Feb 09 2017 | IT Transformation
Tech Debt demystified

By: Aditya Dikshit & Shephali Sharma | IT Transformation

According to recent researches, $3.61 is the tech debt per line of code in a typical application that business are absorbing these days. With business embarking on M&A path for higher revenue growth, exploiting synergies across companies and industries, the quantity of supporting applications and complexity of their combined technology infrastructure is also accelerating. In fact, 52% of total effort is spent repairing architecturally complex defects! This puts immense stress on new and old businesses for managing their technology stack better. Consequently, reducing this ‘Technology Debt’ is fast becoming a necessity.

IT Concept of Technology Debt

The Business Value for organization is determined by the following factors:

1.    Income Impact

      a.   Revenue Excellence

      b.   Operating Excellence

2.   Capital Impact

     a.   Working Capital

     b.   Total Cost of Ownership

3.   Customer Excellence

This business value follows the natural curve, as shown below, overtime as many of these parameters starts performing negatively.

To define the Business Value derived from IT in empirical terms we use the below parameters:

Business Value = f {TCO, RE, OE, CE)

Where TCO = Total Cost of Ownership; RE = Revenue Excellence; OE = Operational Excellence; CE = Customer Excellence

The organizations in this new era have a lot more dependency on IT Value to achieve more

Business Value.

IT Value= Benefit of Change in Agility - Cost of Operational failures - Cost to run IT

IT Value in turn contributes to Technology Debt with a relationship as described below.

Technology Debt        1/ IT Value

Thus, mathematically Technology Debt is inversely proportional to the IT Value and thus the Business Value.

Now that we have defined Technology Debt we also require an empirical way to measure it, we define it as:

Technology Debt = f {FQ, TQ, MQ)

Where FQ = Functional Quotient; TQ = Technical Quotient; MQ = Management Quotient

Elements of Technology Debt

  • Ineffective oversight, with 25% of technology debt typically stemming from deficiencies in discipline, reporting, and strategic focus.
  • Outdated systems, at 30% of the debt factor could be anything from custom Excel and
  • Access systems to pre-2005-era systems that don’t easily integrate.
  • Inappropriate IT Spending, at 25%, caused by under-spending or over-spending, misallocating strategic spending or resource spending
  • Process Chaos, at 20% where many organizations possess incoherent, cross-functional
  • rocesses, resulting in multiple, separate systems and incomplete or conflicting data.

Our experiences with sorting, shifting and clearing through different technology portfolios has helped us develop our proprietary ZeROTechDebt framework which focuses on optimizing an organization‘s ‘Technology Debt’.

As companies evolve through various stages of growth and consolidation, there is a strong need to continually evaluate the impact of the IT Portfolio on Business goals. Creating and Maintaining the optimal IT Portfolio to enable the required level of business velocity and total cost of ownership necessitates a structured approach towards measuring, analyzing and optimizing Technology Debt. Birlasoft's ZeROTechDebt framework powered by the 3rdEye  tool brings the right set of capabilities to achieve this goal.