With growth being top of mind for business leaders, technical debt is emerging as a key concern. If wrongly managed or left unaddressed, it can grow and fester like a wound, leading to higher costs and delays, reduced agility, diversion of resources and impede development.
iTNews Asia speaks to Mark Weaser, Vice President, APAC, OutSystems and Sandeep Bhargava, Managing Director of Asia Pacific Japan (APJ), Rackspace Technology to find out more about technical debt, how it can slow innovation, and how organisations can overcome it.
iTNews Asia: What is technical debt and why is technical debt a concern? How has COVID-19 contributed to it?
Weaser: Technical debt is a technical design or development choice made for short-term benefit with long-term consequences. You can think of it like credit card debt - similarly, technical debt builds up and compounds silently, through thousands of seemingly small decisions.
Across industries, this results from the development of solutions built for speed under the pressure of a modern, fast-paced business environment, rather than building it right for the future.
The COVID-19 pandemic has definitely fuelled this need for speed on both ends of the business: we’ve seen organisations moving operations entirely online in days, and the battleground to meet ever-changing demands in a now digital arena. Organisations have had to respond fast amidst the pandemic to stay competitive - but speed is no longer enough.
To put it simply, technical debt undermines an organisation’s ability to innovate and grow, which can be critical in today’s increasingly virtual economy with a premium placed on both speed and innovation.
As businesses undergo rapid digital transformation over the past year, we are beginning to see cracks in outdated IT technology and limitations in the capabilities of existing developmental tools and platforms. This leaves businesses unable to cope with the unprecedented and constantly evolving demands of customers - a problem that will only persist and grow if technical debt is left unaddressed.
Bhargava: Technical debt, otherwise known as tech debt or code debt, describes the results received when teams prioritise speed to delivery over code quality. Technical debt is often used as a catch all term that covers everything from legacy code to bugs to missing documentation.
According to Gartner analysts, technical debt will shadow CIOs through 2023, causing financial stress, hobbling their ability to recover, and force cloud migrations.
The COVID-19 pandemic caused companies to re-prioritise, cut back and put projects on hold.
Almost overnight, companies had to find a way to ensure that employees could work remotely, exacerbating technical debt in many situations.
Many organisations had to figure out the quickest way to enable technology for a workforce that was suddenly working remotely. Some organisations had to find ways to allow consumer end-point devices to connect to internal corporate systems securely and reliably.
When businesses adopt cloud for the sake of it, they become saddled with technical debt and ill-fitting solutions that will persist long after the COVID-19 crisis ends. Instead of forcing everything onto a single platform that cannot serve all workloads equally, businesses can balance cloud solutions, which can then enable them to accommodate individual workloads without many hiccups.
Technical debt is a technical design or development choice made for short-term benefit with long-term consequences. You can think of it like credit card debt - similarly, technical debt builds up and compounds silently, through thousands of seemingly small decisions.
- Mark Weaser, Vice President, APAC, OutSystems
iTNews Asia: How will this technical debt affect an organisation’s business performance and what is its long term impact?
Weaser: Technical debt is both a financial and strategic burden to the business. For one, there is a massive opportunity cost involved when precious financial resources and talented IT staff are kept busy maintaining and patching outdated frameworks when they could have been focusing on driving innovation and growth for the business.
For example, our report on The Growing Threat of Technical Debt found that on average, businesses devote a 28% of their IT budgets to addressing technical debt. To put that figure into perspective, 33% - just 5% higher - is spent on innovating and building new capabilities.
Having to pay off all this debt leaves organisations with fewer resources to scale and grow the critical business functions that truly matter. The healthcare and social assistance sector, for instance, dedicates 35% of its IT budget on average to manage technical debt - this could have been used to develop new software and infrastructure to capitalise on the growing telehealth industry.
Most importantly, technical debt limits the organisation’s ability to innovate, according to nearly 70% of IT leaders surveyed. In fact, just over 60% of these leaders believe that technical debt is a significant drag on their business performance, eroding their ability to thrive and compete through innovation in the digital landscape.
Bhargava: Neither legacy systems nor technical debt are inherently negative. However, they will impact businesses in several key ways in the long-term:
- Lagging Behind Competition
Operational efficiency and new ways of doing business are under continual evolution. With technical debt, it is difficult to create exceptional customer experiences or innovate, or to optimise the way a company operates, go-to-market, and compete against its competition.
