Technical Debt Might Be Hindering Your Digital Transformation

Organizations face intense pressure to keep themselves at the leading edge of IT capabilities. Sometimes, however, the need for fast technology solutions forces them to make short-term programming and systems-architecture decisions. In doing so, they accrue and compound an invisible technical debt — the price they will one day need to pay to make it right.

As IT software and infrastructure age, and as more features are added to legacy systems, technical debt grows and puts additional fixed operating costs on the company, diverting precious investment in innovation and new capabilities. Over time, the challenge of connecting and updating these systems becomes overwhelming for IT teams, and undertaking strategic digital transformations as an organization becomes even more difficult.

Companies seeking to expand their businesses across the globe may find themselves hindered by an untenable IT environment — a patchwork of hundreds of different systems that slow collaboration and make it difficult to scale innovation.

From Technical Conundrum to C-Suite Challenge

How serious is the problem? The entire C-suite, including the CEO, now recognizes technical debt as not just a technical problem but an obstacle to progress on many fronts. According to an Accenture survey of more than 1,000 C-level executives, evenly split between IT and non-IT leaders, a significant majority say technical debt severely limits their IT function’s ability to innovate (70%), greatly limits their ability to migrate to new technologies (72%), and makes their IT function much less responsive to changes in the market (69%).

To make matters worse, there are no easy solutions to this problem, and indecision abounds. Some 67% of executives we surveyed said they would like to replace all of their core legacy systems. But 70% would like to keep their existing core systems as long as possible — and 50% wish they could have the best of both worlds. In other words, what leaders really want most is to enjoy all the benefits of new information technologies, such as being able to adapt quickly to new situations, while keeping their legacy systems humming.

Fortunately, there is a way for established companies to have the best of both worlds — and create a scalable, flexible, and resilient enterprise IT architecture. This solution is called “digital decoupling.”

To Get Out of Debt, Decouple

Think about your older systems. You still need them, after all, but you don’t want them interfering with critical new digital systems. The solution is to decouple the critical parts of the old systems and make them work harder for you by building new digital systems on top of them.

For CEOs and CIOs alike, here are some of the essential things you will need to do and invest in to get out of debt and evolve to your future IT:

1. Decouple data from legacy systems. Leaders should start by moving data from legacy systems to “data lakes.” These are centralized repositories that allow you to store all of your data just as it is, whether structured or unstructured. Data lakes allow you to run many types of analytics, as varied as dashboards, visualizations, and big data processing, in order to guide better decision-making.

In its widely reported mission of becoming the Google of Wall Street, Goldman Sachs used this principle to create a new banking platform. That platform, Marquee, pulls data about transactions, markets, research, and emails instantly into a data lake and applies machine-learning algorithms to derive insights and solutions.

2. Decouple applications from the legacy infrastructure. Running applications on your legacy infrastructure can be inefficient because bundled applications incur high computing costs. (It’s like having to turn on all the lights in your house when you really only need one.) Decoupling applications from your legacy infrastructure gives you the flexibility to scale offerings and accommodate different application workloads.

A leading insurance company took this approach to gain better visibility into its operations and reduce application management costs. It can now roll out new products in half the time while realizing reductions in run cost and incident volume by 60% each. Most important, the company has realized a 350% increase in incremental auto policy sales.

3. Decouple the business process systems from one another. The days of building software as one large, unified system — where everything runs on one machine — are over. This integrated structure made sense in an era when computation happened all in one place, and a company bundled systems (sales, R&D, supply chain, for example) together for operational and strategic purposes. As technology evolves, such bundling makes less and less business sense, and it actually prevents each system from providing the most value. Why keep all business process systems tied together in a basement on a few dozen servers?

4. Decouple IT talent and budgets from traditional silos. Decoupling is a task and a mindset that both IT and non-IT executives must embrace. IT is often too siloed to harness its full potential. By building cross-functional teams that include both business and technology leaders, the company can deliver better business performance. For instance, a team that includes both customer-facing experts and data scientists can improve e-commerce sales by making more sophisticated use of customer data.

A second area where change is needed is budgeting. Instead of focusing on individual projects, budgets should go toward continuous maintenance, upgrades, and improvements of IT systems — but with the caveat that business value be the driver of spending. This not only makes spending more predictable, it also prevents new technical debt from accumulating. Continuous investment is the name of the game because it allows you to clean up the IT systems required for you to innovate.

Getting Started on the Path to Digital Agility

Whether these are jobs for the CIO, CEO, or both, one thing is clear: Companies born before the internet era have an enormous IT challenge — they must reckon with technical debt in their legacy systems and attain agility to compete with their digital native competitors. The scalability, flexibility, and modularity of Amazon’s IT systems have been key reasons the company has vanquished brick-and-mortar retailers. The same could be said for Netflix, Uber, and Airbnb: Their nimble IT greatly helped them disrupt the entertainment, transportation, and hospitality industries, respectively. Not having technical-debt-laden legacy systems was a plus, too.

For established companies, the task of improving their IT at the warp speed of their competitors is made easier through digital decoupling. They should use it to obtain the agility of the “cloud natives” and build on the enormous wealth of data, accumulated through systems built for another era, to turn a potential disadvantage into a competitive edge. This will require the full buy-in and support of the C-suite, led by the CEO (and likely board approval as well).

Today, 91% of top executives say they are extremely or very knowledgeable about technical debt and are involved with or know the plans for managing it. These numbers are almost certainly this high because the real cost of technical debt, both financial and technical, is the loss of business opportunity that comes with it — in particular, the ability to innovate and grow. To successfully deal with technical debt, CEOs must opt for a permanent solution. It’s time to stop patching and start decoupling.

An adapted version of this article appears in the Fall 2018 print edition.