By Dr. Paul Fermor, UK Solutions Director, Software AG
Technical debt is an occupational hazard for many financial firms. For most, it’s a natural side effect of making pragmatic compromises in order to introduce new processes and solutions in the presence of time and budgetary constraints.
Nearly three-quarters (73%) of UK organisations acknowledge having to address the problems associated with technical debt, which often become much more onerous to resolve over time. Indeed, a recent commissioned study estimated that as much as 41% of enterprise IT budgets are consumed in dealing with the effects of technical debt. To put that into perspective, that’s a third more than is spent innovating and creating new products and services.
However, treating technical debt solely as the accrued mess leftover from development initiatives and a “thing” to be eliminated is a limiting perspective. In this article, we’ll discuss see how technical debt isn’t just an unavoidable part of business growth and transformation, but in fact, can be a strategic lever that firms can use to accelerate the fulfilment of their objectives.
Accordingly, the management of technical debt should be a key element that is incorporated into all significant development & transformation strategies.
Origins of technical debt
Expediting the achievement of objectives by borrowing against the future is a key financial strategy for most governments and businesses. Using this as a metaphor, Ward Cunningham first coined the term “technical debt” in 1992 to help formulate his ideas around how software solutions could be created in an agile manner. Software issues that are intentionally ignored in the interests of short-term agility invariably become more onerous to address in the longer term. Ward recognised how the extra effort to address these deferred issues was akin to an interest payment on a debt, where the debt is the agility acquired by initially ignoring them.
However, Ward also realised that technical debt was fundamentally a systemic issue. It can be intentionally acquired but it is also endemic in an environment where the knowledge of what a perfect product or service should look like is unknown. Each deployment of a service approximates what consumers wish to use, to which subsequent re-work will always be required. In an imperfect world, technical debt is unavoidable.
Accordingly, successful management, not avoidance of technical debt is the key. For most firms, it is the ability to routinely incorporate accumulated knowledge into systems and applications with the minimum effort, so that it looks like they knew what were doing all along. With this approach, technical debt is a management strategy, where firms actively trade off short term and longer-term agility in response to business demand. From a management perspective, it is an approach to distinguish when “good enough” is genuinely good enough, and when “good enough” imposes too greater penalty on a firm’s future agility.
Exchanging technical debt for agility
Back in 2018, Gartner predicted that without sufficient digital transformation, up to 80% of heritage financial firms would cease to exist by 2030. Digital transformation momentum has significantly up-ticked in the interim and IT decision makers say that they have accrued more technical debt over the past year than in previous years.
Digital transformation is ultimately about making organisations more adaptable to disruption. Adaptation implies change, but often there is uncertainty about the exact nature of the change required, and this change must occur quickly. In this dynamic environment, technical debt becomes one of the key control levers for finance firms, enabling them to optimally adapt now by judiciously borrowing against their future agility.
The operative term here is judicious. Judicious borrowing can only occur when the costs of borrowing are understood. Given a specific set of lending terms, a highly mature set of disciplines exist which enable the cost of financial borrowing to be understood in advance. In the context of technical debt, the equivalent lending terms are far less transparent and are dynamically linked to how the organisation behaves.
For example, a “quick and dirty” roll out of a service to onboard partners may seem like a fair exchange of immediate outcome for future agility. This is true so long as the business addresses the technical debt early and uses insights from the early deployment to consolidate the service design. But if the company decides to defer “payment” on the technical debt over successive releases, or worse, chooses to expand the service and to onboard many diverse new partners, many layered dependencies could be embedded into a hitherto simple service infrastructure. What was a cheap, affordable debt quickly spirals with no good paths to repayment.
Automation as a strategy
Automation initiatives are likely to be a significant source of technical debt for financial services firms. This is not only because automation is one of the pillars of digital transformation, but also due to the complexity of the automation challenge which cuts across business and IT domains. Automation is particularly susceptible to poor technical debt management because often it is regarded as a tool, when in fact it is a strategy. Automation tools have never been easier to use and acquire but when used tactically within a narrow context, technical debt is almost impossible to manage. When the application of those tools is informed by a coherent strategy, technical debt becomes more manageable and predictable.
To create such a strategy, a comprehensive understanding of the firm’s Enterprise Architecture is required, from process to the IT infrastructure that supports it. For example, premature automation involves significant technical debt where redundancy or significant variance exists across a process landscape, leading to high maintenance solutions that fail to exploit the business value available. Effective process management enables optimal consolidation of the process landscape to take place before automation, at which point the risk of excessive technical debt from automation is significantly reduced.
However, one cannot undertake an automation initiative through sole consideration of the process landscape. Automation will require IT infrastructure on which to run, so the state of the IT infrastructure must be a key consideration. For example, deferment of application upgrades is a crude but effective way to increase short term agility, though this must not be taken lightly as the cost of running applications that fall out of support typically increase by 200-600%. If this is done, it is imperative not to deploy a large volume of automation workloads on these technically indebted systems, if disproportionate impacts to future agility are to be avoided.
Seize opportunities with technical debt
Time is unforgiving, and as it passes the costs of servicing technical debt increases. This year, fast-tracking the launch of new products and services is a top priority for 78% of firms, and it is likely that all of these firms already have significant technical debt burdens which these new initiatives will add to. There has never been a better time for firms to adopt a formal technical debt management strategy.
Digital transformation and new service initiatives are a necessary endeavour for financial services firms to adapt to disruptive influences on timescales that are imposed by increasingly stringent regulations and the competitive marketplace. In such a constrained environment, the issue of avoiding technical debt is moot. Firms should be striving to understand the nature of technical debt that should be adopted which provides the greatest support to the fulfilment of their objectives. Additionally, this must be supported by a comprehensive strategy for managing the technical debt to ensure the cost of servicing it and the impact to future agility is minimised. A holistic approach to developing and managing Enterprise Architecture is a firm foundation for such a strategy.
With many firms engaging in new service releases and ongoing digital transformation initiatives, it becomes hard for firms to truly stand out. Those adopting a coherent strategy in the context of managing technical debt may find it a powerful differentiator to developing an enduring competitive advantage.