Opportunity cost of technical debt

When an enterprise accrues technical debt it is accumulating technical issues or gaps in its enterprise infrastructure, software system, business workflow, etc. that if left unaddressed can create long-term organizational inefficiencies. In an IBM research report it was found that, nearly three-quarters of organizations report moderate or high levels of complexity in their IT estates, with technical debt (41%), application modernization (32%) and compliance issues (32%) cited as the chief culprits. These issues may be the result of rushed or incomplete development, the use of poor-quality or outdated components, or a lack of proper maintenance due to funding issues or budget shortfalls. Technical debt can manifest itself in a number of ways, such as poor performance, increased maintenance costs, deferring #digitaltransformation activities in the #cloud, difficulty in adding new features or functionality, and decreased ability to innovate.

According to Forrester, “Fifteen percent of banks will fail to tackle their technical debt and become uncompetitive.”

Incurring technical debt is often a trade-off that CIOs make in order to achieve short-term goals or overcome budget shortfalls. However, it is important to be mindful of the long-term costs of technical debt, as it can have significant negative impacts on the overall health and effectiveness of enterprise infrastructure. Addressing technical debt can be a time-consuming and costly, but failing to do so can lead to even greater costs down the road. The opportunity cost of technical debt is the value of the benefits that are forgone as a result of choosing to incur technical debt, rather than investing the time and resources needed to fully address a problem or issue.

There are 4 ways that an enterprise can avoid technical debt within the organization:

1. Prioritize quality over speed: It can be tempting to prioritize meeting deadlines or launching products quickly, but this can lead to cutting corners and incurring technical debt. Instead, the enterprise should prioritize delivering high-quality solutions that are built to last. It is okay to miss product launch deadlines, in-fact it is okay to miss them multiple times. But when you finally launch your product make sure it is not a proof-of-concept but an actual finished product!
2. Invest in maintenance and upkeep: Regular maintenance and upkeep can help to prevent technical debt from accumulating. Enterprises should ensure that there are sufficient resources dedicated to maintaining and updating existing systems. The inside joke in IT Operation teams is is that let’s do just the minimum to KTLO (Keeping-The-Lights-On) operations. But that is exactly the kind of cutting corner that can lead to expensive breakdown events down the line.
3. Adopt best practices and modern technologies: CIOs should stay up-to-date on best practices and modern technologies, and consider adopting them where appropriate. This can help to ensure that systems are built on solid foundations and are less prone to technical debt. Creating a modular enterprise infrastructure stack is very important. This allows to plug and play new modules which have superior capabilities and can delivery exceptional performance and efficiencies for the organization. An enterprise with monolithic architecture will never break higher grounds or become an industry leader. Leveraging #AI when relevant, can create a strategic advantage and even free-up resources to redeploy to other critical business workflows.
4. Encourage a culture of continuous improvement: Enterprises should foster a culture of continuous improvement within the organization, encouraging teams to regularly review and optimize systems and processes to reduce the risk of technical debt. This may require investing more time and resources upfront, but it can pay off in the long run by avoiding costly system wide disruptions. Your continuous improvement program will be a resounding success if you keep on iterating (get the joke!).

According to Gartner, “By consistently assessing technical debt levels, managing infrastructure life cycles based on business impact and strengthening governance of infrastructure fitness, I&O leaders will reduce technical debt in their infrastructures and position their organizations to reap the benefits of doing so.”

As we head into a slow growth year, there will be increased pressures on CIOs to manage their IT budget spending. It is these times when it is critical to differentiate between aspirational IT spending vs accruing technical debt. What is your organizational strategy?