NEW YORK; July 19, 2024 – New research from Accenture finds that organizations with an advanced digital core, investments in strategic innovation and a balanced approach to their technical debt achieved 60% higher revenue growth rate and 40% higher profits.

“Continuous reinvention is now the default strategy because of the pace of change. Organizations are trying to figure out how technology impacts their business operations, especially amid new advancements like generative AI,” said Karthik Narain, group chief executive of Technology at Accenture. “Capturing value from disruptive technologies with an industry-leading digital core is more than a critical success factor, it’s a survival factor. A strong digital core is essential to be ready for reinvention and rapidly seize every new opportunity.”

For the report, “Reinventing with a Digital Core,” Accenture analyzed findings from 1,500 technology executives in 19 industries across 10 countries. Accenture’s research revealed that an advanced digital core is necessary to help enterprises build the technology capabilities needed to be ready for ongoing reinvention across the business. This requires using the right mix of cloud-first infrastructure and corresponding practices for agility and innovation, data and AI for differentiation, applications and platforms to accelerate growth, next-generation experiences and optimized operations—with security at every level.

Accenture’s research also identified AI as a top contributor to technical debt—the cost and effort required to keep IT systems up to date and capable of meeting business needs, accumulated through choices that prioritize speed over long-term maintainability. 41% of executives cite AI as a top-three contributor, tied with applications/platforms. Conversely, AI can also be used to manage and mitigate tech debt, along with new ways of designing systems. Traditionally, this mostly came from legacy code, outdated technologies, and a lack of documentation, but the rapid adoption of AI is adding new technical debt.

Accenture’s study outlines three fundamental tenets to achieve a digital core that’s reinvention ready. When these three tenets are adopted concurrently, businesses can experience considerable rewards, attaining up to 60% higher revenue growth rates and 40% boost in profits.

1. Build an advanced digital core, tailored to specific industry needs: Accenture’s research shows that companies need to achieve an “industry-leading” level of digital core capability to empower continuous reinvention. While the journey may seem complex, Accenture’s survey found that improving one capability—like data—can trigger automatic improvements in others. For this reason, companies should first assess where they are across their digital core capabilities, then prioritize “no-regret” moves based on areas of need. This will catalyze a virtuous cycle of continuous improvements across the digital core.

2. Boost investments in strategic innovation, including re-engineering systems for machine (AI) operations: Companies should monitor the rate at which they increase the proportion of their IT spend on innovation, as opposed to operations, as a key performance indicator. Accenture’s research found that a year-over-year increase of at least 6% is necessary to be reinvention ready. Additional budget can be found when companies reduce inefficiencies with actions such as joining vendors for guidance, optimizing cloud costs and operationalizing automation. Companies can use the resulting discretionary funds to redesign business processes, launch new products and services and enter new markets. Pre-integrated solutions from ecosystem marketplaces provide a starting point. Ultimately, companies need a digital core designed for both humans and machines so both can interact seamlessly with each other and create value through intention—not instruction—driven workflows for business processes. The more immediate focus should be to re-engineer systems for machine learning and AI operations.

3. Balance technical debt with investments for the future, using programmatic and autonomous methods: Accenture’s analysis shows that about 15% of IT budgets should be allocated to remediating technical debt, ensuring the maintenance of evergreen IT capabilities. This is the sweet spot—both higher and lower allocations are not optimal—to balance debt reduction with future investments. Maintaining evergreen IT requires a commitment to continuous updates, upgrades and management of software, hardware and services. Programmatic version control systems can be used to update configuration settings for infrastructure following changes to the code. This method brings more automation, flexibility and integration capabilities to reduce future technical debt.