Technology Debt Adds Cost and Consequences for You Company

Discover how ignoring technology debt — the loss associated with not addressing outdated tech — can hamper your company’s ability to innovate and compete.

Technology debt is a costly venture for companies that fail to invest in solutions that improve efficiency and can replace older, outdated tools. Understanding what it is and how it can affect your business helps you make smart, strategic decisions about your technology investments.

What Is Technology Debt?

Technology debt began as a term to describe software development. Often, developers opt for a short-term option, such as meeting a product release deadline, rather than doing the necessary work that would make the product better. It’s a decision that often ends up causing more work in the long run, with updates, operational problems and dissatisfied customers.

Recently, the term has taken on a broader scope. It is now used to cover the totality of your company’s technology stack — software, hardware, networks, integrations and security. It’s an issue that can affect every area of your company as it touches on the building, deployment, transformation, testing and processes used for your technology.

For example, consider the company that has an older, legacy finance solution that does not have the functionality to integrate with your sales platform or handle currency conversions. That likely means more manual data entry to add customer or financial information into one system or another, and paying for third-party add-ons to address exchange rates. There is a monetary cost, a higher risk of inaccuracies and the opportunity cost of not having newer tools that integrate business software.

What Are the Types of Technology Debt?

Technology debt can take on many forms, including lags in:

System design and architecture
Coding
Deployment and Testing
Operations and Security
Technical obsolescence

Here are several types of technology debt, one of which can actually be beneficial.

Planned technology debt occurs when an organization makes an informed decision with the full realization of the risks and costs of going into debt. For example, a firm delays an upgrade to a system until after a major project is completed.
Accidental technology debt happens after a technology solution is deployed but it becomes evident that the tech is inadequate, difficult or slow to implement. Given the resources expended on some solutions, this can be costly and have long-term negative consequences for the organization.
Bit rot technology debt is a slowly devolving phenomenon that happens when incremental changes are made to a system that causes it to become far more costly and cumbersome. This is the type of technology debt to avoid as it becomes far more difficult to rectify the longer it’s in place.

Consider legacy systems. They may represent several types of technology debt. If there’s a critical product or deliverable, it may make sense to keep the system as-is. They may be paid off and therefor inexpensive to use, at least in the short run. However, your competitors are going to replace those systems with better solutions that allow for the use of new technology, improve operations and give them a competitive advantage.

What Are the Consequences of Technology Debt?

There are several impacts that technology debt can have on your organization, in addition to the potential loss of competitive differentiation, including:

Continued unnecessary technology costs
Demoralized employees working with outdated or cumbersome tools
Increased barriers and difficulty when new solutions are eventually deployed

How Can We Address Our Technology Debt?

In the long run, legacy systems and other impractical technology debt will only hurt your organization. That’s why it’s so important to recognize technology debt and develop a plan to erase it.

Here are some key questions to ask to help assess and prioritize:

What is your IT budget?
How much time is your IT staff spending on maintenance or performance issues? A performance audit can help determine the cost of doing business with your existing technology.
Are you having trouble attracting talent? Working with dated technology is not a good way to convince prospective employees to join your organization.

That structural information helps you begin to create a road map for how to address your technology debt. The steps to take include:

Compiling a list of the technical debts within your organization.
Group the debts into categories related to your business priorities
Note the consequences associated with maintaining each debt
Communicate the issues related to technology debt to all key stakeholders, including employees, board members and partners
Make technology debt everyone’s problem
Invest in catching up, including making multiyear budget commitments
Prioritize the debt reduction steps
Develop metrics to measure your level of technology debt and its impact

Often you can make some quick fixes that solve some issues, even if they’re not the highest priority. Quick wins can help build momentum and understanding, even if the software and legacy systems need to wait to be addressed fully. A cohesive plan for eliminating the debt requires a clear understanding of what it is, where it exists in your organization, the impact it has on your business and what can be done to address it.