Don't Be Misled on IT Debt; You Don't Owe Anyone $500 Billion

Confusing "IT Debt" with "Technical Debt" might cost you next year's IT budget.

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This looks like a story about financial aspects of IT, but if you're a technologist -- especially one responsible for IT operations and the budget to fund them -- don't stop reading (trust me).

Two waves of news stories about the same report -- and the same statistic with two different names -- have the potential to confuse both IT and financial people about cost-cutting in IT budgets. Unfortunately, it will be the IT department and its operating budget that would be the loser in any conflict.

The first wave came right after Gartner released a report Sept. 23 estimating that, globally, businesses had fallen $500 billion behind in the amount they should have spent if they were keeping all their IT systems fully up to date.

The report described the "debt" as "the cost of clearing the backlog of maintenance that would be required to bring the corporate applications portfolio to a fully supported current release state."

Although the post also prompted refutations that called it a "bogus statistic" and a scare tactic using inflated numbers, Gartner's intent appeared to be to point out the real cost and potential risk budget cuts forced in the ongoing IT maintenance that makes up the bulk of IT operations.

The report got a second round of coverage after it was Slashdotted (with a connection to the $465,000 grand the National Science Foundation gave Gartner to study the cost, and ISVs with Solutions started weighing in on how to fix the problem.

Why Technologists Should Care

The problem is, the way Gartner defined IT Debt is only part of what financial experts talk about as "Technical Debt," which is actually the whole cost of developing, operating and maintaining a system until it pays off the cost of building it. Corporate IT people think of that as ROI because they have to justify the time and money they spend according to the benefit they deliver.

Startup technology companies -- on whom most of the discussion about Technical Debt actually involves -- think of it as debt because it's the money they have to borrow to pay to develop a new application.

If you get the two confused, you may end up agreeing with the CFO that in hard times you shouldn't run up more technical debt (thinking he/she's talking about not launching any big new app dev projects for a while) when you're actually agreeing to having your IT maintenance budget cut.

Not a good result.

Technical Debt is a subject of academic study and discussion and even though it's a perfectly valid part of cost-justifying IT in corporate environments, if you follow many of those links, I guarantee you will go to sleep, and dream you have a much better grasp of startup financing than you probably do.

"IT Debt," despite your CFO's eagerness to have you pay back the $500 million to the company, actually means what you've been doing for the company by not spending money. It means systems leaving old machines on life support, software unpatched and networks in need of some backbone.

It's not debt, it's a risk to the company that increases with every dollar unspent and every hour that passes.

You've heard that 70 percent of IT budgets are spent just to keep the lights on? "IT Debt" is the part of that 70 percent that you cut back;   it means you haven't been paying off the light bill and a lot of bulbs have gone out.

When the topic comes up, and it will, don't get sidetracked by discussions about total app-dev cost and reductions in Technical Debt. You've been dealing with ROI and ROA and ROE metrics for years, and Technical Debt is no different.

Just remember that mathematics and accounting have almost nothing to do with each other, despite both depending heavily on numbers.

One follows the laws of the universe and responds to failures in calculation by smacking your plane into a mountain or missing Mars completely.

The other looks really mathy, but it's all variables and no constants, firm rules that can be bent or ignored in one department as long as another is made to pay for it, and gives as accurate a picture of real activity as a fun-house mirrror on a foggy day.

Remember to keep straight which one is which.

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