ERP systems have revolutionized the internal structure of not only large organizations, but also SMEs (small & medium enterprises). The demand for ERP continues to grow because of the cost advantages the software offers. For example, the systems provide data security, enable easier compliance, offer scalability, and improve workflows (among other things)—all on one centralized system.1 While an ERP application such as SAP’s ECC and the newer S/4HANA offers many advantages, it also presents challenges with technical debt.
Technical Debt
Technical debt occurs when the solutions have introduced so much customization, or complexity, that support and maintenance costs start to trend in an unsustainable direction. This type of a “hockey stick” cost and maintenance curve (in other words, costs suddenly rising after being fairly stable) eventually reaches a tipping point that cannot continue.
A Closer Look
Ward Cunningham, an author of the Agile Manifesto, originally coined the term technical debt and later referred to the concept in a 1992 Oopsla conference.2 He believed that violations of ideal coding practices and standards create technical debt, which must be repaid over time.
In Cunningham’s view, a technical debt may speed up short-term work progress, but the real danger is accumulated, unpaid debts and their ever-increasing costs. These costs come in many different forms, including actual financial costs for maintenance, additional time for new solutions to work around the debt, and the inability to deploy more modern solutions. Essentially, technical debt impairs an organization’s ability to simplify, standardize, and modernize.
Technical debt in today’s systems often reflects design decisions and business requests. This debt can occur from accidental flaws, inexperience, or poor business and design decisions. Many poor design decisions come from haste to complete projects on time, or not being familiar with the full capabilities of the software.
Some short-term technical debt can be an advantage. For instance, temporary technical debt can give the business a short burst of speed to deliver solution deadlines while ensuring high quality. However, if the debt continues to stack with other solutions and technical debt over time, it can become unsustainable.
At the end of the day, introducing customization, development, and complexity leads to a system that needs more customization, development, and complexity. As solutions or fixes age, and as their complexity increases, organizations incur the technical debt of the initial investment with the long-term maintenance debt of supporting and working around them.
The Impact of SAP Technical Debt on Enterprises
As the demand for technologies and systems increases, so does the need for reliability. After all, organizations simply cannot cope with frequent system failure.
However, the quest for system efficiency does not always lead to high-quality software solutions. Even though manufacturers and clients may strive for high quality, real challenges (for example, business pressure, implementation, and system maintenance) can rush or restrict the process.
If the quest for reliability and efficiency does not focus on simplification, standardization, and modernization, the end results can be catastrophic. For example, technical debt may delay, or even prevent, the use of technology for new business models, scaling for additional business, or pursuing new market channels.
Often, technical debt leads to high maintenance costs, which reduce cash flow available for investment. Meanwhile, system reliability goes down, eventually leading to failures. For example, in a research study of technical debts in the customer relationship management (CRM) systems of 26 companies, Ramasubbu et. al (2019) found that technical debts had a negative impact on the gross profit scale of the firms involved. 3 Consequently, the business value of the systems drops significantly over time. In some cases, that “value” can even become negative.
Due to the interconnected nature of technology systems, technical debt also poses a high security risk to the supply chain of the entire organization. For an integrated ERP system, a vulnerability at one point can potentially affect its connected components.
Finally, maintenance can become difficult. For example, ERP software vendors provides system updates, but the customization or development from the customer is incompatible.
To provide deeper insight into how technical debt can cause problems, the Software Engineering Institute from Carnegie Mellon University noted a few examples.4 For instance, a poorly designed, shared application among multiple independent groups triggered coordination issues, which slowed processing and created inconsistent data. In another scenario, a company went the opposite direction, creating separate, disconnected access control solutions. These varying solutions required higher maintenance and posed a security risk. Finally, in a data warehouse, the teams used a different data reporting technique than the one designed, where they mass copied data. The high data usage caused problems with storage, records management, and maintenance.
In all three of these scenarios, poor design and lack of communication created the difficulties that lead to technical debt. Oftentimes, these are major factors in other technical debt scenarios as well.
As reflected in this example and previous statements, common problems that arise from technical debt include the following:
- Slower processing
- Data inconsistencies and departmental miscommunications
- Unnecessary maintenance
- Security risks
- Excessive utilization of resources (e.g. data storage)
Remedying ERP Technical Debts
You cannot continue compiling technical debt until you reach an unsustainable tipping point. Rather, you need to counter technical debt with pragmatic solutions that reduce or eliminate—and prevent technical debt from compiling again.
