Richard Blanford, managing director, Fordway
The collapse of Carillion earlier this year reminded all of us of the dangers of running up debt in a business.
Reports say that Carillion’s debts grew by more than 50 percent in its last four months of trading, and it also had a huge pension deficit.
However, another type of debt can be just as insidious – technical debt, where IT systems and services that were once cutting edge are simply not replaced as long as they keep on working. This creates a number of problems, ranging from reduced efficiency as a result of systems running slowly to shadow IT – where staff use products and services not sanctioned by the organisation– and an increased risk of security breaches from old software which are no longer patched or supported by its vendors.
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One of the most high profile examples of technical debt is the NHS, where IT systems that had not been upgraded for years were caught up in last year’s ransomware attacks. New Health Secretary Matt Hancock has recently announced funding to tackle outdated technology, pointing out that generic technology available outside the NHS is “a million times better” than systems currently in use.
The NHS is not alone. We see examples of technical debt regularly at customers who have minimised IT investment over the past few years or are tied into outsourcing contracts supporting outdated IT systems that no longer meet their needs. It is becoming a growing problem, as most businesses are now dependent on technology for critical business functions. But, like financial debt, it is something that people don’t want to talk about, as they don’t want to admit that their organisation might be falling behind their competitors.
For most organisations, technical debt arises due to the accumulation ofa series of business decisions. Each was perfectly valid at the time but was made without considering its effect on other systems and an organisation’s overall IT architecture. The result is an unnecessarily complex IT infrastructure which limits performance, scalability and particularly agility – a major problem in today’s fast-changing digital world. It also takes a lot of internal resource and cost to maintain and manage.
As part of this situation, organisations typically become dependent on bespoke or heavily customised applications that do the job but are complex and difficult to change and become ‘part of the way we do things round here’. This is particularly true in the finance sector, where high budgets once made customised and bespoke applications the norm. These continue to run unchallenged until they fail spectacularly, or the organisation tries to migrate them to a new operating system, by which time the team who implemented them are long gone and a closer look shows that they are written in outdated code on an obsolete platform.
One way to identify the problem at an earlier stage is to spot situations where an undocumented script, work-around or quick fix could become a liability. This means ensuring well-enforced change control and management processes for all the organisation’s applications.
Problems can become apparent very quickly when an organisation tries to move its applications to public cloud. Many application providers are developing their own Software as a Service (SaaS) strategy, but these frequently only support the latest version of their software, so an organisation using an older version which it has customised extensively will need to use private or managed cloud instead.
Although investment will be required to get out of technical debt, continuing to operate an overly complex, out of date infrastructure is expensive. We have benchmarked this across a range of organisations and found that by optimising their IT infrastructure, replacing or upgrading outdated legacy systems and managing licensing and capacity, most organisations can save up to 25 percent of their annual IT budget. It’s a significant saving and something well worth exploring.
As with financial debt, the first step in tackling technical debt is to understand the problem. Your IT team and systems are there to serve the needs of the business – they are not an end in itself. Review and work out what services your business actually needs,not that you or your colleagues thinkit wants, and then decide what systems you need to support those services and what you can consolidate, simplify or turn off. Once that’s done, understand which services can usefully be provided via cloud, which are better off outsourced to a third party, and which to retain in-house.
Here’s an example of how to tackle the problem. As a replacement for a bespoke system running on an outdated operating system, which was costing them a considerable sum in both third party maintenance and in-house staff to support it, one of our customers took the approach of asking us to implement a replacement based on commercial, off the shelf software as much as possible. Whilst they had to make minor changes to existing business processes to fit the way the new application worked, they gained significantly increased functionality, plus easier, simpler and cheaper integration with complimentary applications. They have also minimised their potential for complications and made it much easier to keep up to date,as well as ensuring it can easily be supported by third parties. Minimising the need for bespoke IT is a very effective way to reduce the risk of technical debt.
Another customer, a joint venture, decided that cloud was the best route to take. Each of the companies in the joint venture had different IT systems, making collaboration difficult. Rather than create something bespoke, which would have to be maintained and updated, they decided to have a dedicated Office 365 domain for the project in the Microsoft cloud. They simply have to pay for what they use, while users always have access to the latest version of all the Office applications and receive updates as soon as they’re released.
Every organisation will have different business needs and require different IT solutions. Some legacy systems may be unavoidable, but the more you can standardise and simplify, the lower your risk of falling into technical debt.