- Increase Fixed Costs
The cost of maintaining legacy systems is constantly increasing with platform licensing fees, maintenance costs, and the resource availability of aging skillsets. This amounts to an increase in cost of ownership.
Therefore, organisations will have to reach a state of application modernisation that will allow them to reduce costs while ensuring that they implement a long-term solution.
- Diversion of Key Resources
The most valuable asset of a company is its employees. As systems age, they require an increasing amount of time and input. By diverting resources towards “keeping the lights on,” a company loses out on its ability to innovate and evolve.
- Inability To Integrate New Technology
Firms will likely continue investing in systems that inevitably rely on legacy data or capabilities. It may be expensive to integrate new and legacy systems, adding to the layers of architectural complexity.
iTNews Asia: Would larger organisations be more affected by technical debt than smaller organisations? Why?
Weaser: We do see that larger enterprises dedicate a bigger share of IT budgets (41%) to address technical debt, compared to small and medium-sized businesses (SMBs) who report using 27% of their budget.
Enterprises do feel more confident of addressing the technical debt problem, with 42% of enterprises believing that they are capable of managing it, and 35% reporting that they are currently managing it effectively. The numbers run significantly lower for SMBs, with only 30% and 15% respectively stating the same.
Larger enterprises have more budgets, resources and manpower to manage technical debt. Hence, they will be less affected as compared to SMBs.
That being said, both enterprises and SMBs report largely similar levels of confidence in managing technical debt effectively in the future, standing at 37% for enterprises and 35% for SMBs.
Bhargava: Yes, technical debt is largely dependent on the length of the time an organisation has been in operation. The longer a business exists, the more technical debt (i.e. legacy systems, applications and processes) it will accumulate.
There is a general correlation between organisations that possess greater amounts of technology (systems, applications, processes) with technical debt. Therefore, larger organisations are more affected by technical debt than smaller ones.
A recent McKinsey survey reported that CIOs estimate tech debt amounting to 20 to 40% of the value of their entire technology estate, before depreciation. For larger organisations, this could translate to hundreds of millions of dollars of unpaid debt.
However, smaller organisations that have been in operation for longer amounts of time can also be significantly affected by technical debt. Because they are smaller in size, the volume of technical debt they have will likely be more consumable and manageable.
iTNews Asia: What can organisations do to overcome and avoid technical debt?
Weaser: Thankfully, it is entirely possible to pay off technical debt, starting with a developmental process that is able to meet both short-term deadlines and long-term strategic goals.
There is no need for organisations to make a choice between building it fast and building it right for the future - all they need is to select the right digital infrastructure that will allow them to align existing business priorities with the need for future-proofing capabilities.
Tools such as modern application development platforms would be instrumental in allowing organisations to pay off technical debt whilst continuing to drive innovation and growth.
Bhargava: Organisations can start by tracing the ownership of tech debt for an app or system to the profit and loss (P&L) that it serves. Tackling tech debt via infrequent IT mega projects poses high execution risk and often hinders the business’ ability to compete while a project is underway. Instead, companies should earmark a portion of their IT budget to pay down tech debt consistently, predictably, and over a strategic period.
Organisations should also dedicate resources to tackling tech debt.
Once organisations have reached a unified view of their tech-debt position and what their strategic goals are, they need to allocate funding, mobilise people, and send a clear message from the top that addressing debt accumulation is a priority for the business.
- Sandeep Bhargava, Managing Director of Asia Pacific Japan (APJ), Rackspace Technology
If an organisation adopts DevOps through partnership with a third party, it must engage a vendor with the right capabilities that complements and enhances what it already possesses. IT teams want to plug in skills that match operational models to create cross-functional teams – they don’t want to create dependencies on external parties.
When an organisation has a solid development and product team but requires assistance with infrastructure, their partner will have to swap in as an extension of that team.
Continuous application modernisation is critical to eliminating technical debt and boosting an organisation's ability to create new customer experiences, add value and services, and speed time to market.
Traditionally, application modernisation has been IT-centric, a function of DevOps or traditional IT architecture where the goal is to refactor, re-purpose or consolidate legacy software. By creating the right application environment, organisations will be able to adapt for the future adequately.