Wouldn’t it be great in our working lives if we could just wipe the slate clear every few months and start again afresh? No unfinished tasks. Farewell to endless inboxes with messages we’ve been meaning to deal with for far too long. Undo poor decisions with a wave of the hand. Unfortunately, we rarely have that luxury. And although many of our investments of time and money may help build up positive experiences and skills, we also constantly build up a legacy of good and bad decisions that create a debt that weighs us down, slowing progress.
The digital economy exacerbates legacy problems. The increasing speed-of-change in many technological areas can mean that today’s great advance quickly becomes tomorrow’s sunk cost. This phenomenon of “technical debt” is particularly recognized in the IT field. According to a senior executive survey of leading financial, industrial, government and IT services organisations conducted by the Surrey Centre for the Digital Economy (CoDE) in early 2016, some 40-50% of all IT assets are in urgent need of modernisation. In the case of the UK alone this represents a technology debt estimated to be in the hundreds of billions of pounds, a figure that rivals the UK national pensions deficit.
Digital disruption is now clearly visible in virtually every sector of the economy, accelerating at a pace not seen in any previous era of technology-induced change. Such disruption is largely associated with the explosion of data-consuming mobile devices, Internet-connected sensors and systems, and many forms of real time processing of information, underpinned by cloud services that extend the capabilities of traditional batch-based data centers. The wide scale adoption and diversity of Internet-of-Things devices fueling new forms of data analytics and machine learning will further widen the current performance gap here.
Much IT investment has taken place at the front end of organisations to support the growing customer demand for digital services, but the core systems that form the foundation of any IT estate are unable to evolve at sufficient speed to respond to the digital tsunami cascading down the supply chain. In particular, the IT sector itself is being rocked by the new public cloud phenomenon that is transforming services in a fundamental way. Analysts such as Gartner anticipate that 50% of all internal IT and business services will migrate to the public cloud by 2020. And while this may bring massive processing and data power on-line to these organizations, it is also surfacing many important questions with respect to how IT services should evolve.
It is now observed that while many core systems have become efficient and stable over the many decades of their existence (dating back in many cases to the seventies and eighties), they are now also seen as a key obstacle in the rapid evolution to a fully integrated digital business. A senior automotive executive expressed the problem clearly in his stark commentary that for many organizations ‘software is the new rust’.
Despite the seismic changes taking place across the new digital economy, CoDE’s survey reveals that the majority of Boards remain largely inert to this legacy issue. They see the process of fundamental systems modernisation as overly complex, too costly and involving unacceptable levels of risk. Only a cataclysmic event such as a full scale public outage (as experienced by RBS in 2011) appears to elevate this topic to the board agenda.
In this context, all evidence suggests that legacy extends well beyond the boundaries of technology itself. As always, technological challenges are wrapped in a blanket of process, governance, skills, and human factors that dwarf the initial IT-centered observations. According to senior executives, it is more about a prevailing legacy culture, attitude and mindset.
In tackling the legacy problem and thus assisting organisations to take the big leap towards to becoming fully digital, CoDE’s survey uncovered some valuable lessons for a successful migration strategy aimed at reducing or even eliminating technology debt. These are detailed in the report and summarised as:
- Adopt a business driven and evolutionary (step by step) rather than revolutionary (big-bang) approach when modernising core systems and associated infrastructures to align with customer needs in the emerging digital economy;
- Adjust both the business and supporting IT operating models to progress towards an integrated digital organisation, whilst maintaining strategic control over both these aspects of enterprise architecture;
- Tackle each layer of the IT stack by employing open standards, modern tools and techniques, especially those emerging within open cloud environments such as Amazon’s AWS and Microsoft’s Azure;
- Start to componentise (or ‘hollow out’) monolithic and heavily customised core systems by employing software packages and public cloud services, thereby simplifying access to valuable corporate data and improving front- and back-end IT integration.
Overall, the conclusion from the many interviews CoDE conducted is that ‘do-nothing’ is no longer an option if leading organisations wish to avoid catastrophic melt-down as witnessed in sectors such as Retail and Entertainment. In fact, the survey suggests that it is time for Boards and corporate leaders to control their own destinies in the new digital economy, otherwise someone else is surely able and willing to do so. As one insurance executive stated: “we don’t want to be Ubered out of existence”!
Download the report on our homepage, here.