An Introduction to Tech Debt

While a certain amount of technical debt is standard in all organizations, it can hurt business operations and impede an organization's ability to modernize and implement new technologies if it isn’t monitored and managed correctly.

A recent McKinsey survey indicated that 60% of CIOs believe their organization’s tech debt has increased noticeably over the past three years. The issue is so significant that Forbes estimates Engineers spend 33% of their time dealing with it.

If that isn’t enough, the price of tech debt may skyrocket when businesses implement AI on top of technologies based on poor code and quick workarounds. 

“Adding AI on top of technical debt and a messy application portfolio isn’t only difficult, it may be directly irresponsible. If you don’t have a proper IT portfolio overview, you don’t have control, and you won’t be able to extract value from the new technologies,” says Erik Bakstad, former Enterprise Architect and now CEO of Ardoq. 

So, what is technical debt, and how can it be managed? In this article, we address the following questions: 

What is Tech Debt?
Why Does Tech Debt Occur?
How Does Tech Debt Impact Your Organization?
How To Measure Tech Debt
How to Reduce Tech Debt
What Are the Benefits of Managing Tech Debt?

What is Tech Debt? 

Technical debt, or tech debt, commonly refers to the implied cost of additional rework caused by choosing an easy solution now instead of using a better approach that would take longer. Definitions can vary because the term has evolved over time.

In the early days, tech debt had a narrow definition. Ward Cunningham determined that “Technical debt arose because software developers made a conscious decision to cut corners when they were writing software.” This decision may have been deemed necessary at the time, but it came at a cost because the software could have been built better, and there was a gap between what was delivered and what could have been achieved. This gap, called ‘tech debt,’ was the cost of future reworking needed to fix the software.

Over the years, the definition of tech debt has become broader, and today, the term has evolved to include a much wider range of system deviations. Some may even say that tech debt is any gap between what a system delivers and what is wanted! 

Gartner succinctly states that “Technical debt can be summarized as the future liabilities and risks that are created by suboptimal decisions, natural entropy of systems, out-of-date dependent components, new security and vulnerability threats, and changed or new requirements.”

No matter how you define it, tech debt, like other forms of debt, accrues “interest” in the form of cost, inefficiency, risk, and customer dissatisfaction. Any failure to address tech debt will result in the growth of this interest, potentially exponentially. For example, not dealing with a quick fix, non-standard software patch could tie up significant resources with future troubleshooting or system upgrades. 

It is, therefore, essential that you identify, measure, and manage tech debt.

Why Does Tech Debt Occur?

Tech debt can occur for a number of reasons, either deliberate or inadvertent. Deliberate technical debt can result from shortcuts taken in software development or implementation to speed up delivery. Inadvertent tech debt may occur because standards have changed or an organization has learned something new compared to when the solution was first developed.

For example, an organization might deliberately cut corners to pursue first-mover advantages in implementing a technical solution, onboarding debt in the short term, and planning remediation in the longer term.

The reasons for technical debt may include:

Business Strategy

• Lack of understanding of the business strategy.
• Poor alignment between the business strategy and IT.
• Insufficient funding to support the business strategy.
• Excessive complexity in products, processes, or applications.

IT Environment

• Changing or evolving requirements, common during transformation projects, can lead to short-term and non-optimal solutions.
• Time pressure can lead to shortcuts or the implementation of quick fixes to meet deadlines, typically sacrificing best practices.
• Lack of resources, such as time, budget, or expertise, can compromise solution quality and architectural decisions.
• Limited knowledge or inexperienced specialists may make suboptimal design choices.
• Technical constraints imposed by existing systems or frameworks can force architects to make trade-offs that prioritize functionality over long-term maintainability or scalability.

How Does Tech Debt Impact Your Organization?

Over time tech debt can accumulate and negatively affect your organization in several ways:

• Decreased system quality: Quick fixes and shortcuts often introduce bugs and defects which, when accumulated, make business systems brittle and prone to failures.
• Increased system fragility: Shortcuts during system development or maintenance often lead to tightly coupled systems with interdependent components. As the number of connections increases, so does the risk that changing one part of the system will negatively impact another.
• Reduced flexibility and agility: Tech debt can hinder a company's ability to respond to evolving business needs as carrying technical debt makes it more difficult to make features changes and upgrades.
• Limited innovation: Dealing with tech debt ties up resources, leaving less time for IT to work on modern technologies and innovation..
• Performance issues: Tech debt leads to inefficient solutions that consume more resources and reduce a system's overall performance.
• Scaling challenges: Systems burdened with tech debt may not scale effectively to handle increased loads, leading to performance bottlenecks and potential system outages.
• Operational risks: When issues arise, systems with high tech debt can take longer to recover due to the complexity and interconnectedness of the solution. They can also be subject to more frequent downtime, impacting business operations and customer trust.
• Security vulnerabilities: Quick fixes and inadequate solutions leave the system vulnerable to attacks and exploitation. In addition, high tech debt can lead to inconsistent or delayed security patching, further compromising the system’s security.
• Increased maintenance costs: The cost and effort required to fix issues increases, straining resources and budgets, whilst making it harder to invest in improvements.
• Resource drain: Significant time and resources can be spent managing and reducing tech debt instead of enhancing system resilience and functionality.

