The year 2020 has presented significant challenges to businesses worldwide. Leaders in those businesses have had their lives turned upside down personally and professionally. Business plans have been blown apart. In some cases, the fundamental assumptions about products, customer’s supply chains and staff have been thrown into question. Enterprise architects, or EA’s charged with defining the technical strategies that have been supporting and transforming businesses find themselves in new and unfamiliar environments. Major paradigm shifts have taken place and EA’s are now responsible for rationalizing the technical architecture for a new environment.  

Disruption is unsettling but the same disruption contains opportunities as the landscape changes and customers, employees, and suppliers have new needs, expectations, and constraints. One constant in the pre and post pandemic environment that technology architects will recognize is Technical Debt. Experienced architects know their biggest challenge is not necessarily in deploying new applications, new platforms, or capabilities but managing investment in technology, balancing that investment with other business priorities. Striking that balance means recognizing and managing technical debt. The pandemic crisis presents EAs with new priorities and opportunities for managing that Technical Debt.  

I recently published “Tech Debt 2.0® How to Future Proof Your Small Business and Improve Your Tech Bottom Line”. The timely release of that book is crucial to small and medium businesses. However, reaction from readers has shown that the book’s concepts and recommendations, especially now, are equally valuable to CIOs and technology architects in larger enterprises. 

Let’s step back though and examine the concept of Tech Debt. Initially technical debt was defined as defective code released to rush a product to market. Today with technology permeating nearly every aspect of a business and in light of the realities of the new environment, it’s important to expand the definition of tech debt – Tech Debt 2.0 is any liability incurred in the development, acquisition, use and retirement of technology – i.e. hardware and software systems, or the skills set needed to support them. EAs must reevaluate the role of technology in their enterprise. This means reprioritizing investments in legacy systems, infrastructure and skill sets, be ready to abandon obsolete, dysfunctional systems, processes and methodologies.  

Architects must assess the changed needs of the business, – customers, staff, supply chain and identify efficient technology to support those new requirements. 

There is opportunity to walk away from legacy technology containing Unplanned Tech Debt that has never been corrected, the result of poor practices or poorly communicated requirements.  

The move to remote workspace may present the option to discontinue the use of equipment or applications that have become instances of Creeping Tech Debt where features become obsolete, replaced by the better, faster more capable upgrades. Or, the applications and operating systems are no longer supported, causing security vulnerabilities. 

Changes in market dynamics as the customer base struggles to understand their new needs, constraints and opportunities invite architects and product developers to consider incurring Intentional Tech Debt. By releasing prototypes and minimal viable products (MVPs) customers become partners in product development, helping to build the plane even as it reaches cruising altitude. Architects know this will entail false starts as perceived requirements morph or fade away and require rework as the product matures. But the approach may buy competitive advantage as all players scramble to find their way in the new market space.  

Internally the pandemic disruption will raise the threat of Tech Debt in the form of shadow IT, as frustrated, impatient functional area leaders are tempted to deploy their own solutions outside the guidelines required by a coherent architecture.  Hmmm, let’s see will it be Zoom, or Skype, or Aircall, Slack, Microsoft Teams, GoToMeeting, Hopin and on and on. Unapproved, unmanaged tools can have cybersecurity issues or fracture data integrity by creating multiple versions of the truth. 

This far into the Covid-19 crisis we have seen the very real existential threat as businesses in more vulnerable industry sectors are forced to permanently close. 

As this continues there will be increased activity in mergers and acquisitions. Enterprise architects have an important role to play on both sides of an M&A transaction. Both involve the aggressive management of Tech Debt.  

To maximize the benefit of selling a business or merging with another organization a company must recognize and eliminate excessive Tech Debt. Unsupported, dysfunctional legacy technology can represent major liability to a potential buyer or merger partner. Such a liability could significantly affect the value of the transaction. An EA needs to foresee and mitigate this by communicating effectively with stakeholders the consequences of Tech Debt. 

The EA with the acquiring company is responsible for effective due diligence that uncovers instances of Tech Debt. These include, not just some of the obvious liabilities mentioned so far but also unsuspected instances such as software license stipulations where, for example, the sheer number of employees in a new organization can vastly increase the software maintenance costs even if the number of actual users doesn’t increase. Tech Debt can not only alter the price of a transaction but create an unsurmountable deal breaker. 

