What is Technical Debt?

On average, technical debt consumes around a quarter of all IT budgets every year.

Companies worldwide strive to hold their market position and stay competitive by rolling out software updates and new features. But market and internal pressures often mean new updates and feature implementations are rushed.

This dynamic leads to developers using easy-to-implement solutions to push out half-complete updates. They may not know the best coding practices or may completely miss out on process documentation. 

As a result, they create technical debt – technology and code that developers must rework and fix to address the problems emerging from the implementation.

What is Technical Debt?

Technical debt follows the simple financial analogy of loan and interest. 

When you borrow money, you can accomplish a short-term target quickly. However, you’ll incur interest on the borrowed sum until it’s paid in full. Conceptually, technical debt is the same.

Organizations incur technical debt when implementing solutions, fixes or updates with short-term goals and requirements taking precedent over long-term prosperity.

With technical debt, issues tend to compound over time.

For example, if developers attempt to address technical debt by reiterating code without documentation, they merely keep adding new features in an unorganized manner. This approach (lacking documentation) does not reflect their understanding of the added features, ultimately creating poorly written code without a solid foundation or scope for continuity. 

So, developers must continue to refine and fix the code over and over without making much progress. They pay “interest” on the code debt incurred, in the form of reworking and/or fixing prior implementations.

7 Key Technical Debt Statistics

The following statistics are useful in painting a clear picture as to the causes and outcomes of growing technical debt:

• Over 20% of organization’s technical budget earmarked for new products is diverted to resolving issues related to tech debt. – McKinsey

• Organizations in the 80th percentile for Technical Debt Score have revenue growth that is 20% higher than those in the bottom 20th percentile and 10% higher than the average. – McKinsey

• Organizations in the bottom 20th percentile for TDS are 40% more likely to have incomplete or canceled IT modernizations than those in the top 20%. – McKinsey

• 33% of engineer’s time is spent dealing with technical debt, equating to about 13.5 hours of an average work week. – Stripe, The Developer Coefficient Study

• 44% of organizations say that their technical debt built up over time as their infrastructure became more complex. – SoftwareAG

• 78% of companies say their technical debt rose in 2021. – SoftwareAG

• 64% of organizations consider fast-tracking new product or service launches in their top 2-3 priorities. – SoftwareAG

The Causes and Business Impact of Technical Debt

Apart from ongoing development over time, below are the common causes of technical debt:

• Business leaders lack a proper understanding of the long-term implications of rushed implementations. So, they fail to paint the complete picture of technical requirements, leading to incomplete or erroneous code. 
• Due to mounting business pressures, companies decide to release software updates/features before the required changes are complete. 
• When integrations are required, organizations often give preference (in the short-term) to point-to-point integrations without consideration for evolving business requirements over-time. Hence, the integration and the software it supports isn’t flexible enough to adapt to the changing business landscape.
• When the development process lacks a test suite, quick and risky band-aid bug fixes are encouraged.
• Developers ignoring requirements for documentation, creating numerous future complications (when newer teams try to work on old code).
• When junior developers don’t receive proper training or if there’s no provision for knowledge sharing within the organization, they fail to adhere to industry best practices for coding and integration. The lack of knowledge and skills leads to low productivity and poorly written code. 
• Delayed refactoring is a major concern for growing code debt. Over time, as the project requirements evolve, some parts of the code may become obsolete or inefficient (software entropy). So, those must be refactored to support the current and future requirements. If the team delays refactoring as the code expands, the technical debt continues to amass.
• When the development team engages in parallel or isolated development on multiple components, they must merge all changes into a single source. Such isolated or siloed changes lead to additional rework and compilation burden, increasing the technical debt.
• Insufficient testing due to rushed deadlines pushes out faulty code, further engaging developers in the bug fixing and code modification process. 

The Business Impact of Technical Debt

Now that we have established what it is, and the causes – what’s the business impact?

The two biggest negative impacts of technical debt are – the IT delivery gap and increased Total Cost of Ownership (TCO). 

