Clear technology debt to reduce risk and grow revenue

Clear technology debt to reduce risk and grow revenue

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Relying on legacy technologies can create business risk and stifle revenue growth. Information technology leaders must highlight the opportunities that will emerge from addressing technology debt.

In the fight against inflationary economic headwinds, enterprises need innovation and growth more than ever. However, technology debt often creates unnecessary costs and risk, holding businesses back from optimization and opportunities to grow revenue.

Technical debt is built when a legacy asset is used beyond its valuable life. This introduces the risk of business functions failing when the technology eventually fails. Continually reinvesting in technology and refreshing with newer innovation protects the organization from costly downtime.

The topic of technical debt is often marginalized against what are deemed more valuable concerns of highly competitive organizations. Many organizations struggle to illustrate the cost of a technology failure or breach. Yet if processes go down, data could be lost or orders missed, affecting the organization’s bottom line.

If every business today is a digital business, then the “digital” must be considered with the same level of diligence as other core CEO concerns. Reducing technical debt facilitates three positive outcomes: revenue growth, risk reduction and increased innovation. Instead of seeing technology debt as a burden, chief information officers and IT leaders should focus on the new opportunities that will emerge from addressing technology debt.

Why legacy technology inhibits growth and innovation

As the pace of technological change increases, doing nothing about depreciated assets and legacy contract renewals becomes more dangerous. Such passive decisions can directly or indirectly cost the organization more. These costs are often poorly recognized and attributed, but they are no less significant.

For example, competitors offering a faster, slicker and more effective customer experience will earn more than enterprises relying on lagging, aging technologies. Investors also see more opportunity for profitable growth in organizations making technology investments. When newer, smarter systems are handling business challenges such as supply chain and market disruptions, it also makes the delivery of products and services more resilient.

The latest solutions are also being actively improved, patched and updated to reduce cybersecurity risks, which can result in lower security costs and reduced reputational risk. It is often much harder to ensure that legacy solutions that are no longer being developed comply with the latest standards. Working with newer solutions and their providers reduces the risk of downtime through greater resilience.

Although sourcing and procuring a new solution will likely cost more initially than leaving an old solution to rot, there are many cost impacts of legacy technology that are poorly recognized. Legacy assets typically require additional labor cost to support, maintain, secure, adapt and integrate than more modern, composable solutions. This can also be an issue for organizations struggling to fill open positions in a challenging labor market, not to mention that competition increases when vying for a shrinking pool of talent with skills and experience in legacy solutions.

Finally, obsolete or outdated technology can suffocate transformation and innovation by inhibiting talent growth. In the 2022 Gartner IT Workforce Report, IT employees indicated that growth and development opportunities were highly important, but many expressed low satisfaction with such opportunities in their current position. In today’s talent shortage, organizations that provide growth opportunities through digital investments can attract talent compared to those that continue to use legacy processes.

Address capability gaps to increase revenue

Proactively reducing technical debt increases adaptability, which is essential for digital business. Working with legacy systems may not increase costs, a short-term reward that often creates an environment of passive resistance from stakeholders towards reducing technical debt. However, such approaches that value speed over long-term vision contribute to the accumulation of technical debt and inhibit revenue and growth potential.

Legacy systems are retained because of the perception that change is difficult or risky. CIOs and IT leaders can help stakeholders overcome these fears by using data-driven decision making to implement a disciplined spend analysis program. IT staff should aggregate all relevant financial data, such as the replacement cost of depreciated assets in IT asset management systems, the cost of IT service desk incidents related to legacy systems, and the cost of IT service and operations management of legacy systems.

Then, conduct analyses comparing the costs of legacy upgrade versus digital modernization, including:

  • A benefits analysis identifying the value gap between legacy and proposed solutions
  • A risk analysis comparing the security, availability and commercial risk of these solutions
  • A cash flow analysis that removes bias toward the creation of debt through capitalization
  • A timing analysis that compares the speed of benefit realization, accounting for both supply chain and value realization delays

Evaluate a total cost of ownership (TCO) model extrapolated to forecast the future rising costs of keeping the old systems in place. Mitigate stakeholder concerns by calculating the costs of the solution transition versus inconvenience costs. For example, the scheduled downtime needed to migrate to a new system may not impact customers if done during low- or no-use times.

Invest in cost-effective solutions to increase agility

Faster, better, stronger, leaner are common focus areas cited by executives. Yet, discussions around addressing outdated technology or systems that run the most critical business processes often stall due to unfounded beliefs that current technology is sufficient.

CIOs and CTOs can alleviate these concerns by investing in proven, composable solutions with relatively minimal upfront implementation and configuration costs. Task stakeholders with selecting cost-effective solutions that provide the highest returns. Technical debt cannot be addressed without action, but even small steps will advance the initiative.

Brett Sparks is a senior director analyst at Gartner Inc. covering the IT managed services market, including managed services and trends, provider selection, sourcing strategy, contracts and negotiation and cost optimization. He wrote this article for SiliconANGLE. Gartner analysts are discussing IT cost optimization at Gartner IT Symposium/Xpo taking place Oct. 17-20 in Orlando, Florida.

Photo: dokumol/Pixabay

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