Optimizing technology costs through smarter architecture


Jared Degnan

There’s an epic battle going on in restaurant enterprise technology. On one side, there’s a drive toward continually innovating the customer experience; on the other side there's technology debt that not only hampers innovation, but also becomes a source of continuous budgetary tension.  

Nearly 40% of all restaurant IT budgets go to supporting legacy architecture, such as aging on-premise hardware and manual data management, so it can feel impossible to prioritize and afford new innovations. For most restaurant executives we talk to, it feels like a zero-sum game—but it doesn’t have to. To move beyond tech debt and prioritize innovation, you must start by understanding the size and scope of the problem.

"According to InformationWeek, U.S. companies are spending $85 billion every year on maintaining bad technology."  

Technical debt compounds over time, forcing teams to build on aging foundational technologies. Trying to solve this increasingly tangled web of compromises is difficult at best. There’s a reason that most executives choose the easier path of point solutions rather than dealing with the underlying problem.

Fortunately, there is a solution that can reduce tech debt gradually, allowing executives to balance the cost and benefits of more intentional transformation while keeping the focus on supporting their business.

The approach is called API-first innovation, and it presents a powerful approach to development where organizations can drive transformation by staying agile and strengthening their technology foundation. As a result, they are better positioned to empower stakeholders, foster innovation and create sustainable impact across the organization.

Understanding Tech Debt

Before diving into the benefits of API-first innovation, it’s essential to first understand how tech debt affects restaurants. Let us use a fictitious restaurant, “Burger Burger”, as an example. Let’s say Burger Burger is a restaurant chain in the southeast USA with 45 locations. The chain first opened in the early 80s, running on simple cash registers and paper receipts. Over the decades, Burger Burger opened more locations and began leveraging digital POS, kitchen management and inventory systems, and simple marketing tools to better scale their operations. Their adoption of technology significantly increased the restaurant’s efficiency, allowing them to create a fast and frictionless customer experience. However, the various systems required different employee skillsets and operated on vastly different hardware and software. By 2020, Burger Burger was running on multiple technology systems that were originally developed over 10 years prior. Because of these out-of-date systems, the customer experience had started to degrade, and employees struggled to complete tasks and provide the level of service that customers expected.  Furthermore, these systems were unable to cohesively capture the financial, operational and customer data needed to grow in their local markets and compete in the industry. Despite this lack of efficacy, Burger Burger was amassing high annual costs to keep their software functioning in-store. Their tech debt resulted in critical pain points: higher operational costs, decreased productivity and reduced agility.

Although this is a fictional example, tech debt is a problem that many real restaurants face. Minimizing technical debt allows restaurants like Burger Burger to work toward sustained growth and profitability, as well as to keep the focus on delivering excellent customer experiences and superior food.

API-first innovation: A Paradigm Shift

API-first innovation is a fundamental shift in the approach to development. Rather than building systems and applications in isolation, API-first innovation puts the API at the core of the development process. By designing APIs first, organizations can create flexible, scalable systems that can be easily integrated into existing infrastructure.

The Paradigm Shift: This approach allows developers to focus on building solutions that align with business goals, rather than struggling to adapt to outdated systems.

Addressing technical debt becomes even more crucial in the API-first innovation paradigm; it enables organizations to build upon a solid foundation and avoid accumulating unnecessary costs and complications. Tech debt costs are staggering, with one study estimating "$361,000 of technical debt for every 100,000 lines of code in a typical software application".

API-first innovation offers many benefits to organizations, including increased agility, faster time-to-market and reduced development costs. However, one of the most significant benefits is the potential to reduce tech debt. According to one study, "a majority (69%) of IT leaders say technical debt poses a fundamental limit on their ability to innovate, along with 61% saying it drags on their company’s performance and 64% agreeing it will continue to have a major impact in the future, By designing APIs that can integrate with existing systems, organizations can streamline their infrastructure, reduce operational costs and create a more agile organization. If we return to the example of Burger Burger, by leveraging APIs, the restaurant chain would be able to address their need for actionable financial and customer data through integrating their current systems and simplifying their disparate technological solutions with a clear view into their operations.

