Navigating the Business Costs of Technical Debt

Technical debt - The silent killer of your business

Being in debt has tremendous negative connotations and even worse consequences if it’s not addressed properly. The cost of technical debt can come in many shapes and forms, from damaged reputation to sales decline. Imagine a scenario where your once robust and innovative software solution begins to malfunction, plagued by performance issues, delayed updates, and skyrocketing maintenance spending. This scenario becomes a reality in many organizations that overlook the need to take care of their systems. Let’s discuss the hidden impact of accumulating technical debt and how to handle it.

How to recognize technical debt?

Many signs indicate that a particular system is outdated and in technical debt. Employees are unsatisfied with its complex, difficult nature. Maintenance consumes 70% of the IT department’s budget. Legacy code is so complicated that fixes and updates take forever and require additional workforce.

Research alarms that most organizations (approximately 87%) have to plan modernization within the upcoming 12 months, which means many companies operate on obsolete software when fast, reliable solutions are imperative for business success.

It’s also important to consider the developers’ perspective when defining the impact of technological debt on such areas as software development, implementation, testing, and post-release management. According to Tomasz Grażyński, Head of Quality Assurance at Brainhub, when programmers and QA specialists feel unsatisfied working on a solution and are afraid to introduce changes to not break the system, the software should be modernized. The same goes for poor test results.

When we talk about tech debt, every project actually has it. Whenever you’re making the first commit, you are already starting down the path of accruing some debt, and you will have to pay it off sooner or later. And we pay it off in different ways. Drawing from my experience working in two startups, companies often originate from an idea that requires quick decision-making and even quicker MVP development. This approach already creates some debt. - Brainhub’s Head of Delivery, Aleksandra Gepert

Aleksandra shared an interesting perspective on tech debt - it originates from every business decision. If the brand wants to speed up time-to-market, it might take shortcuts and make compromises, which leads to technical debt from day one. When such choices are made with awareness and objectives in mind, they are justified. However, every debt has to be paid off in the future.

Costs of technical debt in a long-term and short-term perspective

Using a redundant software system can influence all types of operations and disrupt organizational efforts toward success, sustainability, and achieving business goals. How does technical debt impact companies in a long and short perspective?

Short-term costs of technical debt

Technical debt manifests in immediate challenges in productivity and resource management. Development teams experience difficulties and delays when dealing with complicated codebases - from decoding twisted logic to navigating tangled dependencies. Messy software can slow down the pace of feature development and implementation, which results in a worse ability to respond swiftly to rapidly changing market trends and customer demands. Overall, it blocks innovation and new opportunities to generate revenue while also escalating costs. Such a debt can also devalue employee’s work by draining their time and energy for tasks that are mundane and ineffective.

Long-term impact of technical debt

When technical debt is not addressed, it persists and threatens organizational resilience, as well as the company’s ability to stand out from the competitors. It disables scalability and decreases revenue due to potential bugs or downtimes. Customer and employee dissatisfaction are triggered by poor performance of the system that can’t be quickly improved.

Result? Internal conflicts, decreasing brand loyalty, declining market reputation, and in the worst-case scenario - tech bankruptcy. Moreover, legacy systems are often prone to security vulnerabilities and breaches, which can have disastrous consequences for integrity and viability and result in legal or financial repercussions.

<span class="colorbox1" fs-test-element="box1"><p>Also read: Learn how to prioritize tech debt repayment.</p></span>

How to communicate tech debt with clients and stakeholders?

If your organization has to handle the cost of technical debt, it should be open about it and address it as quickly as possible. Effective communication requires transparency, data-driven insights, and strategic alignment with all parties’ business objectives. Stakeholders and customers should be aware of the risks that legacy systems carry and know how modernization can offer new opportunities. Discussing how technical debt will be repaid allows everyone to make informed decisions and allocate resources accordingly. Being proactive is key to driving meaningful change in that area.

As we’ve mentioned above, sometimes the debt is a choice dictated by particular goals, like faster time-to-market. Software engineering partners should honestly present the pros and cons of possible directions to follow and simulate the results of the various approaches. Tomasz Grażyński doesn’t recommend lying or giving false promises because not being able to deliver the project scope leads to both internal and external issues. Instead, he advises talking about the timeline and proposing adjustments to kickstart step-by-step development and meet the expectations.

Aleksandra Gepert adds that education is essential when communicating with clients about technical debt. Since it’s a result of certain decisions, but also an ordinary matter in most projects, the team (including the client) should work together towards reducing it. The project manager’s role is to coordinate the process, present the current state, and explain how tech debt can be paid off.

Metrics that indicate technical debt

Even though it can be challenging to measure the impact of technical debt, certain metrics can be used to check its state. Monitoring software complexity, test results, good practices implemented within the project (like static analysis or code reviews), and user feedback is the first step toward improving the software and reducing its debt.

One of the most important technical indicators is resource usage and the cost of the production process. For instance, if the growing number of users increases the need for hosting 10 times, it definitely points towards debt and has to be included in the project plan to be handled.

Measuring technical debt is not easy, especially with tight deadlines. Despite that fact, it’s worth trying to address it and have metrics that can be easily compared in the future to see how the technical debt is minimized. What’s crucial is to not focus solely on the debt, but on how reducing it can impact the software, the business, and the customers in the long run.

Strategies for handling technical debt

Benedykt Dryl, Brainhub’s Head of Engineering, said in our State of Software Modernization 2024 report:

First and foremost, modernization should be justified. You can't decide based only on technical factors – it has to bring a significant business return. Why is this so important? Many things can go wrong when modernizing – it is a complex operation and should have a solid case behind it.

That’s why repaying technical debt has to be cautiously planned and executed. It should also be approved by all stakeholders before any action is taken. Overall, there is no universal approach - some projects will require more dedicated resources and others will need to foster a culture of continuous improvement to see a meaningful change.

With that being said, how to plan software modernization to eliminate the impact of technical debt? Here’s our list of steps to take:

• Define precise, long-term technical and business objectives. Plan the project with actionable steps and priorities.
• Build a collaborative team with strong communication skills.
• Introduce good practices from day one - create thorough documentation, summarize periods of work, and learn your lessons.
• Pick metrics that will indicate that the goals are met. Monitor progress and compare it with these metrics.
• Talk with stakeholders and explain every part of the process in a simple, understandable way to help them make decisions. Make sure they see the business value of modernization and know how it can minimize negative situations.
• Perform migration according to technical guidelines and don’t push changes if the system is not capable of handling them. It’s better to take smaller steps than to cause another debt.

Confronting the costs of technical debt is not easy, but necessary to keep the business running. Even if the decision to make it was reasonable in the past, sooner or later it has to be paid off for the sake of end-customer experience and general profit. Organizations should invest in debt reduction strategies and work with software engineering partners to modernize their digital infrastructure and promote sustainable growth. A proactive mindset is necessary in the era of enormous competition and rapid innovation. Knowing a company’s technical debt and proactively minimizing it is vital for long-term business reliability and viability.

‍Modernize your legacy system with experts from Brainhub. We’re here to help you address tech debt and create modern, robust software solutions.