Managing Tech Debt is an important part of an organization’s response to the pandemic crisis. Enterprise architects and leaders charged with IT governance have the opportunity and actions they can take on offense and defense to manage Tech Debt to protect their business. 

 Top 10 Plays for EAs managing Tech Debt:

• Stay healthy, your family and business need you. 
• Do a health check of your project portfolio and reprioritize any Tech Debt backlog. 
• Refocus IT governance to accelerate decision making and maintain goal alignment with the organization 
• Develop an “acute” action plan with intent and purpose for the next 30,60, 90 and 180 days and execute flawlessly. 
• Prioritize actions that focus on revenue preservation and customer experience. 
• Diagnose your Tech Debt and plan to address root causes. 
• Conduct a business impact analysis to prioritize your cyber risks. 
• Review and revise essential “pandemic” security policies and practices. 
• Engage your internal team and external partners to best utilize their resources and identify cost saving opportunities. 
• Protect core operations and monitor critical infrastructure services for internal users. 

 

Michael C. Fillios is the Founder and CEO of IT Ally, LLC., a leading IT and Cyber Advisory firm for small and mid-size businesses. He is a four-time CIO, entrepreneur and senior global business and technology executive with over 25 years of experience in transformation, change leadership and operations management in the Pharmaceutical, Industrials, Automotive, Banking and Consulting Industries. His first book, Tech Debt 2.0™: How to Future Proof Your Small Business and Improve Your Tech Bottom Line, was published by the IT Ally Institute in April, 2020. 

In 2020, he formed the IT Ally Institute, a non-profit organization that provides research, best practices, thought leadership and peer to peer programs specifically developed for small and mid-sized businesses. To learn more about the IT Ally Institute and register for our latest research, thought leadership and peer to peer round tables, please visit www.Itallyinstitute.org. 

[This article was originally published on architectureandgovernance.com.]

To stay competitive in our digital world, small and medium-sized businesses need to be equipped with and proficient in the latest technologies. Yet, unlike large companies, most SMBs lack the resources to staff an IT department. Along with lack of oversight, outdated software or hardware, inadequate cybersecurity, or one bad tech investment could seal the demise of a small enterprise.

In his new book, “Tech Debt 2.0®: How to Future Proof Your Small Business and Improve Your Tech Bottom Line”, senior global business and technology executive Michael C. Fillios offers expert insights and practical strategies to help small business leaders managing evolving technology to their advantage and avoid racking up debt that could put their company in peril.     

Fillios recent sat down with Young Upstarts to share his insights about the role of technology-related debt to the future viability of small and medium-sized businesses.

Here is some of our conversation:

Most of us are familiar with the term technical debt. What exactly do you mean by “Tech Debt 2.0”?

In the software industry, the term “technical debt,” also known as design debt or code debt, is widely used as a catchall to cover everything from bugs to legacy code to missing documentation. That definition is nearly 30 years old, and hadn’t evolved with the pace of technology changes, from mainframe computers to the Internet to the cloud, and much more.

In “Tech Debt 2.0®”, we offer an expanded definition that is more inclusive and contemporary with current technology, and shows the impact technical debt can have on an organization if it is not actively managed. My team and I felt it was important to revisit this definition, and in particular, with an emphasis on small to medium-sized businesses. For SMBs, tech debt is a potential existential threat that could impact their future viability and very survival.

Tech Debt 2.0 is any liability incurred in the development, acquisition, use, and retirement of technology — i.e. hardware and software systems, or the skills set needed to support them. And it’s something every business leader needs to be aware of.

How do small and medium-sized companies routinely accumulate tech debt, and often without realizing it? What are some common warning signs?

There are three types of tech debt: unplanned, creeping, and intentional. The first two can accrue undetected. Unplanned tech debt occurs because of an unplanned event, often caused by bad development practices, poor technique or poor communication of requirements. Creeping tech debt is caused by obsolescence of systems or equipment. Systems age because of improvements in upgrades or new products. Equipment ages over time or is obsoleted by new models with improved speed or functionality.

