How to Cut IT Expense While Sustaining Business Growth and Innovation

CIOs have proven the value of IT by being trailblazers and change agents. But now, heading into challenging economic times, CIOs must sustain that progress and invest in digital transformation while actively cutting IT expenditures.

CIOs have a tough job.

They’ve proven the value of IT and IT investment by being trailblazers and change agents. And they’ve collaborated with other business leaders to launch innovative projects that can reshape an organization and increase operational agility.

And now, as they head into an unprecedented economic era, CIOs need to preserve as much of that progress as they can and position themselves for future investment in digital transformation while actively cutting IT expenditures.

The challenge is in identifying internal and external costs that modernization can permanently take off the table. But CIOs can find their answer in the technical debt associated with integration.

Technology analyst Jack Gold estimates that up to 50 percent of a typical company’s IT software budget is spent on integrating legacy systems with modern application suites. And the CIOs we talk with cite technical debt for integration as accounting for 15 to 35 percent of total IT spend. Any way you look at it, that proportion of IT spend for integration is “stupid money.”

Technical debt, in the words of one CIO, is “the conglomeration of bad design, bad code, and corner cutting that accrued over the years so we could get something out the door.” It’s technology, new or old, that has been poorly implemented and was often rushed into service to meet a deadline. Now it requires lots of time and money to maintain and even more if it needs to be improved or enhanced.

Large enterprises find themselves struggling to overcome the operational and financial burdens of technical debt. We know of a major bank, for example, that devotes 85 percent of its IT budget to maintaining old middleware and ad hoc projects from the past two decades, rather than investing in new initiatives that could deliver competitive advantage.

A Plan for Overcoming Technical Debt

How does a CIO eliminate the costs of technical debt while preserving the innovation required for digital transformation? Based on our work with a wide range of businesses around the world and across industries, we suggest five steps for overcoming technical debt.

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