IT debt to soar

Global IT debt will amount to about $500 billion in 2010, with the potential to rise to $1 trillion by 2015, says Gartner.

“After a decade of tight budgets, the scale of the maintenance backlog has created a systemic risk, particularly for large organisations,” explains the IT research and advisory company.

It identifies IT debt as the cost of clearing the backlog of maintenance that would be required to bring the corporate applications portfolio to a fully supported current release state.

"Over the last decade, CIOs have frequently seen IT budgets held tight or even reduced. The reaction has been to still deliver quality of service for operational services and to use any potential project spend to deliver new functionality to the rest of the business," says Andy Kyte, VP of Gartner.

He adds that the bulk of the budget cut has fallen disproportionately on maintenance activities - the upgrades that keep the application portfolio up-to-date and fully supported.

“There is little problem if this is done in one year, or even in two years, but year after year of deferred maintenance means that the application portfolio risk is getting dangerously out of date."

The issue is not just that maintenance keeps on getting deferred, explains Kyte, it is the lack of an application inventory and the absence of a structured review process for the application portfolio.

“This means the IT management team is simply never aware of the true scale of the problem. This problem, hidden from sight, is getting bigger every year and more difficult to deal with every year."

Gartner says one way to characterise the backlog of deferred liability is to see it as a debt incurred in previous years that will need to be paid off at some time.

An application overhaul should be the critical IT strategy for the next 10 years, it adds.

“This 'IT debt' is a hidden risk for many organisations, and given continued tight economic conditions, this IT debt is growing, and the associated business risk is growing.”

It adds that, as businesses continue to invest in business value-added projects that add more functionality and complexity into the existing and aging portfolio, the size of the IT debt grows as well, because the additional functionality and complexity will need to be maintained and upgraded to a more reliable state at some point in the future.

"While it is true that there has never been an IT organisation without a backlog of maintenance activity, the scale of the problem is significantly greater than it has ever been," says Kyte.

Gartner suggests that IT leaders should produce an annual report on the status of the application portfolio. The report should detail the status of the application portfolio, detailing the number of applications in use, the number acquired, the number decommissioned, and the current and projected costs of both operating and sustaining or improving the integrity of the application assets.

"Producing an annual report will not bring about a galvanised response, but dealing with the huge backlog of application maintenance and upgrade activity is never going to generate galvanic activity - there will always be more pressing problems that the business will need to deal with,” says Kyte.

"However, over time, the steady drip of information into the management team will start to bring about changes in attitude and develop a willingness to engage in dealing with IT debt."

Gartner also says worldwide enterprise IT spending across all industry markets will grow 2.9% in 2010 and surpass $2.4 trillion.

It adds that all industries are continuing to return to growth after a challenging year in 2009, when IT spending by vertical market totalled $2.3 trillion - a 5.9% decline from 2008.

“The enterprise IT market will certainly return to growth in 2010, but we now expect it will grow by only 2.9% globally, down from 4.1% growth we had forecast earlier this year,” says Kenneth Brant, research director at Gartner.

He adds that the national and international government sector will experience the strongest growth rate in 2010, with IT spending growing 4%.