Unfortunately, technical debt can hide itself for many years without any notification and then suddenly produce a disastrous failure. Failure often occurs during peak business seasons because the technology is stressed to levels not tested for, and in some cases, not designed for. As a result, businesses must proactively monitor and evaluate their processes to detect technical debt early on.
Proper debt management is rooted in eight activities: identifying the debt, taking measurements, prioritization, prevention, monitoring, paying back, documentation, and communication. 5
Further research can provide you more specific methods to remedy technical debts. For example, SEI from Carnegie Mellon University recommends that the business employ software analytics, so it can efficiently and accurately identify core problems.6 With those analytics, you can focus on the previous list of the five major issues that lead to technical debt. This way, you can reduce technical debt while placing business operations and success at the forefront.
Additionally, businesses should notate every single debt they acquire on a list. During this time, they should write down what needs to be done to pay off the debt, and regularly monitor said debt with milestones and due dates. In other words, the business should consider those technical debts the same way a responsible person does a credit card. The person may need to utilize credit to provide a temporary step forward, but they should also proactively plan for and afford to pay off the debt as soon as possible.
However, clearing or reducing technical debt is more than a technical or change management exercise. You must realign the culture within the IT organization and the business environment to avoid repeating the same mistakes.
In summary, your organization must do the following:
- Proactively list newly acquired debts.
- Evaluate whether a potential debt is a strategic step forward or an anchor holding them back.
- Consistently monitor the system for any overlooked technical debts, and monitor current debts to ensure milestones are met.
Maintaining an optimized environment requires new standards, approaches, mechanisms, and tools for bringing the right focus to technology solutions as business solutions. When you change the organizational factors that allowed technical debt to occur, you keep your technical debt under control for the long-term journey.
Conclusion
Your ERP system is at the forefront of business integration. As a central technology solution for your organization, the system helps automate office functions, integration with suppliers, and direct interaction with customers. Your ERP application has numerous proven benefits, but when they become obsolete and dysfunctional, you may encounter an ERP technical debt crisis.
To remedy the potentially damaging consequences of growing technical debt, we encourage you to take a hard look at your systems and culture. Your approach to technology solutions, your culture, and your controls may need to change. You can discover some of the warning signs of potentially serious technical debt when you ask yourself a few key questions:
- Are technology upgrades costly, time consuming, and require significant remediation?
- Are controls insufficient to evaluate genuine ROI before and after technology enhancements or new technology investments?
- Is IT too slow to respond to business needs?
- Do enhancements take too long?
- Is support costly and incrementally increasing?
- Do you have a backlog of changes or functionality requests?
- Do you struggle to find resources in the open market who understand the existing environment?
- Do you struggle to work around customized functionality to try to deploy standard solutions?
- Is the technology support staff no longer familiar with standard application solutions and options?
If you have answered “yes” to any more than three of these items, you likely have a technical debt issue that will escalate over time. You can’t avoid all technical debt, but you can employ the proper methods, mechanisms, and cultural support to manage the challenges that technical debt creates.
For more information on how to simplify, standardize, or modernize your technology landscape so you can reduce and manage technical debt, reach out to us.
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1 “SAP S/4HANA Cloud, Public Edition.” https://www.sap.com/products/erp/s4hana.html?campaigncode=crm-ya22-int-1517075&source=ppc-1na-bing-search-71700000111999561-58700008462863326-s4hana_s4hana-x-x-x&dfa=1&gclid=59af63341af21e86d4da06bb45c46cca&gclsrc=3p.ds&
2 (Summary) Cunningham, Ward. “The Wycash Portfolio Management System.” https://c2.com/doc/oopsla92.html
3Rajiv D. Banker, Yi Liang, Narayan Ramasubbu. “Technical Debt and Firm Performance”. Management Science, Forthcoming, 2019.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3476765
4Software Engineering Institute, “What Is Enterprise Technical Debt?” 2022. https://insights.sei.cmu.edu/blog/what-is-enterprise-technical-debt/
5Zengyang Li, Paris Avgerioua, Peng Liang. “A systematic mapping study on technical debt and its management”. Journal of Systems and Software 101, 193-220, 2015
6Software Engineering Institute, “Managing Technical Debt with Data-Driven Analysis.” Updated 2022.https://www.sei.cmu.edu/our-work/projects/display.cfm?customel_datapageid_4050=6520&customel_datapageid_4050=6520
