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Why IT debt is mounting

Derek Britton | Sept. 23, 2014
While businesses continue to stockpile cash, they are quietly assuming an unspoken debt IT debt.

Global companies were sitting on $7 trillion in cash and equivalents at the end of 2013, according to Thomson Reuters data, an eye-popping figure more than twice the level of a decade ago. But while businesses continue to stockpile cash, they are quietly assuming an unspoken debt IT debt.

The term IT Debt has been in circulation for years, but the phrase is often misunderstood and misused. Promoted by Gartner as far back as 2010, IT debt is perhaps best described as, "applying a quantifiable measurement to the backlog of incomplete or yet-to-be-stated IT change projects."

IT debt poses challenges across the organization, but the pain point is most acute for CIOs charged with not only setting technical direction for the company, but who are also responsible for IT projects that can if managed and budgeted poorly lead to substantial IT debt. The issue is not lost on CIOs. A 2014 Vanson Bourne survey of 590 CIOs and IT directors estimates an average of $11 million in mainframe application IT debt, an increase of nearly 29% from 2012 levels.

The notion that a company has a backlog of IT projects is not hard to grasp. IT maintains a list of work items, prioritizes these items, and works through this list in the same way any functional area of an organization might.

The root causes of IT backlogs unearthed by research and also suggested by customers, partners and commentators are wide and varied. They include:

* Historical IT investments. The IT world is highly complex; supporting this complexity is an onerous task and previous IT investment decisions may have been a good idea at the time but are now a high burden to keep running.

* Current IT prioritization. With 70% of all IT spend typically directed to keeping the lights on,' clearing the backlog isn't perceived as being a revenue-generating activity, and thus it may go under the radar in favor of more customer or revenue-centric initiatives. A strategy that sensibly and appropriately invests in what is a housekeeping exercise is not easy to justify.

* Human Resources. The lack of appropriate skills is another potential issue, because identifying the solution is one thing but getting staff to resolve it can be quite another. Building a solution to a requirement the basis of which requires very specific know-how might be seen as too difficult or costly to resource.

* Unplanned Backlog. Pre-ordained, planned work on the backlog is one thing, but IT priority is seldom isolated from the business in this way. Organizations are at the mercy of shareholders, corporate events, regulatory bodies and even the judiciary. Compliance projects and M&A activities typically find their way to the top of the list unannounced, pushing other backlog activities further down the list.

 

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