IT Debt in Cloud – The silent risk no-one is talking about

Business Transformation - Digitally

IT Debt in Cloud – The silent risk no-one is talking about

Why is IT Debt important?

It is generally accepted that cloud is here to stay, as an industry it has grown from awkward adolescent into a mature and varied set of services that can drive value from the smallest micro-business to the largest institutions in the world.

It is a reality that organisations do not just use a single service in order to optimise their technology to suit their business needs.

So what is IT Debt and how is it different from “Technical Debt”?

“Technical Debt” is a termed coined by Cunningham (1992), which explains the correlation between software development and financial debt. Principally, the extra work that is necessary to be held in the future, aiming to improve some of the non-functional requirements, such as the readability or the complexity of an application which results in additional cost and likely interest payments.

“IT Debt” is similar in that it is the correlation between the facets of all of the technology stack (defined here as: Development, Infrastructure, Software, Integration, Service, Skills and Data) and financial debt.

The critical difference is that IT debt, despite continuous development, will always be incurred due the rate of advancement in technology.  This differs from Cunningham as he suggests it is caused by the deliberate (or not) lack of it.  If continuous development does not occur, the rate of IT Debt is exponentially increased.

 

What makes up IT Debt?

 

As I have mentioned earlier, it is my view that IT Debt can be broken down into 8 areas that are closely intertwined.  In reality, they are all of the areas that CIOs and IT Directors have always had to worry about but in the world of cloud, they are thrown into sharper focus:

  • Software
  • Integration
  • Development
  • Data
  • Infrastructure & Networks
  • Service
  • Skills
  • Financial

I will highlight the areas that are most pertinent for today’s CIO, this is not an exhaustive list rather some of the key observations relevant today.

Firstly, Development debt.  Technology is evolving rapidly, the plethora of programming languages, code platforms, consumer demand and hot trends all add to the issue of development debt for organisations.  This area is most closely tied to traditional Technical Debt.  The primary issue is that

This leads to Software debt.  This can be largely addressed by the use of enterprise or subscription services, however, this does not address larger applications where organisations have large capital or committed spend.  Managing this remains an issue, this is not new but still a critical factor that causes secondary and tertiary effects on the ability to manage the overall technology estate.  The area that can most help this type of debt is a sharp review of business processes and business transformation to reduce the use of legacy software and drive its obsolescence to an absolute minimum.

Also linked to software debt are integration and data debt.  The needs of the modern business, demand better information, drawn from an ever increasingly wider variety of sources.  In turn, this means that software and services need to be better integrated to maximise value and efficiency.  The reality is that integration is not an easy task for any organisation, irrespective of their level of maturity or age of their technology stack. A key area lies with automating the most important aspects of business work flows across applications but balancing this without automating too much – this balance is vital so not to expose your organisation to unnecessary overhead of maintaining automation scripts as code and integrations are developed.

This is also relevant to the integration of data.  It is complex and CIOs could use the reduction of legacy software as a vehicle to drive further integration whilst also analyse their data to reduce what has limited or no value to the organisation.  This will reduce cost for retention and reduce the overhead for managing it.

Addressing the areas discussed above will naturally create challenges in the management of the Infrastructure and networks of an organisation.  The reality is many organisations have very reasonably invested heavily in their on-premise infrastructure and there is no denying that a hybrid estate often makes the most sense to many organisations.  Naturally, the reduction and management of existing infrastructure is linked with its end of life in order to maximise its investment. This active management also goes hand in hand with network sizing.  The adoption of cloud inevitably exposes the weaknesses in an organisation’s network size, configuration and security.  Managing this is paramount to prevent sprawl, complexity and wasted resources.  It also demands a different way of thinking to traditional methods of network and infrastructure management.

All of these aspects of the technology stack demand effective skills and services.  Many organisations recognise that they do not have all of the skills that they need to be successful on their own.  The rate of technological change and with the major cloud providers issuing new services or products, some at the rate of one every 48 hours, it is impossible to keep up to date.  Effective use of ecosystems of vendors and providers can help organisations start their journey, but they can help during their ongoing development.  The cost and investment of continuous training of own staff is worthwhile and necessary, but the reality is that the paucity of skills available makes maintaining services challenging.  This challenge is also amplified by the use of traditional service management processes and frameworks without evolving them with modern techniques to development such as DevOps and Agile.  This can create friction not only in the technology team but also with the business itself.

This leaves Financial debt.  I would argue that the principle risk of UK based businesses today for the cost of cloud services will be Foreign Exchange.  As the value of the pound (£GBP) has fallen since the referendum for Brexit, the effect of billing has affected some businesses as many US cloud services bill overseas users in US dollars ($USD) before converting the price back to the customer’s local currency, particularly those who opted for an on-demand price plan.  Those users who paid upfront or have financial commitments in local currencies may be protected, subject to how long their existing contracts are set for.  There are other financial risks as well that will be discussed in future articles including how the financial treatment of IaaS can be optimised, but CIOs must work with the businesses to mitigate the financial implications of the debt incurred in this article in order to maximise their budgets.

 

Summary

 

IT Debt is primarily a business problem not a technology one.  CIOs have eternally faced the challenge of limited budgets and ever increasing user expectation on experience and service.  This article is not about presenting something new.  It is rather about highlighting a silent challenge that has always existed and I would argue present more risk than ever before to CIOs.

 

What do you think? Let’s hear your opinions in the comments below or enter the discussion on LinkedIn or Twitter and see what we had to say about it on “The Cloud Show“.

 

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