Digital adoption in the Asia-Pacific region has proceeded at lightening speed, and the pandemic has contributed to heightened demand for solutions across the region by proving the value of cloud services and digital technologies for enterprises. However, the desire to make rapid changes to meet the needs of the current environment and be flexible in response to evolving customer preferences is highlighting challenges with technical debt from existing tech investments. This technical debt slows down development plans and drives up the total cost of owning a particular application or system. In the long term, companies become less capable of bringing products and services to market and of responding to market changes.
To overcome the technical debt that all companies face, IT departments need to optimise IT spending and redirect funds that can be used to drive innovation. With greater control over the IT strategy, CIOs are empowered to focus on innovations that contribute to increased revenue, and market share from competitors. For core enterprise applications like ERP systems, companies can choose to modernise rather than upgrade implementations based on a vendor’s roadmap. This minimises technical debt and increases the IT department’s ability to adapt these systems for new digital projects.
How is technical debt restricting innovation?
Executive leaders today recognise that positive customer experiences can make or break a business of any size, yet few are fully delivering these experiences to customers. Research from NTT found that while customer experience is the top indicator of strategic performance, only 12 percent of companies in the Asia Pacific region say that their customer experience strategies have reached an optimised state. To meet these expectations, companies are pushing forward with plans to reinvent themselves through the adoption of new technologies and business models but IT departments are not set up to support the additional costs of these plans. CIOs generally allocate as much as 90 percent of their IT budget to ongoing operations and enhancements, leaving as little as 10 percent for investments in new technologies and innovations that support C-level goals. This budget model is no longer sustainable to meet digital transformation goals.
Existing technology investments can add further strain to IT resources when considering the short- and long-term costs of making the solution fit for new purposes, known as technical debt. As technical debt accumulates over time, the solution becomes more complex, preventing enterprises from taking advantage of improved technology and adapting quickly to business changes. It can be a significant roadblock that negatively impacts business performance. Another major contributor to technical debt are solution roadmaps from vendors. Companies that stick to these roadmaps believe that they are limiting or eliminating technical debt but are instead spending large sums in annual maintenance costs and updates for very little ROI. Vendor updates may actually increase technical debt, and create obstacles to innovation, growth, and competitive advantage by forcing enterprises to spend limited budget, resources, and time on projects that may not deliver on objectives. At best, existing customisations might be eliminated with the new functionality in an update or enhancement. At worst, it can be a costly investment that adds to existing technical debt. These costs in the existing application portfolio can be reduced significantly to better balance ongoing operations and the price of new projects.
Reducing technical debt
To eliminate a large portion of technical debt from existing applications, CIOs can look beyond annual maintenance fees to remove application costs that are “below the water line”, or that are not immediately visible. Companies can do this by looking to other areas of the application, such as reliability, usability, performance efficiency, maintainability, portability, security, and compatibility, for additional savings. CIOs can uncover how much technical debt exists, and how much it is hindering change, by examining each of these areas. Rimini Street’s savings calculator is useful to help calculate companies’ maintenance savings potential.
Another approach is to adopt a unified support model that moves IT from a cost center to a strategic partner. IT is freed from the burden of software vendor support costs and can direct liberated funds and resources toward revenue-generating strategic growth initiatives for the enterprise. By deferring or eliminating expensive, disruptive, and minimal-value upgrades and migrations, CIOs are able to take control of their IT journeys by moving from software vendor-dictated roadmaps to a Business-Driven Roadmap approach designed around their business objectives, not around the enterprise software vendor’s objectives. With core ERP systems this support improves application management outcomes and supports modernisation efforts that can extend the life and value of enterprise software. Companies gain more flexibility with limited time, money and personnel, and enable resource savings to be diverted to more strategic initiatives. Reducing technical debt can enable CIOs to allocate as much as 40 percent of IT budgets to innovation.
Companies are under more pressure than ever to take advantage of improved technology and adapt quickly to business changes. Rimini Street believes that there is a great opportunity in the Asia Pacific region to drive growth and competitive advantage by optimising IT spend and actively reducing technical debt. The more technical debt is incurred, the more difficult it will be for CIOs to drive innovations that enhance customer experiences and keep businesses operating ahead of competitors.
Download report to see initiatives taken by ASEAN enterprises to save IT costs.
11 September 2020