In summary, tech debt makes systems more fragile, less flexible, and harder to maintain. To ensure long-term resiliency, it is crucial to manage and reduce technical debt by applying best practices in software development, doing regular refactoring, and investing in quality and maintainability.

How to Measure Technical Debt

Tech debt needs to be documented and measured in order to decide what should be done about it. Can it be lived with, and if not, how should it be handled?

Before you can measure technical debt, you should have a clear understanding of what you want to achieve and, as a minimum, make sure you have an inventory of your applications. If your application repository is outdated or missing information, managing tech debt will be challenging.

Read our article for tips on mastering application inventory management.

Once you have documented your applications, you can determine how best to measure tech debt. Over time, numerous methods have been devised, including two well-recognized approaches: the Gartner method and the SQALE method.

The SQALE method

This method proposes relating the cost of remediation to the cost of the debt’s business impact if nothing is done. It estimates the financial cost of remediating quality issues and compares it to the cost of living with the debt. This can be useful to demonstrate the tangible impact of the debt to stakeholders who are cost-motivated.

The Gartner method

This proposes considering tech debt as a source of risk, asking, “Should the unthinkable happen, what negative impact will tech debt have on the business?” It proposes using a 1-5 scale to measure the worst possible impact of the debt and compare this to the likelihood of this impact happening, while also considering the cost of remediation.

These models use different metrics and can, therefore, be used separately or together.

By measuring tech debt, CIOs and business leaders can better address, understand and prioritize efforts to reduce debt, not only in terms of money, but also in terms of business impact.

How to Reduce Tech Debt

To be able to reduce tech debt, you must first understand the level of it the organization currently has. These are the key steps necessary for reducing tech debt:

1. Use either cost or risk based measurements to determine the areas affected by tech debt and create a tech debt backlog.
2. Assess the business impact arising from each tech debt item, including which capabilities or organizational units are affected and how seriously.
3. Determine the effort required to resolve each tech debt item according to the organization's needs (budget, impact, customer satisfaction, and development efficiency).
4. Prioritize the items in the backlog based on the output from step 2.
5. Plan and allocate resources to address tech debt items.
6. Refactor and fix components.
7. Test and validate.
8. Monitor and measure progress for each activity.
9. Continuous improvement to reassess priorities, adjust resource allocation, and evolve system standards and practices to prevent new tech debt.

Tech debt reduction is an ongoing effort and should be integrated into the development process rather than considered a one-time project. By following this process and consistently addressing tech debt, organizations can gradually reduce its impact and create a healthier IT environment.

As an example, Innovation Norway needed to communicate to their management the time and effort needed to reduce their tech debt. Specifically, they had to identify the number of integration components that needed updating to the latest version of the .NET framework and provide accurate timeframes for delivery, estimated costs, and financial consequences if not upgraded.

Application portfolio information was collected and a tech debt backlog created, allowing management to make strategic decisions including understanding the impact of change through dependency mapping, improving governance, driving decision-making about their portfolio, facilitating business case and impact analysis processes, and reducing unnecessary renewals.

What Are the Benefits of Managing Tech Debt?

Where tech debt has been identified as an issue for the organization, the proactive and effective management of it can bring numerous benefits:

• Improved solution quality: Enhanced system quality and reliability, leading to fewer bugs, reduced downtime, and better overall user experience.
• Enhanced development speed: Designers and developers spend less time fixing issues or developing workarounds and more time delivering new features and functionality.
• Increased agility and adaptability: Organizations can be more agile and responsive to changing business needs and market trends. 
• Reduced risk and regulatory scrutiny Through improved security and resilience. 
• Cost savings: Although upfront investment may be required to remove or reduce tech debt, cost savings can be achieved in the long run. By proactively addressing tech debt, organizations can avoid costly fire fighting situations, reduce maintenance costs, and avoid potential revenue losses due to system failures.
• Enhanced resource allocation: Organizations can allocate development resources more effectively.
• Improved customer satisfaction: Removing tech debt results in higher system quality, fewer bugs, and a better user experience, leading to increased customer satisfaction, loyalty, and positive brand perception.
• Attraction and retention of talent: Organizations can attract and retain top talent who value working on quality systems and innovative projects rather than tech debt-related issues.

Overall, actively managing tech debt helps organizations create a healthier IT and business environment, improve their competitive advantage, and drive long-term success.

Summary

Tech debt, a term originally applied to software development, has grown over time to mean any type of system deviation from functional and non-functional requirements. With increased breadth comes an increased focus on its size, growth, and impact on the business.

To gain an understanding and awareness of tech debt, IT Leaders should:

• Get control of the organization’s application portfolio using modern Enterprise Architecture software.
• Measure tech debt and understand where it is causing intolerable risk or impacting the ability to execute or modernize.
• Develop a strategy, with key business stakeholders, to pay down tech debt.
• Monitor, on an ongoing basis, how well objectives are being met.

Learn more about how Ardoq can help you manage and measure tech debt in the resources below.