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How to Overcome Cost-Barriers to Digital Transformation

Technology transformation relies on an enterprise IT department that is ready to move into the 21st century. The transformation means reinvesting in technology to meet customer expectations and future trends, preparing for unexpected events and disruption, and architecting cloud solutions that can support new business models through digital technology.

One of the most significant barriers to digital transformation is the concern over costs and the organization’s financial health. The cost can quickly derail progressive conversations and lead decision-makers back to old issues around accumulating technical debt without significant changes or forward momentum. “[Organizations] are being overwhelmed by the investment needed to establish an ecosystem of partners and by navigating the complexity of connecting a mix of cloud services and other technologies together,” NTT Global Data Center reported after surveying 200 IT decision-makers in large enterprises. “Often already stretched thinly, IT teams can be too busy ‘keeping the lights on’ to devote the time and resources needed to innovate and build a strong business case that validates a new project and helps to secure the budget they require.”

Companies that are going to be successful through digital transformation must prioritize financial performance and cost transparency that supports eliminating technical debt.

Three tactics that organizations can implement to continue innovation initiatives while also tamping down on runaway budgetary items include:

  1. Acting as a transparent broker of services to the business
  2. Investigating the total cost of ownership and whittling down technical debt
  3. Benchmarking costs and monitoring project spending

Using a framework, such as Technology Business Management (TBM), for these initiatives and bringing together the whole organization under an umbrella taxonomy and methodology has the power to centralize efforts, motivate business decisions, and optimize spending. “Leaders who aim to enhance organizational performance through the use of digital technologies often have a specific tool in mind,” say the experts at Harvard Business Review. “But digital transformation should be guided by the broader business strategy.”

Leaders who aim to enhance organizational performance through the use of digital technologies often have a specific tool in mind, but digital transformation should be guided by the broader business strategy.

Act as a Transparent Broker of Services to the Business

It is impossible for leaders to work together without having all of the essential facts and information on the table. Transparency powers transformation by presenting a holistic view. In this initiative, transparency is found in the method of reporting.

Traditional financial reporting does not deliver a comprehensive view of information that is important to decision-makers, says Todd Tucker, author of Technology Business Management: The Four Value Conversations CIOs Must Have With Their Business. Instead, costs must move beyond the general ledger (GL) and cost center and capture a multi-dimensional perspective of costs that are in tandem with metrics like units (e.g., users, servers, applications, hours of labor, etc.). When all costs, resources, and consumption are included in reports, then finance, technology, and business arms of the organization can see the complete picture.

To be a transparent broker of services and empower action in the transformation process, IT should deliver comprehensive financial reporting along with detailed data that gives a full view of costs and usage. Data sharpens the details and illuminates where quality can be improved.

Investigate Total Cost of Ownership and Whittle Down Technical Debt

The anticipation of technical debt can be daunting to organizations that are still wading into transformation or are at a point in the middle of the process. However, a framework or common methodology offers a way to reduce errors and still deliver project phases on-time by creating a shared vision around value.

A total cost of ownership (TCO) takes into account a purchase price and the costs of the operation. It is ideal to find a product/service that delivers a low TCO over time; however, value can also be delivered through the product/service having a positive impact on the business’s ability to execute. Technical leaders can get more leaders on board by demonstrating the value that services and transformation initiatives are comparable to third-party providers, are delivered cost-effectively, and benefit teams within the organization.

The TBM framework identifies the following four techniques for delivering IT services cost-effectively:

  • Benchmark by industry peers and business unit;
  • Perform per-unit cost trending to ensure continuous cost improvement;
  • Measure and manage the cost of spare capacity, unused assets, and vendor spending; and
  • Monitor and manage project spending.

With more efficiency in the delivery process, technical debt is minimized. Using a process like Agile can also help reduce debt because, according to Agile coach Dan Radigan, “Technical debt is the difference between what was promised and what was actually delivered.” Therefore, defining debt, modularizing architecture, and automating tests will help resolve existing technical debt while keeping new development in check.

Technical debt is the difference between what was promised and what was actually delivered.

Dan Radigan – Agile Coach

From the reporting side, TBM continues to track a complete view of project costs and delivered services — taking into account the costs of supporting the new services and the resources they consume. This granular, comprehensive approach to implementation and monitoring of all cost influencers helps leaders better manage and deliver transformation initiatives supported by efficacy data and benchmarked progress.

In conclusion, digital transformation investments are an essential part of organizations competitively participating in the 21st century landscape. Barriers like cost concerns can be overcome through meticulous practices around transparent reporting and addressing technical debt. With a framework in place, teams can feel empowered to move forward with necessary and timely transformation decisions.

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Les Ottolenghi, TNCR Contributing CIO
Les Ottolenghi, TNCR Contributing CIO
As a senior executive, Les provides expertise in business innovation through the use of technology to entities ranging from Fortune 500 companies to industry-disrupting startups. His professional passion lies in expanding the creative thought process and cultivating the business discipline required to develop billion-dollar opportunities and change the competitive landscape.

1 COMMENT

  1. “Technical debt is the difference between what was promised and what was actually delivered.”

    I believe this is fundamentally incorrect. “promises” as in what was promised to the business typically focus on the “what” (function and features) and very little on the “how” (underlying technology). The business typically is un-interested in the underlying technology and would not be able to offer an informed opinion on it. Technical debt (IMHO) occurs when technology architectural and design decisions are made for expedience… because we need to complete the MVP, and then we need to get the next release out. Some of this can be fixed by “modern” architectural approaches (eg, well designed micro-services), which is great if you are starting from scratch.

    Bottom line: It is incredibly easy (and tempting sometimes) to surprise and delight your business (delivering what was promised) while still building technical debt.

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