Understanding Technical Debt Meaning: Definition, Impact and Tips for Businesses

The Impact of Technical Debt

According to McKinsey’s report in 2023, tech debt principal accounts for 45% of IT balance sheets, while most companies pay over 12% interest on projects. A company that spends over 60% of its budget on fixing legacy systems or integrations may get caught in a tech debt spiral that’s constantly paying interest. On the contrary, companies that operate on modern IT stacks and have little or no software technology debt can direct their tech investments to new offerings.

In a survey called “The State of Technical Debt 2023,” 54% of engineers believed technical debt negatively impacts their team’s morale. In addition, 70% of engineers feel the team would ship 100% faster if they had a set process for technical debt. Unfortunately, although most engineers are convinced about the negative impacts of technical debt, 60% of companies don’t have any process to manage it.

Why is it Important to Measure Technical Debt?

Identifying tech debt is crucial for several reasons:

• Decreased productivity: Technical debt incurs an ongoing tax in which engineers spend more time circumventing it than focusing on innovation. According to recent studies, engineers spend up to 40% of their time on technical debt, leading to lower productivity at work and delays in project delivery.
• Unchecked growth: Technical debt grows over time unless appropriately managed. The longer it is left unaddressed, the more it accumulates, leading to higher maintenance costs, longer development cycles, and reduced competitiveness.
• Limited innovation: If you’re in high technical debt, it can hamper your company’s ability to embrace new business models or technologies. For instance, Photoshop offered a license-based model, selling the software for $800-$4000. However, when SaaS became vogue, Photoshop started lagging as their model required selling the software. Incidentally, Photoshop redid its software and could switch to the Pay-Per-Use model, minimizing its technical debt and maintaining its position in the market.

How to Measure Technical Debt in an Organization?

To answer the question “How do I know if our project has technical debt?”, you can assess metrics such as cycle time, stability, developer’s happiness quotient, and backlog size. These metrics can help you understand your project’s technical debt level and provide insights into areas that require improvement. In addition, by tracking these metrics regularly, you can proactively manage technical debt and prevent it from becoming a significant issue in your project.

Cycle Time

Cycle time is the time taken to complete a specific task. For instance, the cycle time in programming is between the developer’s first commit in a section of code and the code’s deployment. Therefore, a shorter cycle time represents an optimized process with lower technical debt. In contrast, the opposite is true for longer cycle times.

Stability

When a developer must solve a problem and implementing a workaround seems faster than making a change and solving the issue for good, you have technical debt. Furthermore, when one change can lead to many more changes unrelated to the system and disrupt the operations, it signifies high technical debt and instability.

Developer’s Happiness Quotient

Developers enjoy working on new ideas and innovations rather than reworking old code or updating systems. Unhappy developers in a particular system are an indicator of high IT debt.

Backlog Size

Measuring how many items you have in the backlog files and how long your development team will take to resolve all the pending things is essential. Often, non-critical features must be updated in the software for a long time. Measuring and monitoring the size of your backlog and its age (old items) can help determine your technical debt. If you have a 6-7 developers’ team, and it takes them more than 3-4 sprints or over six months to resolve the backlog, it is a cause for alarm.

How to Deal With Technical Debt? 8 Top Tips for Businesses

Technical debt can significantly affect the productivity and success of software development projects. While measuring technical debt is significant, knowing how to handle technical debt for long-term benefits is equally important. Companies can reduce maintenance costs and improve their development teams’ efficiency by managing technical debt effectively. Some strategies for reducing tech debt include:

Monitor the Debt Regularly

One of the ways how to manage technical debt effectively, it’s essential to monitor it regularly. Technical debt can take various forms and impact a business in different ways. Companies can address their debt before it grows out of control by closely monitoring it. For instance, Twitter faced IT debt challenges when it built its platform’s front end using Ruby on Rails. It led to difficulties in adding new features and improving search performance. After identifying tech debt, the company paid it off by switching to a Java server, leading to a 3-fold decrease in search latency.

Reframe Your Software Development Strategy

Technical debt indicates that your software development strategy needs a makeover. For technical debt reduction, adopt an agile approach and implement a sprint-by-sprint approach. For instance, when Instagram launched its iPhone app in 2010, it faced a significant setback as the operations were run from a single server in LA, which couldn’t handle the influx of traffic, and the server crashed. To prevent such disasters, Instagram had to pivot to an EC2-hosted database within three days, which the co-founder likened to open-heart surgery. This incident highlights the importance of managing tech debt proactively.

