Technical debt is a common term within IT circles but largely unheard of outside IT. This shouldn’t be the case. Accumulating too much technical debt has become a significant corporate risk that warrants senior management attention. Why? 1) Many businesses are undergoing important digital transformations, 2) technology is improving faster than ever, and 3) technical debt will sneak up and bite companies that don’t prepare for it.
In short, technical debt is incurred when the quickest-to-implement, least-cost options are selected for technology projects. In other words, shortcuts. This type of debt accumulates over time in hard to recognize, intangible ways. And then at a point where shifting business needs suddenly call for a technology solution, i.e. to meet a compliance obligation or a demand from a major customer, you are ill-prepared to deal with the debt.
Much of this debt – siloed databases, unsupported but still-needed systems, processes that haven’t been automated, spreadsheet workarounds, etc. – cannot be paid down quickly. It’s essentially an off-balance-sheet liability. Worse yet, most companies don’t have a good handle on the size of the hole they’ve dug for themselves. This makes proactive technology planning really difficult, especially when forced to react quickly to unexpected circumstances.
Businesses have long survived with technical debt because the speed required to overcome a debt problem has been manageable. That’s changing. Your customers are less patient about inconveniences caused by technical limitations. Their loyalty is harder to retain today than it was even 5-10 years ago. Technology is a main reason for this.
Technical debt doesn’t have to become an elephant-in-the-room problem. There are ways to avoid it:
- Begin to measure your technical debt. It’s not a simple calculation, and 3rd party assistance might be beneficial. But knowing what you have accumulated is a necessary starting point.
- Determine how much to pay back and how fast. A strategic discussion. How much is your technical debt impacting customer relationships, profitability goals, perhaps M&A plans? What should your investment (debt payback) priorities be?
- Find out who your change agents and entrepreneurial thinkers are, if digital transformation is important. Involve them in the process, regardless of their level in the company. Good ideas are good ideas. These are the people who have most of them.
- Make technical debt reduction part of the culture. This type of debt is much easier to accumulate than it is to get rid of. They key is monitoring it and proactively dealing with it the same way you approach financial debt.
As with financial debt, technical debt can be managed fairly easily, or it could snowball and become a big problem. Factors like project duration, client demands or resource availability can all contribute to cutting corners and taking on technical debt. This is ok, as long as you are able to think through the critical technical issues before deciding on a solution. If this is done, you’ll likely avoid an approach which needs serious reworking at some point in the future.