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What Every CFO Should Know About Technology Debt

What Every CFO Should Know About Technology Debt

As a CFO, you have the responsibility to formulate your company’s investment strategy. One area of investment most critical to any organization is technology. While the CFO can rely on the CIO to understand the technology, every CFO must have a full understanding of their company’s technology debt to effectively guide the organization to financial success.

The first place to see obvious technical debt is within your company’s software development processes. Consider this debt the work required before a particular job can be considered complete or proper. If the debt is not repaid it will continue accumulating interest, making it hard to implement changes in the future.  An example would be when a company pushes to get a product into market as soon as possible to gain market share or defend against a competitor. In cases like this, it makes sense to launch the product knowing that it isn’t everything isn’t exactly as it should be but it’s enough to either gain market share or stop competitive encroachment.

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The second, and most expensive, type of technology debt is with the software, hardware, support, and development costs used to support a system(s) the company knows are end of life. These are the system(s) that should have been replaced, and written off as a sunk cost a long time ago. As a CFO, you can identify these systems by all of the time consuming, high-cost projects with the sole business value of staying in business. Another way to identify these systems is by identifying the projects that drastically fall short of the benefits promised in their business cases. These cost overruns are due to the costs and/or project queue required by these systems in order to make the project a success.;

 



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