Transcription:
Businesses Tactics to Overcome Technical Debt Impacted by COVID-19

Bill Klaproth: When you've been searching for the right insight, advice and information on financial marketing, you know where to go? The Speakeasy, the exclusive source for financial marketing insights, with a shot of human, starring Kelly Hellickson and Hilary Reed from EmpowerFi, strategy-infused data-driven marketing solutions for financial institutions nationwide. I'm your host, Bill Klaproth.

On this episode, we talk with Michael Fillios, the founder and CEO of the IT Ally Institute, a nonprofit organization providing small and medium-sized businesses access to knowledge, research, and practical tools to improve their tech bottomline. And we're going to talk about the impact of tech debt on the long-term viability of small and medium-sized businesses, particularly as leaders confront the challenges of COVID-19.

Michael, welcome to the Speakeasy.

Michael Fillios: Thanks for having me.

Bill Klaproth:  Well, we're happy to have you with us, and we're excited to talk to you. So let me start with this. The concept of technical debt has been around for several decades as it relates to managing software defects. So how is Tech Debt 2.0 different? And why was it important to expand the definition?

Michael Fillios: Sure. As we said, it's been around for decades, but it had a very limited definition as it relates to software defects. So for example, developers would make decisions around introducing software, knowing that it had defects or bugs in it at the risk of getting that product out to market sooner.

When we took a look at this in today's world, obviously technology has evolved over the past three decades when we think about changes such as moving from mainframe to client server then onto the internet to the cloud. We felt it was important to revisit this traditional definition and expand it given all of this complexity that has occurred and the different sources of tech debt, which we now refer to as Tech Debt 2.0 have surfaced based on our experience.

So we took that definition. We've expanded it and made it more inclusive of some of the things that we see in the marketplace to go beyond just software defects into even things like purchase software to your talent or processes and data, things of that nature that really do encompass a more well-rounded definition in today's contemporary technology environment.

 Hilary Reed: Can you explain exactly what tech debt is and how it might relate to credit unions? And we deal a lot with things being disruptive in the industry and how tech debt can be possibly a disruptive force or perhaps not?

 Michael Fillios: Absolutely, so in the spirit of thinking about tech debt as it relates to credit unions and the financial services sector, certainly the traditional form of Tech Debt and technical debt has arisen through a lot of development work that financial services and credit unions have done over the years. And I'm sure there had been decisions on managing some of those software defects to get products out to market a faster scenario. However, in this case, want to look beyond some of that and it can be examples,  Hilary and Kelley, to things like core banking systems, for example, that need to be upgraded or modernized to support today's environment.

One example could be is do we have the ability to integrate. with our core banking systems enough so that we can deliver the member experiences that we know are  being expected today that go far and above, what traditional technology solutions can do. So what we really felt was important here was to think about how companies need to manage this technical debt more  proactively so that they don't create risk in their organizations, and more importantly, don't create difficulty in meeting their overall business objectives. And clearly something like the member experience  should be top of mind.

Kelly Hellickson: Sure. No, that's great, Michael. And so if you could describe what that looks like in our landscape in the credit union and bank vertical for financial institutions, who at the organization, how would they go about reaching out to a company  such as yourself to what's the first step, like an audit or talk to us about that?

Michael Fillios: Sure.  A couple of things there. So for one, the 2.0 version of Tech Debt, is a little bit more stealthier to understand in your organization. And what we see is that business leaders and certainly those at the board level may not even realize that they are taking on tech debt inside of their organizations until something bad happens.

One example could be with respect to a cybersecurity incident. Typically, a lot of IT organizations and credit unions and otherwise are maintaining their systems to be current with today's standards. That can mean that they have to do something called patching those systems to make sure they're using the latest upgrades and operating systems from the software providers.

In many cases,  sometimes that doesn't occur on a rigorous basis and could open up the organization for potential risk. Being aware of the types of tech that you have in your organization is the first step. And what we've done is we've created a diagnostic that helps you really uncover some of the root causes of tech debt, which is a pretty comprehensive look across 54 different areas that we over the years have seen as potential that can create this kind of environment.

So for example, if an organization is looking at their applications and many of those applications have been customized or tailored so significantly, it could mean that they are more subject to tech debt because of the fact that they are not necessarily keeping up with all of the current day security mechanisms in that case. You can also look at it from a completely different perspective and talk about data. How easy is it for you to get data from your systems to drive decision-making. That could be data surrounding your members or it could be your data supporting your overall financial performance.

So tech dent can manifest itself in a lot of different ways. Now it's not to say also that debt is a bad thing, and particularly for credit unions as looking at debt as a way of generating income, we're okay with that as long as it's intentional. And this is where, whether you're a business, a credit union or otherwise, need to think about taking those calculated risks and understanding the true impact of those risks in your organization as long as you've got a game plan to deal with them at some point in time.

Hilary Reed: You hit some hot buttons for me there just thinking about core systems and how with so many small to medium sized credit unions who don't have an IT team, right? So they probably lack the resources to even look into tech debt. But when you said the core system and patching things together and just custom ad hoc reporting tools and things just piecemealed together, I didn't realize that that could create tech debt. So for those credit unions who are smaller or medium size, whatever size they are, and they maybe don't have an IT team, like where would they start?

