Financial Companies: 5 Steps to Get Your Technical Debt Under Control
Big banks and financial organisations want to move faster. The demand for modern digital services and the pressure from digital pureplays mean it’s critical to have an agile technology ecosystem.
But technical debt is the main sticking point. Decades of old code and technology now hold these companies back from adjusting to changing digital tides as quickly as they’d like. But all is not lost. And ‘debt’ is a familiar word in the financial space, right?
5 steps to addressing technical debt
1. Take stock of your debts
2. Put together a repayment plan
3. Consolidate your debt
4. Automate what you can
5. Seek help
It’s not all bad
Ward Cunningham coined the technical debt metaphor; it works well. In a recent survey, a majority of IT leaders say it poses a fundamental limit on their ability to innovate, dragging their company’s performance.
It’s important to remember that not all debt is bad, provided it’s manageable. For instance, it helps people own homes, pay for education or start a business. Likewise, development teams may deliberately use virtual gaffer tape to fast-track their next app release. Time to market is essential.
However, they’ll pay interest on the debt later in the form of additional re-work to optimise the application. Aiming for zero technical debt is also often unrealistic since that would require shifting more focus from building new products and features to updating and bug-fixing existing solutions.
It's important to remember not all debt is bad, provided it's manageable.
So, what do you do to address technical debt? This article takes five well-known steps to tackle personal debt and applies them to technical debt.
Raiffeisen Bank International
See how we set up cloud to enable business units to modernise and seamlessly develop and deliver financial applications.
Remember, before tackling your technical debt, you must identify the business drivers and the related technical problems you’re trying to solve. Why are you doing this? It may be that platforms are unsupported, which poses a potential security or compliance risk, or you have a skills shortage because your legacy systems were written in programming language from the 60s.
Tackling technical debt is not simply a technology problem; it’s a business problem.
Learn more about financial services compliance in cloud.
5 steps to addressing technical debt
Step 1: Take stock of your debts
This first step can often be a shock, but it’s important not to get discouraged. Think of it like a financial debt - where you’d list all outstanding debts: credit cards, overdrafts, loans, mortgages, including the interest rate. If your monthly debt exceeds your monthly income, then you’d need to take action to reduce your debt.
It’s similar for organisations looking to reduce their technical debt. Begin by understanding the core business processes and underpinning technology landscape, including operating systems, databases and applications.
This discovery phase is functional and technical. It will give you insights into the depth of your debt, highlight potential gaps and provide a sense of the effort required to modernise.
Step 2: Put together a repayment plan
Unpicking a complex financial debt needs a planned and staged approach. First, it’s essential to establish a budget that shows you where all your money is going and how you spend your income.
Similarly, tech teams need a ‘repayment plan’ to reduce the size and value of your technical debt and determine the programme, timeframe and resources dedicated to the work.
There are two recognised approaches to help pay down your financial debt. Each has pros and cons:
The snowball method proposes that you start by paying off your smallest debt first, followed by the next-smallest debt and so on, until all accounts are paid. This method allows you to build up early momentum.
A guide to digital resilience in financial services
See our best practice guide to leveraging the cloud to modernise and achieve business continuity.
In contrast, the avalanche method focuses on first paying off the debt with the highest interest rate, followed by the next highest interest rate. This way, you pay less interest overall; however, if the principal of your most expensive debt is large, it may take a long time to pay off and can feel daunting.
The same thinking can be applied to technical debt when considering where to start, although it’s important to consider things like business criticality, operation resilience, risk, complexity, and customer value.
As we said - legacy tech isn’t all bad and continues to be big business. For example, it is estimated that $3 trillion in daily commerce flows globally through COBOL systems in the financial industry. Developed in the 1960s, COBOL underpins deposit accounts, cheque-clearing services, card networks, ATMs, mortgage servicing, loan ledgers and countless other services.
You must work with it rather than fight against it – new applications must work seamlessly with older underlying systems until they are ready for modernisation.
