I had lunch with an old friend last week and he raised the issue of technical debt with me: the notion that complexity breeds complexity until a business’ IT systems are a burden rather than a benefit.
The realisation came, like a bolt from the blue, that this was the reason my beloved IT industry had moved from being a creative, savvy business industry to being seen as a dull cost centre, distrusted and feared by many businesses and their management.
Harsh perhaps, but why else then have we seen the CIO, a key executive team member in the 90s, relegated to the IT Manager, reporting instead to finance?
Technical debt got us here. So what am I talking about?
- Every three years the CIO goes cap in hand to the chief executive (CEO) asking for more cash to stay “supported”. There is no real value proposition.
- The CEO agrees to the absolute minimum, corners are cut, decisions deferred, and quick fixes are implemented.
- The business keeps using the systems, users comply, while under their breaths they all swear never to invite the geeks to another Christmas do.
- Technical debt is repaid with sullen compliance and decreasing budgets.
So how has this arisen? Complexity, cost, and increasing competitive inertia is how.
IT systems have been built incrementally, one update at a time, and we have added feature after feature with little or no business value. Systems have become more complex, problems that don’t exist are solved for clients and staff who don’t care.
Our IT systems have become so unwieldy and complex that change, no matter how small, is greeted with a project plan, budget forecast and endless handwringing over:
- “Business risk” (Translation – IT is too scared to change anything lest the whole spider’s web collapses.)
- “Security” (Translation – Complex systems can only be kept safe by denying access to non-geeks.)
- “Privacy” (Translation – data is entrusted only to an anointed few.)
- “Sovereignty” (Translation – if it wasn’t built here it can’t be trusted.)
Naturally all this can only be solved with huge amounts of money and time, none of which is forthcoming because, frustrated by it all, the executive assigns a finance team member to address the need for change.
After six months of careful analysis the CFO returns to the executive with a statement like: “We can try to change but the risk is enormous, the time and costs ill-defined. I suggest we put off major changes for at least two years, and in the meantime upgrade the most ancient of our servers, applications and network security devices.”
Translation: “We are stuffed. Our IT providers and their friends in the IT Department have our nuts in the wringer, there is little or nothing we can do about it except minimise the damage by cutting our budget.”
Too strong? Show me any major ERP or CRM implementation that was built in New Zealand in the late 1990’s or early 2000’s and is still running today and I will show you Technical Debt consisting of:
- Bloated software and clunky reporting.
- Excessive maintenance and service charges.
- Systems that drive the business decisions rather than the reverse.
- A cost to upgrade or exit running into millions of dollars and years of pain.
- Proposals to change are met with a jaded cynicism “we spent massive time and money before and what did we get?!”
So while our established businesses face cost and complexity to the extent where nothing can move without huge pain and risk, out of left field comes the modern, nimble, aggressive and connected new kid on the block competitor.
These guys have built businesses from scratch in less than a year. They have grabbed share across the industry while being smarter, more costumer focussed and more cost effective. They use IT for strategic advantage by using world class services at a fraction of the cost of old school computing.
Don’t believe me? Consider these examples.
The recording industry: Meet Apple and Spotify.
Video rentals: Meet Netflix.
Everyone: Meet Trade Me.
Camera film, local bookshops, photo developers, second hand shops? Meet oblivion.
Whilst technically indebted businesses struggle with falling sales, margins, and ever more demanding customers the IT department can’t or won’t address the issues because of “business risk, security, policy, sovereignty and privacy concerns”.
That is of course unless the business agrees to spend money it doesn’t have, on an outcome it doesn’t trust, over a time period that is uncertain…..
What can the CEO do? See next month’s installment.