OREANDA-NEWS. April 27, 2016. In our first post of this three part series on Technology Debt, we focused on explaining good vs bad technology debt and how it can impact a company’s bottom line. So now that we’ve explained what it is, it’s time to focus on how to find it, with the specific goal of better understanding the five top originators of bad technology debt within an enterprise. Being able to identify the top originators of bad technology debt allows the CFO to better partner with a CIO in making the biggest impact towards lowering company costs and setting the company up for success.

End-of-Life Systems

As we discussed in the first article, most corporations have some form of large legacy system that is at (or past) end-of-life.  The usual answer is to “invest” in a multi-year, multi-million dollar upgrade that will not only consume a good portion of your budget and IT resources but put many of your other strategic projects at a halt until the upgrade is in place.  Success is usually hard fought with many casualties along the way with the lackluster end result that the company is yet again 1-2 years away from this system being end-of-life with almost nothing new that positively impacts the bottom line. 

What started off as an “investment” ends up being an additional line of bad technology debt that the company will struggle to get out of from under in multiple ways, including; financial, speed to market, and market competitiveness.

Multiple Systems That Manage the Same Data

Many large enterprises have multiple systems that have or process almost the same data.  The usual culprit for this kind of situation is separate business lines or geographies that have struggled with the queues of centralized initiatives in the past and have gone down their own paths in order to achieve their goals. 

There are two forms of bad technology debt that come from this situation. The first is that the company incurs increased technology costs by having to support and code to multiple systems that have mostly the same data.  The second is all of the multiple sets of customer data at different levels of accuracy with inconsistent ways of tying the data together.  Bad data management costs companies big money.

Acquisition Aftermath

Most successful companies have grown through acquisition at some point in their history.  While everyone works diligently the first 12-24 months to do what is necessary from an IT standpoint in order to make the most of the new acquisition, there are almost always systems and processes that get left on the to-do list but never get addressed.  These overlooked systems and the resources that support them tend to add to a company’s bad technology debt over time.

Under-Invested Areas

I know what you’re thinking; How can an area add to my technology debt if I’m not investing enough in it? Make no mistake; while the costs of a specific line item in your finances may seem low, your company is definitely paying for it.  Unbeknownst to your balance sheet, many people, processes and other systems are going above and beyond to cover for the lack of funding and systems in these areas with huge business risks if these supplemental processes were to fall apart. They’re the operations where your managers stay awake at night hoping the only person on their team that knows the 20 step process for manually converting your month end numbers into a spreadsheet and/or database doesn’t win the lottery or call in sick.

Misalignment Between IT and the Business

Our last, but not least, originator of bad technology debt is when the goals of IT and the business are not aligned.  If your technology team’s goals and objectives are not directly tied to the success of the businesses they support, you are almost assured of increasing your company’s bad technology debt.  As the CFO, you can have a direct impact by making sure that your company’s internal “billing” system is not giving your IT group the wrong incentives or removing their accountability, as well as reward, for the business’s success.

Prioritizing your focus on these five areas in partnership with your CIO should help your company identify the levers that will move the needle most in reducing your bad technology debt.