Tech teams need a ‘repayment plan’ to reduce the size and value of your technical debt and determine the programme, timeframe and resources dedicated to the work.
Step 3: Consolidate your debt
Debt consolidation involves moving all your existing debts with various lenders into one place with a single lender, making payments more manageable. It may not reduce your interest payments, but gives you a fixed repayment schedule, simplifying finances, so you don’t have to worry about multiple due dates each month.
Financial services businesses with a digital transformation agenda will often look to address technical debt as they shift from on-premises to the cloud. The lift and shift migration approach of legacy on-premises technology to the cloud requires minimal or no changes – it’s the cloud migration equivalent of debt consolidation.
But just as debt consolidation doesn’t solve the fundamental problem of historic overspending, the lift and shift approach doesn’t address historic underinvestment in modernisation.
Also, it doesn’t deliver the full benefits of the cloud nor promote a culture of innovation. Instead, it just moves your technical debt from one place to another – but it helps build traction and is often a natural place to start.
Just as debt consolidation doesn’t solve the fundamental problem of historic overspending, the lift and shift approach doesn’t address historic underinvestment in modernisation.
Step 4: Automate what you can
Forgetfulness can wreak havoc on your finances. For example, forgetting to pay a credit card bill on time can lead to missed payment fees, higher interest rates and blemishes on your credit report.
Automating the hell out of your finances will help keep you on track, reducing stress and cognitive load. Examples of personal finance automation include round-ups (helping you save while you spend), payment notifications (sharpening the pain of payment) and scheduled bill payments. Some accounts even let you set automatic transfers from your current account to your savings pot every time you do things which save money, like cycling to work.
We’ve already mentioned that you can lift and shift to migrate legacy systems to the cloud. But there are other ways of migrating applications to the cloud that actively deal with technical debt.
These options - known as the 6Rs – including rehost (lift and shift) - you can read more about here. Depending on your criteria, you map your applications to them. A smarter and faster path to modernisation and cloud-native services is to modernise workloads as you migrate them. It’s known as refactoring – changing the code in a way that doesn’t change what it does. Refactoring requires more investment during the migration phase yet lowers technical debt significantly, bringing longer-term financial gains.
Once you have reduced your debt – how do you then stay debt-free? It’s essential to think about how you manage your debt in the future. Unfortunately, this modernisation is not a one-time effort. It’s a continuous process of discovery, iteration, and refactoring.
Automation is your friend here. It helps your development team by reducing time spent on repetitive tasks, and automated testing helps lower your risk by identifying defects as early as possible.
Step 5: Seek help
Getting rid of technical debt is hard work and requires commitment across the business. At best, technical debt is a redundant system that needs to be retired. At worst, it leaves you vulnerable to hacks, data loss and potentially massive fines from the financial regulators.
Technical debt can build up for many reasons, but some of these reasons reside across the organisation. For example, promises were made to customers putting development teams under time pressure, or business priorities changed, causing developers to keep switching focus, increasing the complexity of their code. This is why it’s not simply an IT issue but a business-critical agenda item.
As part of your digital transformation, you are likely looking at how you address your technical debt in a secure, resilient, and compliant way. And while this may be the first time you have had to tackle your debt problem, there are experts you can turn to for help who have done it hundreds of times with proven techniques and best practices. This last step is universal – if it gets too much - seek help.
Are you set up for digital resilience in the cloud?
For financial services, basic continuity planning has always been part of keeping up with regulations.
But two factors are driving business continuity up the agenda for FSI right now:
- The current geopolitical instability in Europe
- New regulations like DORA and NIS that require businesses to leverage digital technologies like the cloud to keep running in the event of a disruption or emergency
We have a cloud-based strategy to achieve business continuity - helping you use cloud to safeguard critical data and keep essential services running during disturbances.
It's called the Digital Vault. And our handy guide explains things a little more, and breaks down whether or not you're really resilient to potential risks. Read it here.
A guide to digital resilience in financial services
See our best practice guide to leveraging the cloud to achieve business continuity.
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