SOFTWARE DRIVES BUSINESS VALUE MORE AND MORE EVERY DAY.
And its quality does impact businesses. Like financial debt, there is also technical debt: All past technology choices that can either accelerate development, innovation and growth, or slow everything down. Normally financial debt has its direct impact on a company’s exit value. With technical debt however, the impact is less visible.
According to Mckinsey, CTOs estimate that 20 to 40 percent of the value of the entire technology estate contains technical debt (source). When you don’t have it under control this prevents you from creating new customer value and therefore has a direct negative impact on your business value. Like McKinsey’s research stated, better scoring on technical debt correlates with higher revenue growth. (source)
Technical debt is like dark matter: you know it exists, you can infer its impact, but you can’t see or measure it. This results in product delays, hidden risks, spiraling costs, and even engineers leaving your company in frustration. Leaving technical debt as a big surprise, could have a negative impact on your future exit value, or may prevent you from certain actions like adding new acquisitions to an existing one. Focusing on an optimal exit, this should be on the agenda, but is often neglected.
SIG’S ROI BASED APPROACH
SIG has a proven track record of performing over 200 IT Due Diligence projects in exit processes, mergers and acquisitions. Based on all the knowledge we’ve gained over the past 25 years, we’ve created a 3-step ROI approach to maximize the business value of your software, and manage technical debt. We can help you:
With our Software Assurance Platform, Sigrid®, we analyze the entire application landscape, identify risks and opportunities and their implications in terms of technical debt.
Sigrid provides you with a prioritized list of software improvement opportunities. You know what to focus on high ROI systems. After alignment with your IT strategy, you can decide which ones are the best to improve.
We make it easy for you to decide what to maintain, renovate or rebuild, all based on a solid business case to improve valuations.
VALUE IMPACT: SAVING 12% INSTEAD OF PAYING 20% MORE
SIG helps to prioritize what needs to be done to maximize the efficiency of the software and its impact on your business value. Based on our data of 2,500 systems analyzed, we compared three scenarios (5 years horizon) in terms cost implication:
- Maintain as-is with no significant quality improvements
- Renovate all systems
- Renovate high-RoI systems only
Software development cost in a 5 year period:
This chart shows the estimated costs for each scenario. Yes, those are billions of Euros on the axis; 2,500 systems are included. A technical debt scenario that renovates only the high-RoI systems can save 12% on costs compared to maintaining as-is. However, renovating everything would instead increase costs by 20% due to the renovation efforts not being sufficiently compensated by lower maintenance costs.
With our process you are able to control and improve your software’s business value on a day to day basis continuously. This will help you to maximize your exit value and be ready any time.
Sometimes neither renovation nor continuing maintenance as-is are beneficial. Rebuild may be required for technical or other reasons. In such cases, monitoring quality closely is vital to avoid creating the tech debt of tomorrow.
Do you have 15 minutes to discuss how SIG can help assure the Exit Value is as high as possible?
Click here to set-up your call on Eddy’s calendar (he will send you the dial-in details for the Zoom meeting) or leave your details here.
Eddy Boorsma, Partner SIG Transaction Services