertia described above – going with the flow instead of planning for the future – is one reason. Another reason, however, is that enterprise IT systems weren't originally designed for continuous, iterative improvement, and they certainly weren't designed to keep up with the rate of change we're currently seeing.
All this is putting 'tech debt' onto board agendas and making its 'retirement' an ongoing priority. Whenever you undertake a digital transformation or merge with another company, addressing the technical debt you will incur needs to be part of the plan, not an afterthought.
It's not just about the money, although failing to deal with tech debt only means the problem will snowball, the debt will grow, and opportunities will be missed. Specifically, the longer you maintain costly, outdated systems or devote time to supporting redundant tools, the less time you will spend pursuing what matters most: innovation.
What Could You Do Without Technical Debt?
The truth is, failure to manage your tech debt imposes serious barriers to innovation on two levels:
First, imagine what exciting new software capabilities you could invest in if you weren't spending up to 60% of your IT budget dealing with tech debt? Not to mention, what could your team do with that software if tech debt wasn't taking up 50% of their time?
Still, even if you had unlimited budget and time, that doesn't mean you'd be able to take advantage of innovative technology. Getting legacy software to work together with the latest technology can be like mixing oil and water, so it's often impossible to exploit innovative technology without paying off tech debt first.
As business leaders race to capitalize on the latest technology trend, from edge computing to generative artificial intelligence (AI) like ChatGPT, many companies are unable to make the most of these technologies because their IT landscape simply can't accommodate them. This leaves organizations trying to accelerate digital transformation efforts just to keep up.
Yet, an infamous BCG survey tells us that 70% of digital transformations of this kind fail, largely because they're trying to do too much at once. To prepare to take advantage of every innovation opportunity that comes along, organizations must adopt a culture of iterative, continuous transformation, part of which involves a systematic approach to tech debt.
Opening The Pathway For Innovation
Technical debt isn't something that can be 'paid off' all at once and then not thought of again. Managing your technical debt is a matter of continuous transformation - making small, iterative changes to keep pace with new technology.
The key here is to continuously evaluate your IT landscape in terms of how it supports your business. The Gartner TIME methodology offers a useful framework for this evaluation.
'TIME' is an acronym standing for :
Tolerate - accept the application in its current state for the time being
Invest - prioritize gaining maximum value from this high-priority application
Migrate - work on finding a better application to fulfill this need
Eliminate - remove the application as it is not needed or desirable
Considering applications in terms of their functional fit for the business and their technical fit within the IT landscape is a good way to begin categorizing them.
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The budget you will save from the applications you 'eliminate' can be re-invested into innovation. Meanwhile, gradually 'migrating' your application portfolio over to modern cloud software will prepare your landscape to host generative AI and other innovations.
Understanding your application portfolio enough to categorize it by the TIME methodology relies on mapping and tracking information about your software in real-time. This is where LeanIX EAM can support you.
The Power Of LeanIX EAM
Technical debt is an unavoidable issue that needs to be constantly addressed. This requires understanding and tracking your application portfolio, so you can make regular, iterative changes to manage technical debt and prevent it from getting out of control.
LeanIX EAM is an essential tool for collecting and analyzing detailed information about your IT landscape, so you can effectively benchmark and track and manage technical debt. It will also enable you to incorporate innovative technology into your application portfolio and track its return on investment.
To find out more about our EAM, visit our application portfolio assessment page: