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Technical Debt Can be the Biggest Threat to Innovation: Study


We are living in the digital age where companies are looking at quick and robust technologies to solve a problem. But they often ignore the long-term side effects of introducing new technologies. This often results in what is called the ‘technical debt’ in most companies. In fact, nearly seven out of IT leaders identify technical debt as a major threat to their companies’ ability to innovate, according to a new report.

Technical debt is a technical design or development choice made for short-term benefit with long-term consequences. It reflects the implied cost of additional rework caused by choosing an easy solution now instead of using a better approach that would take longer. And as said earlier, it results from the development of solutions implemented quickly to maximize speed, rather than optimizing for the future.

In its latest report, “The Growing Threat of Technical Debt,” application development firm OutSystems jointly with KPMG examines the cost of technical debt facing businesses across industries and geographies – which can incur huge losses to the company.

Technical debt – what’s causing the nuisance?

As businesses strive to rebuild following the challenges of the past year, technical debt has emerged as a major roadblock to innovation and recovery, especially for enterprises focused on growth. Based on a global survey of 500 IT leaders, the OutSystems report highlights the challenges companies face, as a majority (69%) of IT leaders say technical debt poses a fundamental limit on their ability to innovate, along with 61% saying it drags on their company’s performance and 64% agreeing it will continue to have a major impact in the future.

According to Rui Gonçalves, Partner at KPMG in Portugal, “For years we’ve seen the negative impact of technical debt on businesses’ ability to prioritize innovation and flexibility, which are critical elements to gaining and maintaining a competitive edge.”

There is a massive opportunity cost for businesses of all sizes across all industries as they dedicate time, money, and other resources into technical debt instead of innovation. On average, businesses spend approximately one-third of their IT budget addressing technical debt – this jumps to 41% for enterprises. For example, Izak Joubert, Chhief Technology Officer at JTC Group mentions, “Technical debt can be particularly costly in the financial services industry, where companies thrive on their ability to innovate while providing fast and reliable services.”

Experts believe there can be many causes of technical debt, including pressure to meet deadlines, constant change in the marketplace, and outdated technology. According to the report, IT leaders cite too many development languages/frameworks (52%), turnover within the development team (49%), and accepting known defects to meet release deadlines (43%).

“The combination of old code along with the new generation of mobile apps, stack applications and SaaS sprawl are robbing organizations of resources, time and the ability to innovate,” said Paulo Rosado, CEO, and Founder of OutSystems.

Technical debt could also stunt performance. According to the survey, 61% of respondents said it causes a significant drag on their company’s performance. Stale projects could interfere with streamlining customer experiences and digital transformation goals.

Also, technical debt could negatively affect morale. Few engineers take pride in repeating inefficient processes or working with obsolete tech.

Businesses continue to delay addressing technical debt, further exacerbating the issue. Only 20% say tech debt is something they’re currently managing well, though 36% report they’ll be able to manage tech debt in the future.

Alleviating technical debt

Similar to financial debt, technical debt comes with compounding interest. Enterprises spend 41% of their IT budget on technical debt, while small businesses spend 27%. This interest could grow exponentially if left unchecked. So, what steps can organizations take to reduce their technical debt?

To help alleviate the problem, the report has two recommendations: Stemming turnover in development teams and limiting the number of new programming languages and frameworks a company adopts.

Other methods involve taking stock of your holdings to understand the presence and impact of legacy technologies. Finally, it is important for CXOs to rethink and redirect your strategy from simply maintaining legacy dependencies to addressing them and replacing them with modern styles.

Of course, enterprise IT must take on some form of technical debt to function—it’s futile to get rid of it entirely, as experts opine. So, the best way is to stay aware of the costs you take on. When adopting new technologies, it’s best to consider maintenance implications and plan with longevity in mind.

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