Isn’t it time to sort your business out?

We often talk about technical debt – the cost of maintaining and updating old systems to keep them operational. In most banks, this is 60% to 80% or more of annual IT budgets; in fintechs it’s less, because they have less history, but even here it is often 30% to 50% of costs. The reason? Things become dated very quickly in a digital world.

When I think of this at a personal level, a good example happened just as I started writing this blog. A recurring payment set up three years ago was renewed automatically by PayPal. I don’t use this service, company or software anymore but, because I set it up in 2019, they billed me and I only just noticed that they are billing me. That’s my technical debt.

Another example a friend of mine who was talking about his frustration of the price he pays for broadband.  He was explaining that he has a second home and purely pays for the broadband to monitor a property via webcam. It made him angry that, if he lived there, it would be cheaper and newer to have the service but, because he doesn’t live there, it’s older and more expensive. But he needs it to ensure the webcams work. That’s technical debt.

If you put it in this perspective, how much of what you pay for do you use or need? How much could be cut? Work out the numbers and then multiply them by 10,000 or 100,000 and you get the scale of technical debt a large bank or fintech are exposed to. A HUGE amount of cost overhead that is unnecessary and not needed (editor: isn’t that the same thing?).

In a conservative estimate it is likely that most banks spend 20% or more of their IT budget on things that aren’t needed and, when you have an IT budget of $17 billion – as in the case of JPMorgan Chase – that’s more than $3 billion spent on overheads which could be saved.

The challenge with this is how to do it? For example, my friend says he keeps the webcams and therefore the Wi-Fi, because he cannot be bothered changing the system and taking the risk of losing the connection. Why isn’t he bothered? Because the time to go to the property, organise the replacement system, set it all up again and then reboot the webcams and apps connected to them, is too much trouble and time.

It reminds me of the CIO I knew from a big City bank. He was telling me that they moved office and, six months later, received a massive bill from British Telecom for a dedicated fibreoptic line to their old office which, due to an oversight, they forgot to switch off.

What this tells us is that at a personal and corporate level, there are lots of things we pay for because we are too lazy to deal with them, can’t be bothered or forget to turn them off.

The UK has a few TV shows about such matters, such as Sort your life out, but where’s the company that can step in and sort your business out? The large consulting companies; the boutique advisors; the spring cleaners? Or, to be clearer, the CxO who wants to make a difference and eradicate the overhead by redesigning and challenging the old ways of doing things.

I would go with the CxO … would you?

 

Postscript: As I wrote this, I discovered that SYLO means Sort Your Life Out ... isn't if funny how we always talk about banks operating in Silos?