Technology debt – What is it and how can it be avoided?

By - May 26, 2015

Simply put, technology debt refers to a company’s failure to leverage new technologies to improve their business processes and operations. The associated risks can pose a very real threat to your organization, potentially resulting in millions of dollars lost, reputation damage and loss of competitive advantage.

  1. If you can pinpoint any combination of the factors below, your organization may have too much technology debt. A lack of effective technology leadership. Today’s IT leaders need more than just strong computer skills. They should have a broader view of the organization’s strategic goals, and play a key role in business leadership.
  2. Ineffective IT oversight. About a quarter of technology debt stems from issues related to a lack of discipline, reporting and strategic focus around IT projects.
  3. Outdated systems. These can include anything from custom Excel to old software packages that don’t integrate smoothly with modern solutions.
  4. Misspending. Under-spending or over-spending, misallocating strategic spending or resource spending are all symptoms of misspending.
  5. Process chaos. Many organizations possess incoherent, cross-functional processes, resulting in multiple, separate systems and incomplete or conflicting data.

Ways to reduce or eliminate technology debt
Once you gain a good understanding of the various aspects of technology debt, take a hard look at your organization to assess which are at play. Then, consider taking the following actions to help improve efficiency and drive innovation within the company: assess you IT function to get a baseline on its current state, implement uniform reporting procedures, establish project governance, and analyze and benchmark your IT spend.

To learn more about the concept of technology debt, including specific examples, strategies for measuring it at your organization and best practices for reducing or eliminating it from your company, read my recent CFO.com article A scorecard for technology debt.

To find out more about this or other ways that McGladrey can assist you with your business needs, contact McGladrey’s management consulting professionals at 800.274.3978 or email us.

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