$500 billion -- it's a number so big you'd assume it's a component of the national debt. It isn't. Instead, it's what Gartner analyst Andy Kyte calls the IT debt. "When budgets are tight, maintenance gets cut. After a decade of tight budgets, the scale of the maintenance backlog has created systemic risk, particularly for large organizations," he says.
The "debt" really has two major components: One is underfunding and even neglect of routine but important hardware replacement purchases and software upgrades. The other is the slow degradation of enterprise applications.
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On the most obvious level, managers like Steve Davidek, the system administrator for the city of Sparks, Nev., scrambles to keep systems up and running with budgets that barely covered the basics. Sparks, with a population of about 88,000, was hit hard by the recession, and when it came time to trim services, the IT department was in the cross-hairs, losing 6 of its 14 full-time employees.
"It's been a Band-Aid approach, and the people we support are on the verge of not getting what they need," he says. When money does flow, Davidek says, he hopes to complete the virtualization of servers in the data center, a key task that was just half done during the recession.
Choices made by IT have also contributed to the "debt." Mundane "run the business" expenses are taking a backseat to initiatives, particularly cloud computing, that management hopes will save money in the not-too-distant future, says Harcharan Sing Rajpal, head of Tata's IT application services consultancy for North America.
The second leg of the "IT debt" monster has to do with aging enterprise applications. In reality, these apps are collections of data and business logic encapsulated in programming instructions and myriad platform components, such as operating systems, databases, hardware, and network infrastructure, Kyte says. As they age, these apps are "inevitably diverging from an ideal state toward a suboptimal state, and potentially toward obsolescence or failure."
In normal times, maintenance would slow the decay, "but such investments can be tough to justify in a tight economy when precious investment funds need to be used to deliver short-term, visible business benefits," Kyte says. Even if the current version of an application is running well, the next upgrade for many applications is going to involve a substantial shift in the underlying platform infrastructure.
It would be easy to dismiss Kyte's analysis by claiming IT always wants more. But he says this time, it's different: "While it is true that there has never been an IT organization without a backlog of maintenance activity, the scale of the problem is significantly greater than it has ever been. It is not unreasonable to suggest that the maintenance backlog -- and, therefore, the 'IT debt' -- was probably at an all-time low on 31 December 1999, when every IT organization had spent a significant amount of money upgrading or replacing systems in order to deal with Y2K.
"Since then, however, the demands for IT investment to deliver real business value through running, growing, or transforming the business have drained the maintenance coffers year after year, so year after year the IT debt has grown," Kyte says.
Is that $500 billion number too high? Kyte says he derived it by analyzing several large Gartner clients that generally do a good job of keeping applications up to date. That led him to estimate that a typical Fortune 2000 company would require upgrades costing more than $200 million each.
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