Maximizing the value derived from technology spend has never been more important—or more challenging. The opportunities to leverage technology to deliver growth, flexibility and profitability are increasing, while the need to manage technology spend to support enterprise profitability in highly competitive business environments remains. According to Accenture Strategy research, inadequate technology is listed as one of the top three barriers to growth, while 47 percent of companies with plans for growth are building their future growth strategies on technology and mobility—the top strategy identified by survey respondents.1 Ninety percent of business and technology leaders believe IT-led innovation is critical to survival2 and 82 percent of companies are focused on freeing up funds to invest in growth initiatives.3
Extracting value from technology is essential for growth and competitiveness. To do so, companies must reduce debilitating IT technical debt to compete with disruptors, collaborate and integrate for speed and financial leverage, and relentlessly manage technology unit service costs to free up funds for growth.
Reduce Debilitating Technical Debt
Industry disruptors emerge from obscurity to market prominence almost overnight. They are technologically nimble. They apply latest technologies to their advantage enabling them to steal market share from traditional industry leaders. Technology improvements made quickly by disruptors take traditional leaders many times longer to implement and cost more due to the lack of current enabling technology.
To remain competitive, traditional leaders must recover from technical debt. Companies can start by avoiding incremental debt. They should minimize new investment in obsolete systems and embrace SaaS and cloud. For non-SaaS applications, investments should be made with the anticipation of product-like service management to keep the technology current, capable and flexible. Companies should simultaneously develop a short, medium and long-term strategy to eliminate existing technical debt. These strategies should focus on market-critical capabilities in the short term with less burdensome debt elements addressed in the longer term. Companies need to consider the financial impact of the needed changes and find the financial resources and time needed to address their technical debt challenge.
Collaborate for Speed and Financial Leverage
Companies will not be able to recover from technical debt by leveraging traditional practices. They will need to leverage SaaS, cloud platforms, and collaborative relationships with digital ecosystem partners to move with speed at a manageable cost. Research shows disruptive startups are three times more likely to leverage ecosystem partners than traditional leaders.4
Leveraging the technologies, talent and financial resources of external partners will yield several times the return available from internal investment on home grown technology. Collaborating with partners can speed the identification of game changing innovation and bring the innovation to market more rapidly.
Relentlessly Manage Technology Unit Cost to Serve
To provide the funds needed to acquire new technology to grow the enterprise and to eliminate technical debt, companies will need to look for opportunities to reduce unit costs for core/ commodity services. Some companies will need to develop the capability to identify true cost to serve—not just project expense, not just run expense, but a cost including total spend associated with the service over its lifetime.
Companies should eliminate waste associated with perceived versus actual need. To do this it can be helpful to adopt a zero-based mindset (ZBx) that focuses on identifying non-working money that can be freed up and re-invested in strategic growth areas. Services should be designed to an agreed required level of service versus always delivering the highest level of service at a high cost. Companies should also watch for entitlements such as multiple computing devices, white-glove service desks, company provided cell phones and high-end video conferencing that are misinterpreted as requirements.
As companies move out of technical debt and move to pay-as-you-go external services, the mix between capital and operating expense shifts more heavily towards operating expense. Additionally, companies incur short-term project costs associated with recovering from technical debt, in addition to the potentially higher cost of maintaining services to technical currency. Companies must plan for these changes in spend and mix as they move to a higher value IT operating model. They must look to unit service cost reductions and waste elimination, for example through ZBx initiatives, to fund value-enhancing initiatives.
Meet the Challenge
Companies can meet the challenge of cost-effectively leveraging technology to deliver business value by reducing technical debt, collaborating for speed and financial leverage, and managing unit cost to serve to generate funds for growth. They will then be able to use technology at scale to fend-off industry disruptors while growing their business.
1Accenture Strategy, 2018 Revenue Growth Study
2Rangwala, Abizer, “A New Frontier for Technology - Using nimble innovation to drive profitable business growth”, 2016.
3Jeruchimowitz, Paul; Colwill, Esther; Hudson, Naomi; McMillan, Kent; “Zeroing out the Past”, 2017.
4Berthon, Bruno; Lyman, Michael; Kassack, Damian; Chakraborty, Kunal; “Mind the Gap – What’s the Distance Between Your Digital Operating Model and Your Digital Strategy?”, 2017.