Sandbox Development and Socialization

One of the key tenets of API-first innovation is the importance of building and testing in a controlled environment. Technical sandbox development provides a dedicated space for developers to iterate on their ideas without the risk of impacting production systems. This approach offers several significant business benefits, including lower costs, a faster development process and mitigated risk.

Lower Cost: Sandbox development can significantly reduce costs associated with traditional development processes. By allowing developers to experiment and test their solutions in a controlled environment, businesses can avoid potential costly mistakes that could occur if these changes were directly applied to production systems. This cost reduction is particularly valuable in scenarios where complex integrations or system updates are required, as it allows for thorough testing and refinement before deploying changes to the live environment.

Faster Development: Sandbox development enables developers to iterate quickly and efficiently, leading to faster innovation and time-to-market. By providing a safe and isolated environment, developers can freely explore different approaches, troubleshoot issues and refine their solutions, as opposed to the more cautious, lengthy process of live deployment. Without the fear of disrupting critical business operations, businesses can adapt rapidly to changing market demands, customer preferences and technological advancements, ultimately gaining a competitive edge.

Mitigated Risk: Sandbox development allows organizations to thoroughly test and validate their solutions, ensuring a higher degree of reliability and stability when integrating new features or updates. By providing a controlled environment for experimentation, potential issues or conflicts can be identified and addressed before deploying changes to production systems. This proactive approach reduces the likelihood of costly downtime, customer dissatisfaction or negative impacts on business operations.  

Permanence and Long-Term Gains

API-first innovation is not a one-time fix; it is a fundamental shift in the way organizations approach development. By empowering stakeholders to drive change and take ownership of solutions, organizations can create a more agile and sustainable infrastructure. This approach has the potential to create long-term gains, reduce operational costs and foster a culture of innovation. Implementing API-first innovation has a quantitative impact, not only in terms of technological advancements but also in driving business success and fostering competitive advantages for forward-thinking organizations.

Addressing Tech Debt with API-First Innovation vs Incremental Change

Companies typically take one of two common approaches to addressing tech debt. The first is incremental change, involving gradually updating legacy systems to align with business goals and spacing out investments to upgrade over a 5+ year roadmap. This approach is less disruptive and requires lower upfront costs but requires sustained investment over a more extended period. This is the approach that a brand like Burger Burger would likely take. The second approach is API-driven transformation, involving fundamentally changing the core of the organization's infrastructure. A primary concern for this approach is its much more rapid cost curve, creating a barrier for businesses with other high investment areas as part of their growth strategy. However, the potential gains from API-driven transformation are significant. The Oxford Economics Survey discovered that companies that invest in APIs, “experience stronger revenue growth. Leaders report 6.7% average annual revenue growth over the past three years, vs. 4.9% of others”.

Cost Analysis: ROI and Tech Debt Reduction

API-first innovation has the potential to generate significant returns on investment by reducing operational costs and increasing agility, enabling organizations to achieve long-term savings. According to a 2022 report, “by 2025 companies will be spending 40% of their IT budgets on simply maintaining technical debt". This staggering statistic underscores the pressing need for organizations to prioritize the resolution of tech debt and adopt API-first innovation as a proactive strategy. For restaurants especially, low margins and increasing labor and inventory costs create immense operational pressure. With IT improvements outside of their core competencies, rapidly upgrading and integrating tech systems means that they can continue to focus on their purpose: serving delicious food and delighting guests. Moreover, the research conducted in The Role of APIs in Firm Performance highlights a remarkable outcome: "eight quarters after adoption, firms have 12.9% higher market values, a considerable effect". This demonstrates the concrete business impact and value creation that API-First Innovation can deliver, solidifying its position as a strategic imperative for organizations aiming to remain competitive and flourish in today's dynamic digital landscape.