What can CFOs do to lead their company's away from the mountains of technical debt?
First it's necessary to give a quick definition of bad business technology debt: it is the spending of resources and money that don't increase your products value in a lasting way (or increase revenue) and don't improve your chances to get to market quicker for future projects. Bad tech debt can also come from certain projects that have high support costs that consume your technology budget.
You can usually find technical debt like this in the following places:
- End-of-life systems
- Multiple systems which manage the same data
- In the aftermath of an acquisition
- Areas with little investment
- Where there is poor alignment between technology and business
Knowing all of this, a CFO can find himself in the ideal position to tackle technical debt due to strong ties to both business leaders and the CIO and ensure that the company is making the right investments.
First, in order to make sure that you are making the right investments its necessary that IT and business are properly aligned. This can be done by having a group within the organization dedicated to knowing the catalogue of projects going on within the organization and knowing who these projects impact, what systems the interact with, and what the purpose of it is. This will allow for you to keep the company's investments in line with each other.
As CFO ensuring that your company's strategy for investment is focused on actual impact/value and not just short term survival is key. To make sure that your company is continually moving in a positive direction its necessary that resources spent aren't just to avoid a system crash but to actually increase value for your customer and company. If you find yourself in a vicious cycle of spending to avoid system failure this requires a strategic discussion on how to get out of this cycle and onto a path of actual growth.
According to this post, one of the greatest ways that a CFO can steer their company away from technical debt is to partner with other executive to minimize on premise applications and take advantage of the cloud. The high costs associated with maintaining the software and hardware needed to maintain on premise systems running can often not be worth the trouble. It also creates a focus on spending resources to keep services operational rather than focusing on innovation. By moving to the cloud you are able to eliminate the majority of support costs and focus staying competitive as a business through innovation and improved customer experience. Moving to cloud can also substantially reduce development times, reducing your project time and cost, and improve your ROI. You will be able to develop an application once and feel certain that it will continue to work the latest operating systems and browsers without much effort on your part.
The above mentioned tactics will help move your company away from a vicious cycle of technical debt (focused on survival rather than innovation).
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Erik Oltmans, an Associate Partner from EY, Netherlands, spoke at the Software Intelligence Forum on how the consulting behemoth uses Software Intelligence in its Transaction Advisory services.
Erik describes the changing landscape of M & A. Besides the financial and commercial aspects, PE firms now equally value technical assessments, especially for targets with significant software assets. He goes on to detail how CAST Highlight makes these assessments possible with limited access to the targetâ€™s systems, customized quality metrics, and liability implications of open source components - all three that are critical for an M&A due diligence.