Businesses need to ensure their IT strategy is aligned to their organization’s business goals and tackle potential problems such as technical debt in order to optimise their IT budgets.
According to new research from IT services company Crayon in conjunction with Sapio Research, 95% of businesses are failing to optimise their IT budgets, despite extremely challenging market conditions.
The poll, which surveyed 2,100 IT decision makers across the world, found that while 90% businesses list IT cost optimisation as a high priority, many were struggling to cut costs for various reasons. These included lack of time among senior decision-makers (31%), lack of knowledge on how best to cut costs (28%) and a lack of visibility across an organization’s spending.
A particular problem when it comes to cutting IT costs is ‘technical debt’. This is where companies invest in a limited short-term software solution such as a piece of coding, only to find that they need to spend much more fixing and updating the software further down the line. It’s like borrowing money in a hurry to buy a shiny new car, only to find that you haven’t looked at the interest rates and end up in debt, spending thousands more than you needed to!
And while it may sometimes be worth taking on technical debt for market advantages that speed and agility may bring, it does need to be addressed if it starts to impact the core business. “There’s a tendency to go as fast as you can to get the MVP (minimal viable product) out there, and you don’t necessarily build an overly industrialized application at the beginning,” Wayne F. McGurk, CIO and SVP of IT for the National Rural Electric Cooperative Association, recently told CIO magazine. However, “when technical debt starts hindering any of those operating principles, then it’s risen to the level where we want to address it,” he added.
Wasted IT budgets
For its 2023 Global Technology Executive Survey, managing consulting firm Protiviti surveyed 1000 tech executives and found that technical debt is a leading obstacle in innovation for nearly 70% of organizations, consuming 31% of IT budget and requiring 21% of IT resources to manage.
Similarly, 56% of respondents to LeanIX’s IT Cost Optimization Survey 2023 said outdated technology and technical debt are particularly high contributors to wasted IT budgets. According to Gartner, infrastructure and operations leaders who actively manage and reduce technical debt can achieve at least 50% faster service delivery times to the business.
But what practical steps can businesses take to tackle technical debt and help reduce their IT costs more broadly when times are tight? Here we offer a few tips that may help.
Before you can begin to decide how to optimise your IT budget, you need to get a full understanding of how you currently use technology. Without a clear picture of your IT usage, you won’t be able to identify the areas where you can save money. However, this requires a level of organizational transparency that many companies lack. Start by conducting an audit of current technology and systems and assess how they’re being used.
Organisations obviously need the peace of mind that when something goes wrong with their software they’ll get it sorted quickly. However, while it’s important to maintain vendor relationships, it’s also important to reduce or avoid excessive vendor management costs. Some enterprise software vendors, for example, charge over 20% of the original licence costs for their ongoing support packages. Alternative options may be to use a third-party support provider or manage IT operations internally.
To a great extent, technical debt is an inevitable consequence of innovating at speed. If companies waited for every line of code to be perfect, many projects would simply never see the light of day. That said, it’s important to minimise technical debt by improving project structures, for example with the use of project management and code analysis tools. Technical debt can also be reduced by establishing coding best practices and by ‘refactoring’ at regular intervals – changing poorly written or ‘filthy code’.
According to technology consultancy Gartner, by 2025 70% of digital investments will fail to deliver the expected business outcomes due to the absence of a strategic portfolio management (SPM) approach (Gartner, Magic Quadrant for Strategic Portfolio Management, April 2022). All too often without a cohesive view of how the IT portfolio relates to business strategy, problems will occur such as IT budgets being spread too thinly across too many projects to be effective or delivered in the wrong parts of the business. Generally speaking, IT projects and programs that are aligned to an organization’s strategy are completed successfully more often than projects that are misaligned.
So, in conclusion
In a business environment where it’s more important than ever to rein in and manage costs it’s essential that organizations stay focused on how their IT strategy fits in with their overall business strategy and understand the risk that technical debt represents.
In terms of addressing the risk, start by quantifying the size of the problem and then looking at short and medium ways to reduce and eliminate poorly utilised and wasted IT spend.
Look at ways to consolidate your tech, use SaaS and PaaS models to optimise your spend and how you use a mixture of on and off premise solutions in the most cost-effective way.
Most helpful can be talking to a team of people who know how to do this and who can take the pain of technical debt away for you.
