What is Tech Debt and why you need to pay it down

As an executive, you know to keep a close eye on company finances, including whether, when and how much debt the company can handle yet remain fiscally healthy.

Unfortunately, most businesses do not track tech debt and the negative impacts it has to their business. As a result – many businesses make the mistake of believing that managing their technical debt is a simple matter of good housekeeping – a “keep the lights on” operation isolated to their IT departments.

Nothing could be further from the truth.

Technical debt is anything and everything that slows down or hinders development.

Hindered development will lead to problem that cascade through entire company while it slows down improvements in every part of the business with a stake in that development. This often means the *entire* company. Tech debt will delay the delivery of all new features.

That’s not the worst of it.

Like other kinds of debt, tech debt accrues interest and the problems it causes compound over time. It’s like a tax that’s added to everything. Companies with an unacceptable level of tech debt pay the price with slower time to market, bloated production costs, higher IT support costs, and a high level of complexity that draws IT’s time away from more transformative work. Companies with a lot of tech debt also experience high churn rates among its developers, who face frustrating limits on the work they can do because of that tech debt.

Such companies often add more developers, erroneously thinking that if they just turn out more code, they can keep pace with the new features and functions they need to compete. Or they spend increasing amounts of time and IT budget in a game of Whack-A-Mole as they try to fix all the problems that keep popping up.

To help explain the issue, we sometimes equate tech debt to old factory equipment with broken bits that aren’t ever replaced. The factory owner can add more workers to the production line and tack on more pieces to the equipment, but neither approach fixes the underlying mechanical problems. Neither approach makes the equipment run right, and neither will help the factory produce more or better widgets. Ultimately, the only way to make that factory efficient and agile is to fix the broken parts.

It’s the same with technical debt.

But here’s the other challenge with technical debt: In most organizations, it’s something that’s invisible, unmeasured and unquantified. As a result, it typically remains unaddressed.

In fact, most organizations don’t have the slightest idea how much debt they carry. That’s why both young and old companies can see product and engineering costs way above what’s optimal: They have more technical debt than they even know.

As an executive, you may think it’s time to clear the technical books and get rid of all the tech debt that exists within your company. That, though, isn’t the goal. The reality is that there’s always going to be some amount of it.

Instead, here at Strive, we recommend that you tackle the problem by first understanding how much tech debt you have and then whether it’s an acceptable amount or whether it’s so much it’s slowing you down.

Tech debt fits into the overall methodologies to invest in and borrow against in order to be agile and move quickly. We’ve been developing the complex model to quantify tech debt. This allows us to identify and measure its financial impact, considering opportunities that get taken off the table and business risks introduced due to that debt

This approach helps everyone on the executive team and the board understand the importance of paying down its technical debt.

In addition to offering this standardized model for assessing and measuring the ongoing cost of technical debt, we advise clients on ways to pay down that debt and how to design, build and implement debt-free alternatives moving forward.

We know this approach is effective. We worked with one client, a services company, to measure its tech debt and quantify how it was impacting its agility. Executives there were able to see how resolving software bugs and other problems in existing code would unblock product teams and make them both faster and more responsive to evolving market needs. So instead of accumulating more debt, they actually saw better returns.

Companies that have paid down their tech debt and now have a good credit score are well positioned to compete against any upstarts that enter their market. They also require fewer resources to produce superior outcomes and to produce them quickly.

That’s a message the board and your shareholders will want to act on – especially now, as companies increasingly feel the pressure to be as efficient as possible in the face of a constricting economy.

Do you have Tech Debt?

Here at Strive, we take pride in our Technology Enablement practice, where we can assist you in understanding and mitigating your organizations tech debt. Our subject matter experts team up with you to understand your core business needs, while taking a deeper dive into your organization’s growth strategy. Click to learn more about our Technology Enablement capabilities and how we can help.