Avoiding technical debt in your organization

Most of us know what it’s like to have and manage financial debt. When it comes to technical debt however, we're not as familiar, nor do senior executives spend a lot of time talking about this in the board room (they should be!).

Technical debt reflects the implied cost of additional rework or investment needed to move forward as a result prior choices in software or technology solutions that are no-longer fit for purpose. One might think of it as the “technology baggage” of the organization. If not managed appropriately, this baggage will require additional investment to bring it to a point where it can generate a return vs costs on the balance sheet.

While technical debt can result from multiple causes; misunderstood project scope, lack of effective implementation process or poor technical leadership, it still needs to be addressed promptly to avoid accumulating additional “interest” and playing into the sunk cost fallacy.

Knowing this, how can you avoid the longer-term spiral of technology debt in your organization? 

Examine your technology spend through 3 lenses: Run, Transform, and Grow

Think of these terms as the three pillars of a portfolio view of your technology budgets. Careful consideration of allocation across these pillars will minimize the cost of running your existing technology footprint. It will also allow you to apply appropriate levels of investment in the critical areas of growth and transformation.

A target ratio for mature companies using the RUN/GROW/TRANSFORM model is 55/40/5.

Common mistakes include not reserving a portion of investment for experimentation with cloud services, machine learning or RPA (TRANSFORM), not understanding the business growth that is enabled and which depends on the GROW spending and excessive spending on the maintenance category (RUN).

Next, benchmark your technology spending. 

A strong, actionable benchmarking process involves defining your business and mapping the industry and competitive ecosystem in which you compete and operate. Each technology area of investment should be aligned with business and user needs.

This vetted approach to technology benchmarking will help you determine which new investment opportunities will yield the best outcomes. To examine the five steps you should use to develop your technology benchmarking process, read the full article about technology budgeting on the dPrism website. 

Finally, retire older technology systems in a timely manner

It should be no surprise to both business and technology executives that older systems are costly to run. However, many remain in place because they deliver a few essential legacy functions. Executives must overcome the fear of change. 

An active system retirement plan, updated every year, needs to be part of every technology budget.

This technology retirement plan needs to be challenged (why not earlier/sooner?) and actively managed. We have seen retirement plans take lower priority over several years. 

Unfortunately, the impact accumulates to create severe budget problems down the road. Imagine if the budget allocated to running these older systems were re-allocated to your GROW or TRANSFORM pillars in the technology investment portfolio – what a difference that would make!

I talk with CTOs and executives every day who have questions about technical debt and technology budgets – this is simply scratching the surface of the conversation. What questions or challenges are plaguing your organization? Let us know if we can help. 

This article is based on a blog written by my colleague Adriaan Bouten, adapted from dPrism.com. Read more at https://www.dprism.com/insights/.