Tech debt is usually a foreign term to people outside of the technical sphere, but it is essential for everyone in a company to know and understand what technical debt is, why it happens and how to avoid it.
Put simply, technical debt is the labor and time costs of fixing poorly configured software and/or bad code after the fact. Alex Gostev, Project Portfolio Manager at QArea, likens it to monetary debt. It accumulates interest and therefore becomes harder and harder to pay off if not dealt with in a timely manner.
Continuing with this analogy, McKinsey Digital describes the principal and interest components of technical debt like this:
“The principal is all the work that must be done to modernize the entire technology stack. This includes deferred maintenance or upgrades below the app layer, modifications to comply with data standards, and bespoke packaged software (that is, customizations that take software beyond the point where the original vendor can easily provide ongoing support).”
“The interest is the complexity tax that every project pays today. It derives from the need to work through fragile point-to-point or batch data integrations, harmonize nonstandard data, and create workarounds to confront risk and meet business needs. These frictional losses inhibit companies’ long-term velocity and productivity and harm current budgets and returns on investment.”
Different people have categorized technical debt in different ways. Kenny Rubin breaks down technical debt into two categories: happened-upon and known. These categories are fairly self-explanatory. The former is unexpected tech debt that comes up in the course of working on a product; the latter is deliberate choices made by developers to take shortcuts or put off tasks until later for the sake of time or money.
Any company that makes technical investments can experience tech debt, and in the digital age that applies to nearly every company on earth. However, the impact of tech debt on a company varies across industries. When Target was hacked in 2013 due to technical debt in the form of poorly patched software and hardware, their reputation took a hit. A similar hack on a hospital or power plant could be catastrophic, which is why awareness and education around tech debt is so important.
Even if you don’t run a hospital or power plant, it’s still important to assess and mitigate tech debt for your company for many reasons, which we will expand upon below.
Labor: if you’re in serious tech debt, you will need additional manpower to manage it and compensate for it with additional functionality in certain systems. Tech debt consumes around 40% of development time, according to a study done by Appian.
Lost sales opportunities: Not only can system outages lead to lost lead generation and sales opportunities, but unnecessarily slow or complicated customer experiences can drive consumers away too. This may be due to losing track of an order, failing to produce invoices or quotes, slow load times on a website, or simply spending too much time extracting consumer data and not analyzing it.
While technical debt is something all companies experience in one form or another, it’s important to consistently assess and pay down technical debt in order to avoid costly mistakes, lost opportunities, or time spent managing technical debt that could be better spent elsewhere. As you assess how to best manage technical debt for your company, keep in mind how these changes will affect your team, too.
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