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Manage your tech debt, just like how you manage your financial capital structure

Manage your tech debt, just like how you manage your financial capital structure

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In the last year, IT leaders had no choice but to make snap decisions to keep their business intact and employees online. Unfortunately, the enormous pressure to pick up new technologies led to significant growth in technical debt.

The technical debt accumulated during the pandemic will shadow 70% of CIOs, causing financial stress, inertial drag on IT agility, and "forced march" migrations to the cloud by 2022.

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What is Technical Debt?

Technical debt refers to the cost and additional work created from choosing the technology solution that was quicker to implement when a snap decison was demanded,  instead of selecting the best solution for the long run. Not all tech debt is bad – when quick delivery is more important, making an instant decision with a less than full understanding of the consequences is necessary.  

While the upfront investment (aka principle) could already be costly, tech debt brings in a magnitude of "interest"- technical complications, financial burdens, and process issues that harm budgets, exhaust IT resources and negatively impact company value.

And we all know, the longer the debt persists, the greater the interest you will pay.  

Unlike financial debt, technical debt is not inherently a metric and can be hard to measure. We recommend you watch out for these red flags to keep issues from spiralling:

In a recent McKinsey survey, CIOs reported that 10% to 20% of the technology budget dedicated to new products is diverted to resolving issues related to tech debt.  

Companies have been forced to modernise core system foundations requiring disruptive technology refreshes, which in turn causing unavoidable downtime and inconvenience.  

Working with aging platforms and their complex integration could pose significant security risks for IT and make reporting, including meeting regulatory compliance challenging

Organisations dependent on aging platforms are often not agile enough to respond to emerging opportunities timely. IT often finds their time is spent managing the process issues rather than improving critical business functions.  

Just like personal debt management, how you tackle your technical debt may make a big difference to what your company pays in the long run.

If a company can only afford to fix emergencies rather than deliver new capabilities, as time goes by, the cost of “repaying” the debt becomes more complicated and more expensive. Consider a simple analogy like credit card spending. When one has a massive pile of debt compounding interest – it is often too difficult and too late.

Work out what debts you have

To find ways to manage debts, a good starting point would be to determine which infrastructures are accumulating the most "interest".  While this could be an uncomfortable wake-up call, it will give you a clear view of exactly where you're at. 

We recommend having tools to measure and track the red flags, document, and report on problems timely, and communicate the problems between IT and business.  

Reflect on the business goal

By clarifying the overall goal and defining the strategy at a business level, companies can work out the technical capabilities and allocate the necessary resource and budget accordingly.

Factor Tech Debt into business decisions

Design IT and business interventions to tackle the debt problem. Rework your governance processes and practices, adjusting ongoing maintenance costs to reflect actual "interest" from tech debt. With the right approach, you can regain control and refocus your resources on creating value for your customers and the business.

Know your options

When the risk and cost of existing systems outweigh their benefits, explore alternative modern options to reduce the burden. Some infrastructure can be replaced entirely with an out-of-the-box solution; others could be broken down into smaller components to release tangible value back into the business quickly. 

Seek help

Balancing futureproofing with short-term cost benefits is an art, and addressing the debts can drain the budget and take a lot of time.  Scope Logic provides meaningful support to our clients, who may be experiencing hardship technically. If you need help managing your technical debt, call us to arrange a meeting.