First up is a new report from Andy Kyte, a Gartner fellow, in which he estimates that “Global IT Debt” will total $500 billion in 2010, with the potential to jump to $1 trillion by 2015.
Those are big numbers, but what does Global IT Debt mean? “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,” notes Kyte in the Gartner announcement.
from CIO article ERP Sticker Shock: Maintenance, Upgrades and Customizations, September 23rd, 2010
Well we finally have a term for the traditional licensing model in which large vendors and consultants charge exorbitant sums of money for delivering little more than an ephemeral vision of increased efficiency and seemingly limitless savings . . . Global IT Debt!
Referencing my favorite scuba diving analogy, you know the one where the diver stabs his buddy in the leg and swims for the service at the first sign of a shark, the irony is that this term was coined by Gartner whose sage advice was supposedly designed to help organizations to avoid disaster rather than embrace it.
What’s worse, and in a deflective manner that would rile the sensibilities of a Larry Winget, whose books include titles such as Your Kids Are Your Own Fault, and emphasize the importance of taking personal responsibility, the article talks about the need for “user education” relative to clients having a better understanding their existing ERP capabilities. Isn’t it always the users fault?!
The writer then suggests that once duly educated, clients will be convinced of the need to throw good money after bad by “clearing the backlog maintenance,” to bring the “corporate applications portfolio to a fully supported current release state.”
Never mind the fact that the expletive-deletive application has never worked properly in the first place. Talk about an unconscionable cash grab!
Think of this way in terms of an every day life example. It is like you have purchased a car while it is still being created on the designer’s board. Then, and even though you do not have immediate use of the car in the foreseeable future, the dealer insists that you buy an extended maintenance agreement in which you pay a hefty monthly fee. Doesn’t this make sense? Who wouldn’t jump at an opportunity to own a car under these circumstances?
What the writer and Gartner expert fail to mention is that 85% of all IT/ERP initiatives fail to achieve the expected results and are eventually scrapped costing clients collectively 10s if not 100s of millions of dollars. Perhaps , and I am just throwing out ideas here, instead of user ignorance, may be the reason for the Global IT Debt is somehow tied to poor results?
Based on the above, clients would do better buying their ERP solutions from some guy wearing a trench coat in an alley. At least it would be a lot cheaper to achieve the same outcome!
30
Procurement Insights 
fielding dent
December 18, 2010
Agreed. However i disagree with Mr. Widget’s book title! However the analogy drawn is clear.
fielding dent
December 18, 2010
My apologizes. Mr. Winget..that should of read.
Steve Christensen
December 19, 2010
I saw this report when it came out. I have written two blogs about this very topic. Both can be found on our website.
To your point, the reason these applications are “out of version” is because the initial implementation was a train wreck AND the ability to upgrade to a new version (even if someone was crazy enough to consider it) is effectively impossible. To do so would require that all of the customizations/modifications originally made to the base application just to get it to work in your business would have to be re-done. No sane person looks at that and says, “Oh yes, may I have more uncontrollable budget and schedule fraught with risk”.
This debt will continue to mount until it just goes away. It goes away entirely by discontinuing maintenance on the application. Nothing prevents the customer from continuing to run the application that is already installed. Lock the darn thing in a closet, feed it electricity, reclaim the budget you used to spend on maintenance and invest that in Operational agility.
The next generation of enterprise computing does not require the risk, cost or disruption of the systems that caused the Global IT Debt in the first place. Instead, the leverage these systems as core financials and unleashes the Operation to achieve the change that is constantly demanded.
Full disclosure, BabbleWare is one of the companies that has delivered these next generation systems. Our cutsomers, such as Toyota and Owens and Minor, have already reaped the benefits of an easy to use, agile and rapid application that is custom fit to your business requirements in as little at 1 day.
Each customer’s business is unique. ERP’s were not made to adapt to this model. They were built to consolidate not to change. They were built for Finance and not for Operations.
Companies can begin to make their portion of the Global IT Debt vanish by leaving their current systems untouched and adapting their business rapidly, without disruption and with custom solutions that are installed and measured BEFORE investing in their roll out. All the old rules of business applications have changed and the customer now gets to write their own rules and control the success of their own business.
procureinsights
December 19, 2010
Thank you for disclosing your company’s focus and for sharing your thoughts as they coincide with the direction of the industry. The only question . . . what took so long;)
Shyam
July 23, 2011
true… you know what they say…Hire an accountant whose own tax return is more complicated than yours