How to create value for businesses at a time when labour arbitrage in the outsourcing industry has plummeted? That is the challenge CIOs are facing today. And to overcome this challenge, they have started looking at reducing technical debt. Technical debt (also known as design or code debt) refers to the eventual consequences of poor system design, software architecture or software development within a code-base. Just like financial debt, these uncompleted changes incur interest.
Business productivity is directly impacted by application software health, which in turn depends on its code quality. Structural quality of code is determined not only by the computing ability of an application but on the architectural details and code construction methods. The code should be robust enough to bolster against crashes, unauthorized access, and data corruption. Ability to be scaled or re-factored with changing business needs is also a crucial aspect of good quality code.
A research report by Everest Group pointed out that the traditional value drivers of labour arbitrage, process efficiency, and standardization, were unable to provide the next level of value in application outsourcing engagements. Furthermore, it said that buyers are facing multiple challenges in their portfolios, such as rapidly declining productivity, and that service providers are unable to respond to these issues. Gartner’s IT Key Metrics Data research of 2014 shows that organizations spend over 56 percent of their application budget simply maintaining applications. The cost of technical debt comes at a rate of $3.60 per line of code. According to the software analysis and measurement company CAST, an average-size application, composed of 374,000 lines of code, would cost you more than one million US dollars.
While cost reduction is still largely the factor influencing IT investments, prevention of technical debt in the long run is also being keenly considered. Business users in the digital age are smart about technical debt and want no-hassle designs that might involve little code refactoring in the future. This changed scenario is largely an outcome of the changed model of outsourcing that is evolving and maturing to different levels, and scaling up productivity is one of the prime objectives across industries today.
At our company, for example, we helped a global bank radically bring down high severity defects, and significantly reduced codebase by deploying pertinent tools that we developed. Likewise, a major telecommunications company was able to use the metrics drawn out by our tool to systematically eliminate technical debt and increase the shelf-life of their applications, by measuring the impact on code quality when multiple vendors are employed.
The other key factor in application development and maintenance that can help scale up productivity is the outcome based model, where delivery models are based on tangible business outcomes, such as ‘improved enrollment rate of a healthcare plan’, ‘reduced call-waiting times’ in a call center, etc. The concept of co-creation is also seeing its genesis in the present business world. The rise of proactive, participative, and innovative customers, increases collaboration through social media. Last but not the least, the idea of sharing both the risks and rewards pushes more organizations toward embracing co-creation in their application development methodologies. Sooner or later CIOs across key IT markets will start integrating these aspects into their approach to deliver more value to their clients.
The article was originally published on Dataquest in February 2015 print edition and is re-posted here by permission.