The issue of technical debt – outdated technologies at the core of an organization’s IT infrastructure – is becoming increasingly urgent as new digital technologies and emerging players unburdened by legacy systems reshape the competitive landscape. The problem is especially acute in the financial services industry, where mainframe technology supports key customer interfaces, and replacing it comes at a significant cost and disruption. Nevertheless, solutions exist, and organizations that address the need for modernization early rather than late are likely to win over those that procrastinate.
Protiviti covered the topic of technical debt and its implications in the September issue of our emerging risks newsletter, PreView, and most recently in Board Perspectives. In the podcast below, Ed Page, a Managing Director with Protiviti’s Technology Strategy practice, provides further insight on this growing risk. (Full transcript of the conversation below.)
In-Depth Interview – Technical Debt
[Transcript]
Kevin Donahue: Hello. This is Kevin Donahue, Senior Director with Protiviti’s Marketing Group, welcoming you to a new installment of Powerful Insights. I’m pleased to be joined today by Ed Page. Ed is the Managing Director and a leader with our technology consulting practice and he and I are going to be having a conversation today about the concept of technical debt in organizations. Ed, it’s great to talk with you today.
Ed Page: Thanks, Kevin. It’s good to be here.
Kevin Donahue: To start us off, Ed, I’ve heard of technical debt as term referring too the accumulation of outdated technologies over time in a company’s IT environment. This results in diminished agility and reduced ability to respond to demands by customers and deploy innovations. Is this correct?
Ed Page: So, technical debt is a concept that’s actually been around for a very long time. It’s really the idea that trade-off decisions get made over the course of time. Effectively, shortcuts get taken or things get deferred, and over time those decisions result in this concept of technical debt which is basically things that you do in the short term that may not be the best or the right long-term decision. Then those accumulate over time, and much like the concept of financial debt, you have to pay that off at some point, whether by doing an upgrade or applying patches or by replacing components but it’s basically the short-term decisions that result in the accumulation of debt that needs to be repaid from a technical perspective.
Kevin Donahue: Ed, is this a matter of companies falling behind the technology curve in terms of efficiencies and capabilities they are losing through their legacy systems?
Ed Page: Yes, exactly. Because this debt accumulates, it prevents organizations from being nimble and being able to take advantage of some of the newer technologies and actually can result in a number of things, whether it’s cyber vulnerabilities or issues with stability but it also really hampers organizations who are trying to take advantage of the newer technology which is coming out at an ever-increasing pace these days. It’s probably worth noting that’s why it’s so important now. As organizations become more dependent on technology and as organizations become more digital in nature, the ability to be nimble and to take advantage of the newer technologies is more critical today than ever. So if there is a lot of technical debt that prevents that, this problem just becomes much more acute.
Kevin Donahue: Ed, with regard to today, with everything we are hearing about digital transformation, new technologies, AI and so forth, is technical debt ramping up faster today than in the past?
Ed Page: Yes, it certainly is. In some cases, it’s accumulated over a long period of time. In some organizations, it’s something that has accumulated. In other organizations, it’s accumulating quickly for all the reason that you just described. As I said earlier, the fact that everything is becoming digital these days makes this ever more important and it’s certainly very acute in organizations that have a lot of legacy technology. So in a number of industries, financial services industry is a good example, there’s a lot of technology that has been a part of the environment for decades – and that results in a lot of technical debt that’s hard to get rid of.
Changing the core technology of a large enterprise organization is a daunting task but it’s something that organizations need to think about given the importance of technology today. It’s probably also worth noting this is a topic that we talk about a lot. A lot of organizations are trying to put a digital façade on their enterprise and that works to some extent but it’s hard to be fully digital if you can’t be digital all the way to the core. This concept of technical debt is oftentimes most acute in the bowels of the organization so that’s another part of this concept that is important to note.
Kevin Donahue: Are there particular areas of the organization where this issue is most acute?
Ed Page: Yes. As I said earlier, I think probably the most acute areas are in the back office functions, the parts of the technology that have been around the longest. I often talk to our clients about the archeology of their technology, so it’s very often that there is a surface layer of technology that is quite new and quite robust and quite shiny, if you will. As you dig down through the layers of technology that have accumulated over time, it’s very often the case that some of the underlying core accounting or core processing technology that is in place is quite old. Legacy systems in some organizations were implemented three or four decades ago, which means they are on mainframe technology, which is still very reliable and can perform a lot of functions quite effectively but it’s technology that is not as nimble and agile as organizations need to be in this new digital age.
Kevin Donahue: Ed, as my final question here, given the importance of technical debt and the issues around it, what can organizations do to manage it?
Ed Page: Yes, great question, Kevin. I think about it in three parts. First of all, you need to have visibility into what your technology debt is. In every organization, it’s a little different so really understanding what the debt is, where it exists and what form it is taking is probably the first step in this journey so just really having good visibility into that situation is first and foremost. Then second of all, is really having an action plan to deal with it and it does take organizational fortitude to deal with it because oftentimes, technical debt is hard to repay, but an action plan that deals with it over time is important.
Then finally, I would say that there needs to be a way to manage it going forward. So whether it’s through a solid target architecture or architectural principles that get applied, I would say that there are new architectural patterns in terms of making things more in smaller pieces. So making smaller components out of your technology but really working to future-proof your architecture on a go-forward basis would be the third thing. If you can do all those things, if you have good visibility, an action plan to deal with the debt that exists and then governance and a future-proofing strategy, I think that’s a good three-step process to dealing with this.
Kevin Donahue: Ed, thanks very much for joining me today to discuss this concept of technical debt, one that is certainly of critical importance to organizations. Again, I invite our audience to learn more by reading our latest PreView newsletter available at protiviti.com/emerging-risks.
[End transcript]
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