Article
Why your technology spend is a black box, and whether you are overpaying
Most CEOs have the same uneasy feeling about technology cost. The invoices are large, they go up every year, and no one can give a clear answer to a simple question: are we getting our money’s worth?
That feeling is usually right, and there is a name for most of what is hiding in there. It is technical debt, the accumulated cost of shortcuts, aging systems, and deferred work that every technology estate carries. It is real money, and it stays invisible until someone measures it.
McKinsey’s research put numbers on it. CIOs estimated that technical debt amounts to 20 to 40 percent of the value of their entire technology estate before depreciation, and that 10 to 20 percent of the budget meant for new products gets diverted to servicing it instead. A large share of what you spend on technology is not buying you anything new. It is paying interest on decisions made years ago.
The reason it stays invisible is that it never appears as a line item. It shows up as projects that run long, integrations that quietly cost more than they should, and a team that spends its time keeping the lights on instead of building. The CFO sees a rising technology budget. No one sees why.
Getting the black box open
The fix is not a cost-cutting exercise. It is visibility. A few things change the conversation.
Tie every major system to what it costs and what business purpose it serves. Most organizations have never mapped this. When you do, the systems quietly draining budget for little return stand out, and the decisions about what to invest in, hold, or wind down become obvious.
Separate run from change. Know how much you spend just to keep existing systems alive versus how much goes to new capability. The right ratio is a leadership decision, not an accident, and most companies are spending more to run than they realize.
Rationalize the vendor stack. Overlapping tools, auto-renewing contracts no one revisits, and licenses for software half the company stopped using are common and recoverable.
Treat the debt as a business number, not a technical one. McKinsey’s point is that technical debt should be owned at the level of the profit and loss it serves, so leadership can weigh paying it down against other investments. Companies that manage it well free their engineers for real work and grow faster than the ones that let it compound.
What I do
I have cut infrastructure cost by 20 percent while improving reliability at the same time, on a budget over twenty million dollars, by doing exactly this: mapping spend to value, separating run from change, and rationalizing vendors. The goal was never to spend less for its own sake. It was to know what we were buying and stop paying for what we were not.
If technology feels like a black box and you suspect you are overpaying, the first step is not a budget cut. It is one honest picture of where the money actually goes.
Written by Jon McAnnis, Principal Advisor at Groundwork Technology Advisors.