Growing Global IT Debt Hits $500 Billion, Reports Gartner

Thanks to a decade of shrinking IT budgets, the global IT debt will approximate $500 billion in 2010, a gap that could widen to a potential $1 trillion by 2015, said a Gartner analyst.

Corporations have a list of maintenance tasks that need to be completed to upgrade all applications to the most up-to-date versions. It includes decommissioning older hardware and updating everyone to the most recent version of a software package. IT debt refers to the cost of clearing out this backlog.

Growth In Hidden Costs

“This problem, hidden from sight, is getting bigger every year and more difficult to deal with every year,” said Andy Kyte, vice president and Garner fellow.

When CIOs have a tight IT budget, or a reduced one from previous years, they tend to fund the operational activities and put less critical projects on hold. While deferring the tasks for a year or two won’t pose a major risk to the company, it becomes a ticking time bomb if the IT management does not track application inventory or evaluate the portfolio on a regular basis.

“The bulk of the budget cut has fallen disproportionately on maintenance activities – the upgrades that keep the application portfolio up-to-date and fully supported,” said Kyte.

One way to characterise this backlog is to see it as debt incurred in previous years that needs to be paid off, said Gartner. Deciding not to update the application defers the potential liability but the business needs remains. Additionally, investing in new projects for new functionality without updating the older applications adds to this debt, because IT departments have to complete the upgrade process without breaking the new features.

Years of delayed IT upgrades, combined with the recent economic slowdown, have put corporations so far off the maintenance cycle that business risks are looming. Organisations have a set of critically dependent business applications, such as email, financial software, or even the phone system.

While the systems continue to work and the employees get everything done, the applications themselves are “suboptimial”, if they are not updated regularly with security patches or upgraded to newer versions with added features. Over time, they can become obsolete or fail, which can have catastrophic consequences.

Gartner identified application overhaul as a critical IT task for corporations over the next decade in the report.

Kyte acknowledged the IT debt will never be wiped out completely, even in a strong economy, because IT departments will always prioritise certain applications over others but he added that the “scale of the problem is greater than it has ever been”.

Clearly, IT departments cannot win since, if they focus on maintenance tasks, they are criticised for not innovating or gaining competitive advantage. If they focus on new projects and functionality, they are adding to this IT debt.

Gartner offered a recommendation of sorts to help managers and CIOs navigate the tricky balance between maintenance and innovation. The IT department should do a top-to-bottom review of the application portfolio and produce annual status reports, “detailing the number of applications in use, the number acquired, the number decommissioned, and the current and projected costs of both operating and sustaining or improving the integrity of the application assets,” the analysts said.

The annual status reports won’t accomplish much on their own, since the company still needs to prioritise maintenance over innovation, but it becomes harder to ignore or overlook applications that need attention, said Kyte.