• IT delivery gap

The short-term impact of technical debt on a company’s IT bandwidth isn’t always initially apparent. However, as developers start addressing technical debt, the gap between the company’s IT capacity and business needs increases. This is the IT delivery gap. 

Since the development team is forced to work on age-old software/code, they fall behind the market trends. The company cannot innovate or work on new products. It limits the firm’s abilities to respond to competitor threats – the company fails to adjust and adapt to recent trends as it must first fix existing problems.

In the long run, companies find it challenging to create teams or find professionals willing to work with/on older technologies while their competitors work on new-age innovations. It reduces forward motion, hampering the organization’s ability to innovate and implement new ideas as it invests time and effort (“interest payments”) in fixing the old software.

Naturally, it minimizes business profitability in the long run. 

• Increased TCO

TCO denotes the cost of developing and deploying a software or application, and the ongoing costs of its maintenance, upgrades, and support. If a company chooses to address its technical debt in chunks, both maintenance and support costs multiply exponentially. 

Maintaining outdated systems and technologies inevitably increases the TCO.

Needless to say, the firm loses significantly on other financial opportunities while allocating its resources to combat the technical debt. 

How Can Organizations Mitigate and Reduce Technical Debt? 

Enterprises can reduce technical debt by creating a well-planned tech debt strategy and following these best practices:

• Promote good coding practices

Half-done coding and testing procedures may help an organization meet deadlines, but they eventually lead to a burnt-out team and unsatisfied customers. 

Building a competent development team starts with competent IT leadership. Instead of focusing on deadlines and quick deliveries, IT leaders must encourage good development practices, including thorough testing (unit and regression testing), timely code reviews, training the team on best coding standards, etc. Implementing these measures ensures employees quality-check before the release date.

• Identify and prioritize customer needs

Customers’ wants and needs are two sides of the same coin. While it’s not practical or feasible to address your target customer’s wants, you can identify their ‘needs’ from valuable customer feedback. 

IT leaders must figure out strategies to cater to customer needs without complicating the development process for the team. A feasibility study is an excellent option. Also, it’s crucial to let the customers know you’re not going to trade software scalability and flexibility for short-lived success.

• Adopt automated testing & discovery testing

In automated testing, a bot or automated solution performs a 360-degree check on software products. Automated testing runs multiple debugging cycles for every module change to identify and eliminate bugs in your code. You can train the automated testing tools to fix repetitive bugs. By coupling automated testing with continuous integration, you can solve common bug problems, efficiently.

Similarly, discovery testing helps identify outdated systems not performing per set expectations or standards. It’s vital to refactor systems design to build future-compatible systems.

• Opt for a well-implemented integration

Organizations must consider integration during or before implementing new technology, particularly business-critical solutions/tools like ITSM. Since these solutions are significant long-term investments, they must be flexible enough to scale as the organization’s data volumes grow. Poorly planned integrations or standalone integrations between tools and systems can quickly become a huge source of technical debt. 

While it’s important to consider integration options early on, companies must also consider the scalability factor of their chosen integration solution. This is where Perspectium shines. 

Reduce Technical Debt With Perspectium

Perspectium can seamlessly synchronize multiple systems and tools, including ITSM, CRM, CSM, ITOM, and BI tools, to break silos and offer complete transparency.

Its automated integration solutions are highly scalable and available 24×7. They transform the data at the source to ensure it moves to the right place at the right time. 

Perspectium enables inter-application integration, breaking siloed workflows and data. Thanks to real-time data transfer, your teams can work with unified data to extract meaningful insights for every possible business need.

Be it data migration to an external database for disaster recovery or analytics and reporting for data-driven decision-making. 

Perspectium’s solutions are designed to scale and adapt to your evolving business needs. Rather than relying on API calls that impact the performance of integrated systems, Perspectium uses a Message Bus System and “Push” technology to deliver performance-impact-free integrations. 

Additionally, Perspectium provides automated integrated solutions as a service. This means organizations benefit from Perspectium’s expertise in implementing and maintaining the integration.

In turn, this allows for additional internal resources to tackle existing issues and prioritize other, value-adding tasks.

Essentially, Perspectium makes tech debt management much more convenient through seamless and automated integrations.