Our partner, Nextworld, wrote an article about assessing the cost of enterprise technical debt and provided some short-term actions that would help organizations prioritize initiatives to pay much of it off.

For those who might need a refresher, technical debt is a measure of a company’s burden that stems from aging and inflexible computer systems, and it can be just as much of a liability as financial debt. When exploring the topic, there are three main questions to ask;

• What’s the annual cost?
• Is the technical debt growing or shrinking?
• What will it take to substantially reduce it?

The Technical Debt Equation

Konrad Rogers, the Chief Information and Operating Officer at Nextworld, explains that most technical debt can be traced to a single source in an organization; the Enterprise Resource Planning (ERP) software. But how does this all happen? How does it build?

At first, when exploring an ERP for your company, it seems smarter to pick the fastest solution, not the one that preserves long-term resilience. There are investments in shadow IT initiatives, and you deploy technology that goes outside of the central technology organization. The complexity of the technological infrastructure increases, the data is fragmented, future upgrades become more expensive. Maintenance is a heavy-hitter and devours IT resources, making it difficult to develop new products and capabilities. The system becomes inflexible and unreliable.

The above situation can go on for years. Think about your own system, how long it has been in place, how many hands have dealt with it over the years. There were times of innovation in the past but with the way technology is in today’s world, the traditional way no longer benefits the same way that it used to. You need to pay off the principal of your technical debt so you can devote your resources to modernization. Per Rogers, the most powerful way to reduce technical debt and acknowledge the burden of your aging technology is to eliminate the legacy ERP system.

Switching to a modern cloud-based ERP can radically reduce the complexity of your organization’s technology infrastructure. Cloud solutions are designed for integration that increase speed, data accuracy, and flexibility.

“The best cloud software today is designed with a humility that accepts that no single solution can do everything. Rather, it’s built to work with multiple programs while keeping a single up-to-date version of critical data. Equally important, it empowers rather than inhibits innovation by business units.”

Making the move to Cloud is dependent on a variety of factors and it might not be the best fit right now however, there will come a time when you no longer have a choice. Perhaps your best strategy is to keep going on-prem with continuous innovation updates. Cloud is just infrastructure, so you don't need to move your whole instance. Maybe it's a good time to pick and choose what you want in the Cloud, like security, to test it out. Moving away from traditional ERP makes the most sense.

In the end, the opportunity to tackle technical debt must fit your overall strategy. If you’re not too sure what that strategy could look like, we would be happy to share more about our own story or what others are doing.

If you’d like to read Konrad Rogers’ full blog, you can do so here.