When companies choose a cheaper option for an IT implementation now, knowingly accepting they’ll incur additional costs for rework later, it’s called “business and technology debt.”
Like monetary debt, technical debt accumulates “interest” by making it harder and more expensive to implement changes later. Unaddressed technical debt leads to IT paralysis and business-driven solutions outside IT-governed systems, known as “shadow IT.”
In this article, we use the term “technical upgrades” as an example of technology debt, discuss why debt is becoming a growing problem, and show how a cloud architecture will erase technical upgrade debt forever.
Technical upgrade debt
Over time, software evolves to accommodate business needs, taking advantage of emerging technologies and improving the user experience.
Many companies, under a “let’s customize” paradigm, own on-premises versions of software that they customize heavily. For upgrades, companies use in-house resources or external partners that charge the cost to an upgrade project. These programs, usually led by IT, aim to reduce system downtime without focusing on delivering new business value. IT-led technical upgrades upgrade the technology stack, as this saves time and cost and can be accomplished with minimal use of business resources.
Technical upgrades: pure cost
Upgrade projects rarely impact only one system. They typically affect an interdependent landscape of systems including, for example, enterprise resource planning, customer and supplier relationship management, analytics, manufacturing and materials management, data warehouses, and so on. This adds to the complexity and cost of an upgrade.
Without regular technology upgrades, however, technical debt grows even faster. Missing a sequence of upgrades could lead to a stalemate of upgradability and out-of-support software, which could force a company into a system re-implementation.
The pressing problem of technology and business debt
This is such a pressing problem today because new business models emerge at a much faster pace than ever, and technologies have changed more dramatically in the past 10 years than ever before.
The shift from products to services created digital business models that require use of intelligent technologies. Enterprises that accumulated business or technology debt find that their existing tools and systems can’t accommodate new business models.
Digital business models are driven by real-time technologies like cloud, mobile interactions, artificial intelligence, and machine-to-machine communication (IoT).
A cloud-centric architecture for reducing technology debt
Implementing a cloud-centric architecture from the bottom up and re-implementing new digital-enterprise best practices can wipe out all technical debt in one clean sweep. Here is how:
In the past, the whole IT stack – operating system, database, application server, core, and interdependent applications – had to be upgraded. Software-as-a-Service (SaaS) deployment models eliminate this effort. In the SaaS model, the software code is fully controlled by the SaaS provider. “Technical upgrades” are managed and delivered by the SaaS supplier in the background. Applications are loosely coupled via APIs.
Cloud applications are evergreen. Customers can take advantage of new features with every new release. Evergreen software is the panacea to technical debt. To reach it, there are several roadmaps you can follow.
The closest option to a “technical upgrade to the cloud” is a conversion to a cloud product. While this option will provide the lowest business-change impact, it misses out on the implementation of optimized business processes and brand-new digital enterprise solutions.
More effective is a “greenfield implementation.” This approach avoids code customization and allows a step change to new digital business processes, taking advantage of intelligent technologies – thereby erasing all legacy technology and business debt in one clean sweep. And the company emerges debt-free.
And please listen to the replay of our “Pathways to the Intelligent Enterprise” Webinar, featuring Phil Carter, chief analyst at IDC, and SAP’s Dan Kearnan and Ginger Gatling.