Tech debt. It sounds like a marketing term to stir fear and uncertainty. Truth is, it is not.
It is real just like financial debt. It is the result of a series of decisions over a period of years that accumulate.
In this article we cover
What is Tech Debt?
Tech debt is the gap between existing and optimal systems when decisions are made to take shortcuts, skip maintenance, and delay investments in technology solutions. Over time, that gap becomes large enough it becomes a roadblock to company performance and growth. The most famous example of tech debt is the Y2K incident, where to same time and space, programmers adopted the practice of using two digits for the year.
Another example of tech debt that more of you can relate to would be running an ERP system that was implemented as a response to the Y2K issue and hasn’t been properly maintained either by the user or the publisher. Some ERP publishers are struggling to migrate to the latest cloud technology, and some companies quit paying maintenance on the system years ago, thinking they were saving money by not updating the system on a regular basis.
Tech debt is similar to financial debt. It is the result of a series of decisions that accumulate over a period of years.
Think of the correlation to credit card debt. You get the card for “emergencies”. It’s funny what can become an emergency. You see something you “need” and charge it. Since you didn’t have the money to buy it outright, you don’t have the money to pay off the credit card. Interest accrues, more purchases are made, and balances grow.
Eventually, you have a real problem. The debt needs to be paid off. It is holding you back.
How Technical Debt Accumulates
Tech debt is far more subtle as it accumulates. You don’t get monthly statements showing how far behind you are falling. Like financial debt, tech debt accumulates in several ways:
- Short term needs preclude you from adopting a long-term plan. You need a solution now so you choose something that can be implemented now.
- A lack of knowledge on technology obsolescence. You aren’t aware of the changes happening with your technology stack and don’t maintain it.
- You fall victim to the outcome bias. Things are working well now and will continue to work well in the future.
Let’s take a closer look at each of these.
Creating a “Franken-ware” Environment
When you don’t have a long-term strategy and allow the urgent need to drive tech decisions, you run the risk of creating Franken-ware.
Often, when each department identifies an urgent need and deploys its own solution, the result can be a mix of standalone solutions, data silos, and sometimes even integration programs that need to be maintained. IT expenses balloon because each solution requires a maintenance contract, and keeping all of the systems running becomes a workload for your IT team. Processes become inefficient since users have to interact with multiple systems and there is a problem identifying a single source of truth, even though you invested in an ERP system years ago.
Resource Allocation Challenges
A major part of running a business is resource allocation. You have a limited resource pool, whether it is people, cash, inventory, production capacity, or time. Many times, decision-makers are not fully aware of what happens when the investment in maintaining and improving technology is deferred. Especially in small businesses, they know they need to allocate their resources to the most immediate needs.
However, maintaining technology infrastructure and systems is much like car maintenance. You can pay now or pay later, but you will pay. It has been said that buying technology is like jumping off of a moving train. You are where you are, and the train keeps moving. However, incremental improvements will keep you in a place to take advantage of technological advances.
Eventually, the ERP system you stopped upgrading 15 years ago will no longer be compatible with new hardware and operating systems. Then you have an urgent problem to address.
Workarounds and Hidden Costs
Business leaders often look at the financial results, are satisfied, and turn to address pressing matters. Things are moving ahead, so things are working as they should, right? Not necessarily. Companies running older operations software are being supported by really smart employees who have created workarounds to make things happen.
These workarounds are not getting the expected results, which may be removing employees from value-added activities and limiting your ability to grow.
Tech debt is like all other debt. It must be paid eventually. Consider a plan to get current, then maintain it with the future in mind.
Strategies to Manage Tech Debt
- Developing a Long-Term Technology Roadmap: Undoubtedly, staying on the leading edge of production processes and technology is a priority and a requirement to remain competitive. That strategy needs to extend to your information systems as well. Creating a governance framework is key to evaluating and making investment decisions, whether around policies, innovation, or information systems. First, find out where you are, figure out where you need to be, and then create a comprehensive plan to get there.
- Regular System Audits and Updates: Passing on system updates isn’t a cost-saving measure over the long term. Part of your systems governance should include regular reviews of system status, not just to keep your system up to date but also to review the publisher’s investment in improving and advancing the software.
- Employee Training and Involvement: Top-down initiatives rarely produce optimal results. Engage your employees to identify needs, pain points, and areas for improvement. Use their input to develop a requirements list that guides your information systems governance and deployments.
Is Your ERP System a Tech Debt Trap?
Every business’s ERP system should be a solution, not a problem. However, in many cases, these systems can become significant contributors to tech debt. Here are some signs that your ERP system might be part of the problem:
- Outdated Functionality: The system lacks modern features and struggles with current production demands.
- Integration Challenges: You rely on multiple standalone systems or manual data transfers.
- Excessive Customization: Upgrades are costly or impossible due to extensive custom code.
- Poor User Experience: Employees create workarounds, and training new staff is difficult.
- Rising Maintenance Costs: You spend more on maintaining the system than improving it.
- Limited Mobility and Cloud Access: The ERP lacks modern access options like mobile or cloud capabilities.
If these signs sound familiar, it’s time to evaluate your ERP’s role in your tech debt and consider modernization strategies. Remember, an effective ERP system should empower your manufacturing processes, not constrain them.
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Remember, investing in your ERP system is investing in your company’s future. Don’t let technical debt hold you back from achieving your business goals.