Global IT debt will total approximately $500 billion in 2010, with the potential to rise to $1 trillion by 2015, according to Gartner, Inc. After a decade of tight budgets, the scale of the maintenance backlog has created a systemic risk, particularly for large organizations.
Gartner defines IT 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.
"Over the last decade, CIOs have frequently seen IT budgets held tight or even reduced. The reaction has been to still deliver quality of service for operational services and to use any potential project spend to deliver new functionality to the rest of the business," said Andy Kyte, vice president and Gartner fellow. "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. There is little problem if this is done in one year, or even in two years, but year after year of deferred maintenance means that the application portfolio risks getting dangerously out of date."
"The issue is not just that maintenance keeps on getting deferred, it is that the lack of an application inventory and the absence of a structured review process for the application portfolio. This means the IT management team is simply never aware of the true scale of the problem," Mr. Kyte said. "This problem, hidden from sight, is getting bigger every year and more difficult to deal with every year."
Gartner analysts said one way to characterize this backlog of deferred liability is to see it as a debt incurred in previous years that will need to be paid off at some time. This "IT debt" is a hidden risk for many organizations, and given continued tight economic conditions, this IT debt is growing, and the associated business risk is growing.
As businesses continue to invest in business value-added projects that add more functionality and complexity into the existing and aging portfolio, the size of the IT debt grows as well, because the additional functionality and complexity will need to be maintained and upgraded to a more-reliable state at some point in the future.
"A modern enterprise or public sector organization is likely to be critically dependent on a number of business applications. Each one is at a particular point in a complex life cycle; each one is slowly but inevitably diverging from its ideal state toward a suboptimal state, and potentially toward obsolescence or failure," said Mr. Kyte. "While it is true that there has never been an IT organization without a backlog of maintenance activity, the scale of the problem is significantly greater than it has ever been."
Gartner analysts said IT leaders should produce an annual report on the status of the application portfolio. The report should detail the status of the application portfolio in terms that the rest of the business can readily absorb, 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.
"Producing an annual report will not bring about a galvanized response, but dealing with the huge backlog of application maintenance and upgrade activity is never going to generate galvanic activity - there will always be more-pressing problems that the business will need to deal with," Mr. Kyte said. "However, over time, the steady drip of information into the management team will start to bring about changes in attitude and develop a willingness to engage in dealing with IT debt."
Additional information is available in the report "Measure and Manage Your IT Debt," which is available on Gartner's website at http://www.gartner.com/resId=1419325. This research is part of the Gartner Special Report "Application Strategy: Overhauling Your Application Portfolio." The Special Report is available at http://bit.ly/bH4Fky. The Special Report includes video commentary, as well as links to numerous reports examining the application overhaul process.
Kyte will provide more-detailed analysis during the session "Building the Compelling Case for Application Overhaul" at Gartner Symposium/ITxpo, being held October 17-21 in Orlando, Florida.
Gartner Estimates Global 'IT Debt' to Be $500 Billion This Year, with Potential to Grow to $1 Trillion by 2015
September 23, 2010