Michael Fillios: Yeah, it's a great question and it's sort of at the essence of why we created IT Ally to be that ally to these small businesses and we think of credit unions in a lot of ways as the small businesses of the banking sector. And we recognize how important they are to local communities, to employers, and especially during COVID times as an alternative for individuals and companies to go to. So we really need to make sure these companies are future-proofed.

So we created this business and we do a lot of research to help provide some of that expertise in a way that is more affordable and accessible to you. as a credit union or a company. So we can provide some fractional-based advisory services that would come from people that are very experienced, whether it be folks like myself that have been a CIO in banking or subject matter experts that are in cyber or others that maybe are savvy at data analytics and business process automation. So we try to right size these services to make them accessible to credit unions so that they can get the best capabilities that other larger institutions can, but do it in a way that really partners and becomes an ally to them.

Given all this complexity, certainly again, COVID has just highlighted this significantly, now with the ability to provide these services through mobile and online banking platforms, have become much more important and, of, course there's choices out there for the end consumer or the member in this case, so we want to make sure that we are providing them differentiation. So technology becomes extremely important and not just something that you can create or think about as an afterthought along the way.

Kelly Hellickson: Yeah, that's a really good point. And speaking of afterthought and not letting tech or tech debt become an afterthought, Michael, describe some of the warning signs that you could put into relative terms for credit unions and banks.

Michael Fillios: Sure. One of the basic things that you can look at is growth. Is your business growing? Is your credit union growing? And you can define growth  in whatever fashion that's applicable for your business. So if it's growing our online platforms or getting more usage out of our mobile banking applications, taking a look at sort of the business drivers can point you to areas where you might have some root causes of tech debt.

Another example is going to be, we often deal with clients that don't have a really good understanding of how much they are investing in technology or they're investing in technology and it's very limited to what we call keeping the lights on or the operational side of the house. And this will point to areas where you need to have balance in your investment such that you are spending enough to help grow the business as well as to protect the business, not to mention to get more efficiencies and effectiveness out of it as well certainly in these competitive times. So, those are some of the areas.

The other area I would look at is your projects. Are your projects being delivered on time and on budget? It could be another symptom of root cause of tech debt. And again, lastly, how easy is it for you to get information out of your systems? Have we really managed that effectively? Or does it take a village to be able to just get some basic information from multiple sources pulled together every time we make that request.

So it does require a little bit more of  thinking differently process, but I can assure you that these examples exist and certainly ones that we're trying to help institutions figure out how they can address in the most cost-effective way.

Hilary Reed: Yeah. We always say spend the money now on the things that will make you more efficient in the future. And for us, in terms of marketing, it's spend the money on the data upfront so that you're not spending the money on the backend, marketing to the wrong people. And it sounds like it's a similar situation, you know, spend the money on tech and upgrading efficiencies now, so that down the road, your credit union can grow. But it's such a tough conversation to have when credit unions, "I don't have it in the budget. I don't have it in the budget." That's one thing that I know we come across a lot. I guess one last question here, Michael, what should any credit union, but more small to medium sized credit unions, do now to avoid tech debt in the future?

Michael Fillios: First, you got to understand, what you have inside of your environment. You got to start with a position of understanding some of the facts. And that can be informed by risk. So when you think about tech, I often equate it to risk. And this is a board level conversation that you want to really understand. So you could be taking on risk from a technology standpoint and not even know it until again something bad happens.

So first step I would say is understand where you believe you might have risk in your organization,  so you can build a fact base to help at least make informed decisions on what you should do first, second, third. Second then is to develop that plan and develop a balanced plan that not only addresses risk, but also helps position the credit union for growth and growth is of course more important now than ever.

And I can assure you that growth is going to come from some digital means, which means that we need to up our game as it relates to digital tech. And balance those investments, making sure we understand what our members are looking for, of course, so you can prioritize. Given, like you said, the cost constraints are going to always be there, but that also is not an excuse to do nothing. You must take action.

Hilary Reed: Excellent. Thank you so much. And I just had another question, Michael. Where can somebody go to learn more about Tech Debt 2.0?

Michael Fillios: Sure. So we formed the IT Ally Institute, which is a nonprofit organization that was launched in 2020. They also have published my first book Tech Debt 2.0, and you can visit them online at ITAllyInstitute.org. And you can find  information there about the book as well as the different types of research and thought leadership that we offer that can help organizations really start this process and become better equipped to deal with this ever-growing threat.

Bill Klaproth: Yeah. That book is really interesting, and you can find it on Amazon, too. Tech Debt 2.0, How To Future-Proof Your Small Business and Improve Your Tech Bottom Line. It's a wealth of information. Michael, thank you so much for your time. We really appreciate it.

Kelly Hellickson: Thanks, Michael.

Hilary Reed: Thanks, Michael.

Michael Fillios: Hey, my pleasure guys. Thanks very much for the opportunity.

Bill Klaproth: Once again, that's Michael Fillios and thanks for joining us. And our calendar is open. Let's make the time right now for our first meeting about our AI solution, Intellify. Send us an email today at This email address is being protected from spambots. You need JavaScript enabled to view it.. This is the Speakeasy Financial Marketing podcast. Thanks for listening.