Right now, chances are tech debt is accruing in your business—and it is not showing up in your monthly variance reports or other accounting controls that your organization depends on for recognizing financial its well-being or warning signs of trouble. It is also likely that someone in your organization, without explicit or implicit authority or oversight, has taken action or made decisions that have added to the technical debt of your enterprise.

As it relates to symptoms, firstly, I would say a likely sign is that your underlying business could be underperforming, whether financially, servicing customers, or not being able to grow or expand. More specifically, tech debt can be detected internally before it escalates if leadership is paying attention to some of the early warning signs, such as:

• The majority of IT investments are focused on keeping the lights on vs. helping to achieve business objectives.
• Project are consistently delivered late and over budget.
• Data is hard to access, its quality is poor, and it doesn’t drive decision-making.
• Inability to attract and retain IT talent.

Rather than leave it up to leadership to connect these dots, my team and I wanted to develop a more intelligent way to uncover these underlying root causes. Therefore, we created the Tech Debt 2.0 Diagnostic to help organizations understand and measure their TD score.

We’re all familiar with high-profile cyberattacks on major business and government organizations. Why should small business leaders take cyber risks seriously? What are some simple ways to reduce them?

The reason cyber advisory is critical for every SMB is 60% of all targeted attacks are towards small to medium-sized organizations. And of those data breaches that are successful, 90% impact small to medium-sized companies. What explains the higher success rate? Research shows 82% of small to medium-sized businesses are not adequately protected from cyberattacks. And the data shows that most small business owners don’t have a plan for response if they’re hit. That’s a problem, because cyberattacks can range from the mildly annoying to the deeply destructive.

Here are a few ways SMBs can reduce cyber vulnerabilities:

– Outsource security monitoring and management to a dedicated resource or cloud provider with necessary resources.

– Establish, communicate, and enforce security policies governing passwords, policies, procedures, especially around physical access, network access, email policies, data security.

– Keep all systems and equipment patched and up to date on security upgrades, and discard equipment or systems that are no longer supported.

You mentioned intentional tech debt. When can tech debt be beneficial to a growing business?

Tech debt can be beneficial when it is deliberatively incurred with a specific goal in mind, such as speed to market for competitive advantage or release of prototypes to clarify customer requirements. It is essential that intentional tech debt incorporate a plan for remediation at some time in the future and that the organization has rationalized the consequences of performing that remediation.

In addition, tech debt can play a critical role if a business is in the process of being bought or sold. This can be a double-edged sword depending on whether you are buying or selling a company.  For an investor or PE firm looking to purchase a company, it is very typical to review the amount of financial debt that you will be purchasing as part of the transaction. Tech debt is similar to financial debt, but you aren’t necessarily paying back someone other than yourself.

Conversely, if you are selling a company, and have managed your tech debt such that your liability or debt rating is low, this could create an advantage for you in negotiating a potential premium, as you have built tech equity rather than accrued debt.

How can small businesses stay up to speed on evolving technology and compete with large companies with IT staffs and state-of-the-art resources?

Staying on top of tech debt is especially difficult for SMBs that might not have the technology departments, CIOs, and CTOs of larger organizations. However, independent, experienced firms and individuals with no interest in promoting any one solution are poised to provide their expertise to help SMBs differentiate real technology advances from technology-of-the day solutions. They provide not only fractional services as traditional consultants but also often as virtual CIOs or CTOs, available on-demand to fill these roles for SMBs and help manage technology investment and technology strategies for the future.

Another path open to SMBs dealing with tech debt is collaboration. There can be substantial value in a collective approach to addressing shared issues. Collaboration opportunities come in a variety of forms and have different advantages. Vendor user groups, Chambers of Commerce, Roundtable Programs, and others, foster collaboration among similar organizations and peers sharing a particular technology, brand, or product, and in some cases, provide technology agnostic advice from peers.

For leaders of small and medium-sized businesses, it is crucial to both invest in consultants and seek out collaborators in successfully managing and leveraging tech debt 2.0.

[This article was originally published on youngupstarts.com.]