Shortsighted CEOs leave CIOs with increasing tech debt

Many organizations are mortgaging their futures by reallocating IT resources from long-term projects to achieve short-term wins, according to a recent survey of CEOs.

Two-thirds of CEOs surveyed by the IBM Institute for Business Value acknowledge raiding long-term IT projects to achieve short-term goals. At the same time, the CEOs surveyed see a focus on short-term performance as the top barrier to innovation.

The authors of a report based on the IBM survey urged CEOs to stop looking for a silver bullet in their IT departments.

“Be honest about where you’re working with outdated tech and set specific timeframes for mission-critical upgrades,” the authors write. “Don’t borrow from the future to get quick wins that your organization won’t be able to scale.”

Finding a balance between short-term and long-term needs can be a challenge, some IT leaders say, especially with heavy pressure to invest now in AI. But shortsighted IT strategies, often pushed by CEOs seeking short-term gains, can saddle CIOs with increasing tech debt that can further undercut long-term outcomes and innovation.

Taking too long on AI projects

Extracting value from AI is a key CEO priority today, and many IT leaders have in turn reshaped their IT agendas to emphasize projects centered on the technology.

Part of the problem, however, is that organizations move too slowly on AI projects, says Arijit Sengupta, founder and CEO of Aible, provider of an AI development platform. AI technology is changing so fast that projects taking more than a month can end up built on out-of-date technology, he says.

AI projects should start with rapid prototypes, Sengupta adds.

“AI projects done right are not shortcuts that distract from the long-term goals of the organization,” he adds. “Adopting AI to fundamentally transform the organization is the key challenge and opportunity of this decade and perhaps our lifetimes. But this has to be done right to avoid dead ends and tech debt.”

Slow developing AI projects aren’t the only problem, however. This year, many CIOs have focused on getting AI prototypes up and running without fully considering the long-term operating costs, he says. Gartner recently estimated that organizations that don’t understand how their generative AI costs scale could make a 500% to 1,000% calculation error, he notes.

“What you don’t want to do is build a solution that won’t be cost-competitive long-term,” Sengupta says. “I’ve heard from many business leaders that they’re terrified their projects will succeed, because if they do, their costs will be unsustainable at scale. That’s not where you want to be.”

Balancing cost-cutting and innovation

Other IT leaders say there’s a delicate balance between short- and long-term IT goals. A lot of the current focus with AI projects is to cut costs and drive efficiencies, but organizations also need to think about longer-term innovation, says Taylor Brown, co-founder and COO of Fivetran, vendor of a data management platform.

“Every business, at some scale, is based on the decision of, ‘Do I continue to invest to make my product better and update it, or do I just keep driving the revenue that I have out of the product that I have?’” he says. “A lot of companies face this, and if you want to stay relevant, you want to compete and invest in innovation.”

There are some companies that can probably survive by not thinking about long-term innovation, but they are few and far between, Brown says.

“If you’re a technology company, then absolutely, you have to constantly be thinking about innovation, unless you have some crazy lock-in,” he adds. “In order to win new customers, you have to keep innovating.”

Some IT leaders, however, aren’t convinced about the IBM report’s focus on IT shortcuts vs. innovation. IT spending is driven more by a desire to enable business goals, such as growth, and managing risks, including cyberattacks, says Yvette Kanouff, partner at JC2 Ventures, a tech-focused venture capital firm.

“These objectives might require short-term IT spending to help the business achieve its goals, but it’s not a trade-off,” she says. “It delivers results.”

Still, there is some tension between short-term and long-term goals, because every organization has a backlog of IT tasks that need attention, she adds. “While it’s important to address the backlog, continuously focusing on cleanup can get in the way of forward progress,” Kanouff says. “This is why it’s essential to balance short-term and long-term objectives.”

Organizations need to focus on longer-term goals because chasing the latest IT trends often doesn’t work, she adds. “This can lead to what I like to call ‘keep tech-current paralysis’ to acquire the best, the newest, or the coolest products, which don’t necessarily add value to the business,” she says.

Kanouff recommends that CIOs view every IT plan needed to achieve their business goals through the lens of risk. For example, if an on-premises data center creates major cybersecurity risks, an organization may want to prioritize its cleanup over a long-term cloud migration project that brings long-term benefits.

“If these risks are not addressed, the business is at a disadvantage,” she says. “While it’s important to stay in execution mode and focus on tasks as a CIO, it’s equally important to ensure that any action taken truly aligns with the overall business objectives.”