Ask tech colleagues to define technical debt, and you’ll get enough answers for a large language model. Plot those responses on a timeline, and you have a short, sharp history of how tech debt has evolved — and where it might be going next.
Step back a few years, and it was mostly developers who were worried about tech debt: Are we using the right coding structure? Are we patching or actually developing for the future? Then it moved up the chain to become a problem for the chief information officer: Are we incurring tech debt because we’re not upgrading our software? Are we building a resilient digital core in our business?
The chief financial officer was often the next to get involved: What are the financial implications if we’re not investing smartly in our tech stack now? More recently, tech debt has been elevated to a cross-board discussion that is often couched in terms of risk: What’s our tech debt’s potential impact on the organization? Are we losing ground to rivals or opening ourselves up to vulnerabilities?
The backdrop to this is an environment in which, according to 2023 Accenture Research, 95% of CxOs say they plan to increase their technology spending in the year ahead. So that begs the question: Is your business’s innovation being held back by a wall of tech debt?
A Few Hard Tech Debt Truths
In this area, the CIO and chief technology officer will most likely be concerned about “hard” tech debt — critical but outdated solutions whose care and feeding is becoming increasingly complex and costly to manage. Infrastructure may be approaching the end of its useful life. Application sprawl may have entrenched antiquated solutions in critical business functions. Internally developed solutions may have fallen behind off-the-shelf applications that have modern architectures, more capabilities, and smaller support footprints. Of concern, particularly in the broader C-suite, is the fact that older solutions tend to increase the company’s exposure to cybersecurity risks that could threaten business continuity and customer satisfaction.
The end result: Companies are spending good money where they shouldn’t out of fear of the destabilizing effects of change and traditionally high transformation failure rates. Even worse is that this diverts scarce resources toward capabilities the business already has — not new solutions that drive innovation, revenue, security and productivity.
Hard tech debt limits how fast companies can bring new products to market, decreases their resiliency, and reduces their agility and capacity for innovation. And if a company’s architecture is outmoded, the business may struggle to hire the engineering talent it needs to compete.
Soft Concerns With Sharp Edges
The chief executive officer is also focused on “soft” technical debt — the degree to which a lack of past investment in technology has allowed the company to fall behind the market in terms of product innovation or market share. This is the origin story for the classic disruption model, where startup companies leapfrog established market incumbents with newer, more nimble solutions.
Soft tech debt is difficult to measure and harder to manage, but not impossible. Accumulated soft tech debt is less about quantifying past investments, and more about positioning for better investment going forward.
In 2023, IT executives told us that 57% of their IT resources are spent on maintaining existing systems and processes, and 43% on business reinvention and innovation. Growth companies need to invest more in innovation while re-platforming existing solutions to modern architectures. The benefits are clear: tech-forward companies that fully integrate technology into their strategy development are 2.3X more likely to outperform peers in terms of revenue growth and return on invested capital.
When it comes to tech spend, it’s important to ask yourself: Are we investing enough in growth and transformation? Are we limiting how fast we can bring new products to market? Are we decreasing our resiliency and reducing our agility and capacity for innovation? And ultimately, what’s the impact on our customer experience?
It’s Time to Pull Down the Wall
The C-suite does not have the luxury of tackling these as individual issues. In an era of compressed transformation, they need a rapid, transformative response to tech debt that puts business value at its core. To tear down that wall, you need a four-part plan.
The first step is to get a board-level awareness of the problem. The working language of the board is finance. So categorize your spend against hard tech debt solutions and what you need to invest to dig out the soft debt silt that has built up from years of under-investment.
For the CFO, this could mean identifying how a company’s tech debt is dragging down its bottom line. For the chief strategy officer, it may mean illustrating how tech debt is handing competitors an edge.
In tech-forward companies, it helps that the tech fluency of boards has increased dramatically in recent years. Some 75% of tech-forward companies report having both a tech-fluent CEO and tech-fluent C-suite executives.
Standards exist that can help companies quantify tech debt. Disciplines such as technology business management, FinOps, lean portfolio management, or a more comprehensive value realization office are powerful tools for identifying, tracking, and measuring your tech debt.
With this information, companies can develop a clear plan to rebalance their investment portfolio across run, grow, and transformation spending. This plan must also articulate the right governance structure to curb your tech debt now and keep it in check in the future.
One of the clearest indicators of unwieldy tech debt is when an organization is using its limited funds to prop up legacy solutions that are not advancing the company’s goals.
CIOs need to stop the bleeding and be vigilant about what technology solutions need to be retired. They also need to recognize that there is both good and bad debt and separate their tech debt from their forward-facing investments.
Tackling tech debt is fundamentally a transformation exercise, whether that’s a full-scope tech transformation or a more targeted program in a priority part of your business. For either option, finance needs to be embedded into the fabric of the tech transformation operating model.
A tech value approach can be particularly effective. By combining disciplines such as technology business anagement, FinOps and more, companies can create a more collaborative and effective framework for measuring and delivering better value from their technology investments.
The key target here is to “self-fund” much of the cost of the tech debt transformation by identifying early-stage cost reductions that can create a “fly wheel” effect, whereby savings can fund the investments to drive even larger subsequent transformations.
By making the right decisions now, and with the right governance structure in place, tech leaders can stop recurring problems and avoid spending new money on old debt.
As their tech debt recedes, organizations can now focus on enhancing their operational efficiency. Lean portfolio management, cloud computing, microservices, and DevOps all have a role to play.
Automation and Agile practices will help minimize tech debt during software development. And as generative AI fundamentally rewrites the rules of how we code, it should also prove effective at curbing tech debt at its source.
To run this effectively, companies should establish a tech value function. This will bring together:
- The technology teams who are architecting and delivering the modernization of the products and platforms;
- The business areas who are prioritizing and funding the capabilities being transformed;
- The finance groups who are measuring the benefits and outcomes of removing the tech debt.
As organizations make investments, particularly through the fly wheel of self-funding, it’s essential to elevate your value realization reporting so that you are clearly measuring the financial and wider business impact of these investments.
Make technology lifecycle management a priority for your technology team. Run regular code reviews, implement continuous integration and deployment processes, and establish dedicated teams for debt reduction. Couple this with ongoing sustainable investment.
Throughout, ensure you are clearly communicating to the entire board the real business value being delivered by your technology spend. This will bolster your executive team’s focus as you build a culture of continuous improvement.
Technology should be an inspiration for businesses to best tackle the challenges they face — not a wall that is holding back their growth and ambition. By breaking down their tech debt, companies can clear a path to realize the full scope of their ambitions.
Tech debt will be among the topics explored by Accenture’s Tech Value specialists at this year’s TBM Conference, which takes place in Austin, Texas on October 24 to 26. tbmconference.org