How to calculate your org's tech debt in order to get exec approval for modernization

What Is the True Cost of Technical Debt in Legacy Applications?

Every enterprise operates with some degree of technical debt. Millions of lines of existing computing code undergird most enterprise operations, and sooner or later, all code is technical debt.

Technical debt is not inherently “bad” but it can certainly prevent enterprise businesses from achieving the agility required to maintain relevance in our evolving digital economy. As proprietary legacy systems continue to age, the modern technology stack is advancing at increasing speed. Newer platforms offer greater interoperability and help organizations leverage the full value of their business data through analytics and AI.

Technology-Driven Competitive Pressures are Building

Mission-critical systems are often architected on legacy platforms with proprietary codebases that expanded over multiple decades, making them difficult to replace or update. Eliminating technical debt comes with fear of significant business disruption. However, executives do recognize that customers demand a better customer experience from brands. Accenture reports that 96% of insurers believe digital ecosystems are making an impact on the industry.

Customers expect to be able to personalize the services they need. They crave a fully digital experience with 24/7/365 access to accounts, quotes, and information, as well as multiple channels of customer support. Enterprises need to employ digital, mobile, cloud, and IoT technologies to drive new value for customers. Laggards risk being outmaneuvered by innovative businesses using advanced technologies to differentiate themselves.

Assessing Your Technical Debt: The Math

When deciding when or if it is the right time to pay off technical debt, most organizations assess it in terms of the dollars required. Kelly Sutton described the math behind paying off technical debt in an article that is now a few years old, yet still relevant. To quantify how much debt is currently carried by the organization, it is necessary to calculate the principal and interest:

• The investment required to pay off the debt (programmer hours or contractor developers) can be thought of as the principal.
• The cost of continuing business-as-usual by using engineering resources to bridge the debt on existing platforms can be thought of as the interest. This can be measured in terms of the number of incidents to resolve or the person-hours required.

With this way of quantifying the cost of technical debt, enterprises can compare the ongoing cost of the technical debt versus the one-time cost to fix it. This provides a framework for decision-making about which debts are worth paying off and how IT projects should be prioritized. But this assessment only captures the short-term (near current) condition of your technical debt. For a longer-term assessment, we have to expand the thought process to include the softer costs.

Calculating the True Cost of Technical Debt: Opportunities Lost

Once you can perform the math of technical debt today, it’s time to think in bigger terms. After all, technical debt is not solely based on the cost of hampered organizational productivity today. The much larger cost may be found in how technical debt will constrain your business in the future.

To calculate the true cost of technical debt, we need to think in terms of risk. What current business opportunities could be jeopardized or even lost in the future due to excess technical debt? Consider these questions:

1. Will technical debt prevent your product teams from delivering new features, products, or services that customers demand?
2. Does technical debt obstruct your organization’s ability to work effectively and efficiently? For example, is your organization able to collect and visualize data, in real-time, from every global location for complete enterprise visibility?
3. Is technical debt limiting workforce recruiting and retention? For example, does a lack of support for cloud platforms prevent hiring remote employees? Does a convoluted codebase make it difficult to attract top IT developers?
4. Are there opportunities to partner with (or acquire) promising fintech or insurtech startups that cannot be explored because technology stacks are too disparate?
5. Is the organization already losing customers due to a stale/outdated customer experience? How quickly might that accelerate as new competitors arrive?
6. How might technical debt prevent full monetization of enterprise data?

In the larger competitive landscape, what does your organization stand to lose in both the short- and long-term? The long-term is more difficult to predict, because you do not yet know all of the opportunities that will arise in the future, given the rapid pace of technological change. But bank on this: If technical debt is already slowing your organization, or forcing you to pivot away from new opportunities, the rising inflation on technical debt will only compound the problem with time. Characterize the full risk profile of technical debt now, so the executive team can gain greater visibility into its true cost for decision-making purposes.

About Synchrony Systems

At Synchrony Systems, we help companies reduce technical debt by transforming legacy, in-house applications to modern technologies while preserving business-critical functionality. Customers gain control over the management and execution of complex application modernizations using Synchrony Systems’ Modernization Lifecycle Platform (MLP). MLP is an end-to-end solution that orchestrates automated migration and modernization processes, tracks all modernization activities, and provides complete transparency of all modernization activities to stakeholders. The result is reduced technical debt, reduced company risks, improved team communication and collaboration, and accelerated modernization initiatives.