Application rationalization is largely about the elimination of technical debt. Let's explore what we mean when we talk about tech debt, how much is too much, and what you can do about it?
Technical debt is something we talk about a great deal, but it's also a nebulous concept. It's often less tangible than a simple financial figure, and it isn't always a deficit that must be eradicated at any expense.
A degree of tech debt is to be expected in any organization and employee frustration is as accurate a metric as lost revenue. This can make the concept confusing and hard to pin down.
Let's look closely at what we mean when we talk about tech debt, and consider when and how you need to act on it.
What Is Tech Debt?
Technical debt is a way of expressing the impact of a lack of investment in enterprise technology in financial terms, so you can compare it to the cost of investment one-to-one.
Issues resulting from a lack of investment could include:
- instability or performance issues caused by outdated systems
- security threats from unrecognized vulnerabilities
- the cost of upgrading servers to increase capacity
- the effort involved in a digital transformation or cloud migration that's been put off
- any other deficit caused by having anything but the optimum IT landscape
These items are often hard to define in terms of financial cost. Tech debt, however, allows us to consider the impacts in practical terms in order to make realistic decisions.
The Ghost Of Technology Past
Often, what we mean when we talk about tech debt, is that imperfect decisions have been made regarding IT investment in the past that have created consequences in the present. Scrimping on IT budgets before, costs us money now.
We all know the benefits of cloud migration, equally in terms of reduced long-term cost, increased speed and efficiency, and in integration with modern tech solutions. If you decided that you couldn't afford a cloud migration three years ago, you could find your enterprise lagging behind your competitors today.
Think of it as taking out a loan against the future. Not upgrading your systems today leaves you with money to spend, but eventually, you need to pay that money back with interest - that's your tech debt.
Conversely, you could consider something akin to tech 'credit'. If you do undergo that digital transformation this year, then you won't need to worry about it next year and you can take all the extra revenue and reduced costs from the investment as profit.
The Impacts Of Tech Debt
Of course, technical debt isn't specifically about money. It's a way of putting a financial figure on a range of undefinable impacts that will ultimately cost you, even if it's hard to quantify.
Of course, you need to consider the direct financial impacts, as well. These include:
- the cost of upgrading systems when this can no longer be avoided
- not taking advantages of reduced costs from less expensive cloud systems
- regulatory fines due to poor cyber security
- loss of revenue during system outages
- increased costs of maintaining legacy systems
Yet, there are various aspects of tech debt that it's harder to pin down in financial terms. Just as a start, tech debt also includes:
Performance
If a task takes your current system five minutes when it could be done in one with a new system, how many person-hours are you wasting each year? Improved software and hardware performance improves employee performance and company performance.
Customer Trust
A Forbes survey found that 91% of customers who had a bad experience won't purchase from that supplier again. Meanwhile, Storyblok found that 60% of consumers abandon purchases due to poor user experience. If your technology lets you down, that's a problem; but if it lets your customers down, there's a definitive impact on revenue.
Talent Churn
Customers are the priority, but there is also an issue with your tech failing your employees. In a 2019 keynote, long before the pandemic, ServiceNow CEO, John Donahoe, declared that employees now expect the same experience from their workplace tech as they get from their personal iPhone. Frustration with poor workplace tools will increase the portion of your staff seeking alternative employment.
Information Silos
There's an expression in IT: "job security through obscurity". This refers to employees in your business who have essential information about crucial systems in your application portfolio and tech stack that no-one else has, as no-one else uses them anymore. If that person ever leaves your business, your whole IT landscape could collapse. Using modern, best-of-breed tools as part of a rationalized application portfolio with comprehensive documentation guarantees continuity of service.
Loss Of Opportunity
Collaboration and partnerships are vital in the modern market. Yet, if your application portfolio is filled with obscure, outdated tech that doesn't work as well as it should, then it may not be able to integrate with the toolset your partner uses. This can result in you missing out on lucrative opportunities.
Is Tech Debt Always A Bad Thing?
Technical debt is an expansive concept that covers so many potential aspects. No company is ever going to be completely free of it.
Even if you could escape tech debt, however, you likely wouldn't wish to. Investing in having a 'perfect' application portfolio would be a waste.
Deciding not to migrate to the cloud this year will create a tech debt, but if you can't afford the migration, then that's the correct decision. Equally, the vulnerabilities of hosting on a public cloud may make it too much of a security risk.
As such, a certain level of tech debt is not only acceptable, but could well be strategically essential. So, how do you determine what level of tech debt is reasonable?
How Much Tech Debt Is Too Much?
To understand when tech debt reaches a threshold, we have to remember our original definition of tech debt: we said tech debt was a way to put a financial value on deficiencies in your tech stack in order to compare them to the cost of remedying them.
You simply need to view your tech debt as a financial value; work out how much your tech debt is costing you in terms of everything above. You then contrast that to the cost of a transformation to resolve your tech debt to find your technical debt ratio (TDR).
Tech Debt ÷Cost Of Transformation × 100 = TDR
If your TDR is over 100%, then you need to do something about it. If it's below 100%, then the problem isn't worth resolving.
A high TDR is both an indicator that it's time to manage your tech debt, and the proof you need to win stakeholder investment. When the cost of fixing a problem is less than the problem is costing you, the fix is obviously the right choice.
We have, however, skipped over two important questions that you need to answer before you work out your TDR:
- What is the financial value of your tech debt?
- Where do you need to invest to repay the debt?
That's where LeanIX can support you.
How Do You Solve Your Tech Debt?
The LeanIX Enterprise Architecture Management (EAM) platform empowers you to identify and document all the applications across your portfolio. Automated surveys will then collect comprehensive data on each application and add it to third-party information to give you a complete overview.
This will immediately indicate where technical debt bottlenecks are occuring, as well as when your applications will enter obsolescence in the future. You can then roadmap a transformation plan for application modernization based on the Gartner TIME methodology.
Read: Gartner TIME Methodology For App Rationalization
All of this can be visualized in a scalable way, depending on the needs of each user. This means you can quickly see your tech debt trouble spots and exactly what would be involved in resolving them, making calculating your technical debt ratio (TDR) simple.
Using the LeanIX EAM, you can save 75% of the effort of process mining, make decisions 80% faster, and ultimately cut 20% of application costs. To find out more, download our guide:
