As much as 71 percent of the impact from business transformations depends on technology, according to research from McKinsey. Ensuring your organisation is up-to-date with best practice on how to reduce technical debt can make a huge difference between success and stagnation. Technical debt not only impacts businesses’ ability to transform and innovate, it’s also costly and can be damaging to brand reputation when it isn’t managed properly.
In this article, we’ll explore how New Zealand businesses should be tackling this issue head-on.
Technical debt is the consequence of deferred work caused by factors including limited resource, budget or opting for the quickest solution, rather than the most effective solution. As businesses grow and evolve, their infrastructure inevitably faces challenges and limitations. Technical debt arises when decisions are made to cut corners in the short-term, with the expectation of paying the price in the future. This could mean neglecting security measures, pushing network and storage limits beyond what they can handle, or simply "sweating assets" beyond their useful life.
There are two types of technical debt – conscious and unconscious. As the name suggests, conscious technical debt occurs when a business makes an intentional decision to optimise for the present, rather than the future. Tools such as a technical debt register will help your business keep track of these decisions so they can be solved in the future. Does your business have a technical debt register and when was it last updated?
Unconscious debt on the other hand, is a surprise waiting to happen. For example, an IT approach implemented by a company turns out to be error-prone.
Technical debt is commonly a symptom of any kind of transformation within an organisation. The age-old approach to limited IT budgets and not enough time contributes to unmanageable technical debt. McKinsey research shows, some 30 percent of CIOs believe that more than 20 percent of their technical budget ostensibly dedicated to new products is diverted to resolving issues related to tech debt. And according to Gartner® research, “many CIOs remain under pressure to stabilise IT costs or even reduce them, even as enterprise-wide technology investments increase and require additional funding for foundational and new IT capabilities” 1.
With funds getting tighter, tech debt is at risk of growing. As a result, a new, modern approach is needed to IT budgets to prioritise technology investment, which will ultimately support better management of technical debt. We believe insights from Gartner, Inc. research support this – recent research reveals “there is a growing appetite for technology investment among management boards and an expectation for the CIO to play a strategic role in investment decision making”1.
The impact of technical debt isn't just financial. By compromising the integrity of crucial systems, companies open themselves up to potential breaches, downtime, and lost productivity. It can prevent further development or changes to infrastructure as they become too risky to undertake, ultimately impacting the organisations ability to respond to changing business needs.
Technical debt impacts business and digital transformation when it gets unmanageable. Research by OutSystems showed a majority (69%) of IT leaders say technical debt poses a fundamental limit on their ability to innovate. If you don’t keep up with technology, your business will be left behind. This ultimately impacts your competitive edge. Potential clients who are comparing you to your competitors may view it as a negative if you are seen to be using outdated technology. In an age where digital transformation is crucial to staying ahead, it's more important than ever to identify and manage technical debt before it undermines progress.
The flow on effects of unmanageable technical debt include employees and, eventually, customers. Although taking on technical debt might help in the short-term, if it’s not managed effectively it can impact employee and customer engagement and trust in the long-term, which can ultimately impact a business’ bottom line.
On the flipside, managing technical debt effectively and paying it down can lead to meaningful benefits for a business. McKinsey research has shown it can free up engineers to spend as much as half of their working time on value-generating products and services, less time on managing complexity, and improving uptime and resiliency.
By reducing tech debt, businesses can really get to a point where technology is an enabler for growth and productivity
- Craig Davis, Spark Enterprise Architect
With the ever-changing pace and complexity of innovation, technical debt can quickly add up. But with the right strategies, we’ve seen this successfully reduce within some of our largest Enterprise customers.
By taking a proactive approach to prioritising technical debt, New Zealand businesses can reduce it effectively and keep business momentum – and innovation – on track. Improve today for a better tomorrow.
The reality is you are always going to have technical debt. The challenge is in managing its level and there are two key levers, avoiding new tech debt and paying back existing tech debt. At its core technical debt is business debt so its about understanding the risk and taking steps to mitigate or accept it.
Define what you consider technical debt and then search it out in your environment. Building out a register will ensure you maintain visibility.
Create a holistic and objective impact assessment to identify which debt is generating unacceptable business impacts. Consider direct costs and also long-term effects on your business.
Making a conscious decision to avoid addressing technical debt is effectively the business accepting the risk. Quality analysis will ensure this risk is accurate, but it will also support the business case for investment where the risk is deemed not acceptable.
Your environment is not static, risks change and evolve. You can’t control what you don’t track. Establishing the governance to periodically review your technical debt and the actions required to address it will enable you to actively reduce it.
The speed of technology development will only accelerate, bringing pressure to keep pace. Technical debt can quickly accumulate and become a barrier for businesses plans to innovate. Fortunately, the future of technical debt reduction looks bright.
Companies are investing in preventative measures, such as specialised tools and training so IT teams are more conscious of technical debt within their planning. There is an increased understanding of the importance of paying down technical debt over time, rather than letting it accumulate and cause issues down the road. Pragmatically revisiting previous decisions (many that were rushed during covid) and implementing clear governance has enabled organisations to get to a place of comfort from where they are then able to focus on innovation.
While there is progress to be made to ensure IT costs and technology needs are better planned for to match the increased reliance on these services, it's clear that technical debt reduction will continue to be a priority for companies looking to stay ahead of the competition.
If you’re looking at how to take control of your organisation’s technical debt, our team is here to help you develop a plan to tackling it head on.
Craig Davis is an Enterprise Architect in Spark’s Enterprise Architecture Practice and has over 20 year’s experience providing technology leadership, vision and strategic advice for organisations.
Graham Atkinson is a Principal Consultant in Spark’s Cloud and Infrastructure practice. Steven Douglas is an Enterprise Architect in Spark’s Network & Security practice.
1Gartner, CIOs need an IT Financial Plan, Not Just an IT Budget , Galliopi Demetriou, Cesar Lozada , 23 August 2021, Refreshed 20 March 2023.
GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.