Ready to curb tech debt? Start here

By David Ruggiero

In 2021, mergers and acquisitions (M&A) hit a record high of $5.9 trillion—64% higher than 2020.¹ Financing was readily available, with interest at near-zero rates all year.² Then came interest rate hikes, inflation, and war. In 2022, M&A plunged more than 30% to $3.6 trillion.³

The party may have ended, but for many of the merged and acquired companies, plenty of work remains to integrate systems and settle tech debt.

Think of tech debt as personal fitness for your organization’s information technology. The longer you put it off, the more work will be necessary to catch up.

Any time a systems recency update or tech stack upgrade is delayed in favor of spending resources and time on other priorities, tech debt grows. As it does, the real cost of eventually paying the debt increases—with interest.

• IT environments become more complex.
• Operational agility erodes.
• Cybersecurity vulnerabilities multiply.
• Cost redundancies endure.

With the end of cheap lending, now is the time for IT and business leaders to address tech debt. Read on for four guiding principles to keep in mind as you do.

1. Identify and prioritize your debt

When merging two systems and teams that were previously separate, clarity is crucial. The debt you think you have may not be what your new partners think they have. Best to start on the same page.

Assess your tech debt with an eye toward which operating systems, databases, software versions, and processes are eligible for updates. Include a description of what needs to change, ranked by priority, as well as recommendations for what changes to make and cost estimates for each.

• Where are the easiest wins?
• What is most critical to address?
• How much will it cost?
• How long will it take to address?

Keep in mind: it may not be possible to resolve all tech debt by version currency. Some of the debt may be better addressed separately.

For example, we worked with an international skincare business that wanted to move to a hybrid cloud model, incorporating public cloud from AWS with legacy on-premises services.

An initial assessment of the AWS foundations revealed the company’s existing environment was not capable of scaling as desired. There also were gaps and risks created by a third party that would make the project unmanageable as it grew.

We advised the customer to repair the existing AWS landing zone, while keeping delays to other ongoing projects minimized. We modified the landing zone using AWS best practices, automation, and good governance. The customer understood and accepted that an amount of risk remained. Still, the solution enabled the team to autonomously build and support their mission-critical applications in the AWS cloud.

Once the cloud platform risks were addressed, the customer was able to prioritize and update critical workloads first, ensuring minimal disruption to those teams.

2. Know your desired state

With more clarity about the current state, you're better positioned to define a desired state and design an integration architecture.

The future architecture defines the processes and tools your team will use to replace, connect, and integrate your systems. It’s a critical step—both to realize the benefits of cross-platform work and to ensure you don’t inadvertently acquire new tech debt in the process.

Our own history shows the benefit of establishing an ideal end state before taking on tech debt. When Kyndryl spun off from IBM in 2021, we had 24 months to replace more than 1,700 legacy applications. Decentralized governance and redundant data environments also posed challenges. It was an opportunity for a fresh start, and we took it.

Rather than weeding through all our legacy applications, we identified our core platforms—including HR, collaboration, enterprise management, and others—and strategically aligned our business processes to these platforms. This process has cut our enterprise applications roughly in half.

By limiting our use of custom solutions, we’ve been able to unify processes, secure operating environments, and move to a 100% cloud-based infrastructure.

As you design your integration architecture, limit expectations that you’ll accommodate every application interface—doing so may actually yield new tech debt.

Now on to the integration itself.

3. Start with a proof of concept

It can be helpful to develop a proof of concept to show your team (and yourself) what success will look like. Pick one small part of the overall project and work it through to completion so your team and end users can see how it helps, what benefits it provides, and what pain points it eliminates.

Spinning up a proof of concept can also help you identify issues you wouldn’t have otherwise seen conceptually, or problems that could only arise from actually using your system.

At a large North American car manufacturer, we executed a proof of concept to migrate two of the company’s core apps to the Google Cloud platform. This demonstration helped prove the technical conversion of COBOL to JAVA, showcase the art of the possible in a new user interface, and give insight into what the full program effort would take.

4. Communicate as you migrate

Remember: resolving tech debt can take time. You could be in an interim state for 12 to 36 months, so pace yourself. As you do complete different parts of your phased plan, deploy the solutions to your wider organization to start getting feedback early.

Many integration plans falter because they jump from the current state to the end state with no mind paid to the interim state in between. When something goes wrong, they have to go back to the beginning, rather than resetting within the interim state and continuing to move forward. Clear, consistent communication with key stakeholders is a critical piece to the overall program. Communicating the overall road map, including interim states, as well as current issues, challenges, and where you are on that road map, is critical to keeping everyone informed and on the right page.

The opportunity of M&As

M&As present great challenges but also great opportunity. Using the four guiding principles outlined above, companies can leverage the M&A transition to reduce and eliminate legacy tech debt.

David Ruggiero is a Kyndryl Consult Partner within Cloud Advisory. With broad and deep experience across multiple industries, he helps customers understand how to transform across their Application Portfolio achieving better time to market, more efficient and cost-effective operations, higher employee engagement, and better business outcomes.

¹ Mergers & Acquisitions: The Secrets To Success, Forbes, May 2022
² Federal Funds Effective Rate, St. Louis Fed, June 2023
³ Sharp fall in global dealmaking brings pandemic-era frenzy to a halt, FT.com, Dec 2022