Refactor the Source Code

One of the key strategies how to reduce technical debt is to apply code refactoring. This technique involves improving the quality of the source code without changing its behavior. In cases where the code was written in a rush to meet tight deadlines or by inexperienced developers, rewriting the code can take time and effort. However, regular refactoring can significantly enhance the code’s readability, maintainability, and performance. This practice ensures that the code remains relevant and adaptable to changing business needs while reducing the risks of not managing tech debt.

Conduct Unit Tests Regularly

One of the best practices for managing tech debt, it’s essential to conduct unit tests regularly. Unit testing allows developers to catch regression bugs early in the development cycle, reducing the chances of accumulating technical debt. By identifying and addressing bugs early, developers can improve the quality of their code and make the coding process more agile. Furthermore, automating the testing process can help ensure that tests are conducted consistently and reliably, reducing the risk of human error.

Maintain Documentation to Make Repayment Easier

Another option how to solve technical debt is maintaining comprehensive documentation of the project is crucial. This documentation serves as a knowledge base for the development team and facilitates problem-solving when dealing with challenging situations. In addition, with detailed documentation, engineers can quickly understand the code and its dependencies, reducing the time required to resolve issues and contributing to the overall agility of the development process.

Advocate Regular Maintenance

One of the tools for managing tech debt, it’s crucial to advocate regular maintenance. Conduct weekly sprints to focus on paying down technical debt and cleaning up the codebase. Start with addressing the code causing the most significant impact on the product’s functionality. Then, to ensure that technical debt is addressed, involve product managers in the process so they can understand the scale and cost of the debt. Regular maintenance, which includes updating the code and migrating old data to new systems, can reduce technical debt and keep the system running smoothly. A dedicated clean-up team can also help ensure that technical debt is managed and addressed regularly.

Plan Reasonable Workloads

When you choose tight deadlines to get the first-mover’s advantage, there are chances that your developers will choose a rigid framework. Refactoring the app to a more flexible framework will lead to a high debt payback. Work on reasonable deadlines that don’t compromise the quality of the project.

For example, when discussing technology challenges in healthcare, it is crucial to understand the complexities of the industry and the different stakeholders involved. One possible approach could be to break down the topic into smaller subtopics, such as the impact of technology on patient care, the role of electronic health records (EHRs), or the challenges of interoperability.

By setting reasonable deadlines for each subtopic and allocating resources accordingly, content writers can ensure enough time to research and write a comprehensive and insightful piece. Additionally, this approach helps to avoid relying on rigid frameworks or outdated information that may lead to a high debt payback in the future.

Move Away from Monolith Architecture

Moving away from monolithic architecture is essential for technical debt reduction in enterprise IT solutions. Monolithic architecture refers to a traditional unified model for software program design where the application is composed in one piece. While it may be simple to set up initially, it becomes more work to incorporate more data, functions, and users as your business grows. In addition, if any program needs to be updated, the entire application must be rewritten, leading to more time and money investments.

Modular architectures, on the other hand, are relatively independent and allow for more accessible updates and maintenance. By breaking down the application into smaller, more manageable modules, you can reduce technical debt and improve the quality of your software development. For example, instead of having one large bookcase for all your books, it’s better to have smaller, separate bookcases that can be easily expanded and updated as needed. This approach allows for scalability and long-term flexibility while maintaining the quality and security of your application.

Conclusion

Understanding the risks of not managing tech debt is crucial for any business that wants to stay competitive in the long run. Skipping proper technical debt management may provide short-term benefits. Still, it will eventually result in time loss and decreased effectiveness.

Technical debt reduction not only improves the product’s quality but also boosts the morale and productivity of the development team. At Digicode, we regularly monitor technical debt and ensure that our software developers are in control with the right metrics and strategies.Our team provides various IT company services, including evaluation and refactoring of software systems. Digicode also provides smb technology solutions, software re-engineering services, custom mobile application development services and AdTech development services. As a result, we can minimize and manage technical debt and work towards a healthier future for our business and clients and be the leading IT solutions provider company.