ROI of Technical Debt

This article is part of my Better Return On Investment from Software Development series.
These articles are aimed at senior management funding Software Developer or IT Professionals attempting to show the ROI benefits of what can sometimes seem counterintuitive.
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In this article, part of my series explaining better ROI from software development, I'd like to introduce the concept of Technical Debt.


Technical Debt is a means of measuring and explain problems in our Software Solutions using the metaphor of traditional financial debt. A s with building a house (discussed in the last article looking at the ROI of an Analogy), financial debt has considerable shared understanding and is incredibly useful to increase shared meaning.

Technical Debt allows us to assign a metric to something that is otherwise overlooked, but is nevertheless extolling a cost on the organisation.

What is Technical Debt?

"Technical debt (also known as design debt or code debt) is "a concept in programming that reflects the extra development work that arises when code that is easy to implement in the short run is used instead of applying the best overall solution". Technical debt can be compared to monetary debt. If technical debt is not repaid, it can accumulate 'interest', making it harder to implement changes later on. Unaddressed technical debt increases software entropy." Wikipedia

Personally, I take this a little further and expand it to be anything that would be sub-optimal expense when operating and maintain a Software Solution.

Two things certain in life …

Every Software Solution will have an ongoing cost.

That is unavoidable.

Even the best written and designed Software will have some cost associated with its upkeep.

You will never get it to zero.

But there is a point of optimal cost – beyond that is what can be considered the “interest” you are paying on your technical debt. Each software system will have a different optimal cost – and there isn’t necessarily an easy way to establish that – which is possibly why technical debt can be quite a subjective measure.

How to measure

While it is possible to measure – and thus report on – technical debt, it is not necessarily an easy thing to do.

For me; just having an awareness of how “indebt” a system feels should be enough – rather than expending considerable effort in reporting and managing.

As long as the entire organisation is bought into that; it can be much more cost effective than performing all of that work – just to provide a business case.

That being said, the Software Development world isn’t perfect and sometimes we do need to put a number against it.

I’ve seen a few options, but they basically boil down to the amount of effort to return the Software to that optimal point.

To establish this with your Development Team, I’d ask them to draw up a list of anything that feels sub-optimal, then provide a development estimate for it. From that, you can establish a cost to fix.

Even this however doesn’t give a true view of the debt. This is how much it would be to remove the debt. You may be paying interest on the debt in other ways – low productivity, additional resources to operate, delays in changes, etc. Some of these can quickly outweigh the debt cost.

If a cost can be attributed to the any sub-optimal item – great, throw it in to any technical debt calculation you are preparing – but trying to actively seek them out can be expensive in its own right.

What could be consider sub-optimal

Again this can be difficult to quantify – it can differ from Software project to Software project.

There are things that would be considered universal good Software Development practice – these will be things your Development Team can advise on. (If not, I can help).

You will then have those less universal affects that are specific to your environment and the Software. Those are the ones that would require review and analysis.

One good way to capture technical debt, is after a problem. If a system failure or project delay can be identified as being due to something being sub-optimal – great, make a note of it. You should also be able to value it as you’ve suffered for it.

Our choice how much

Once you have some view of the Technical Debt, it is up to you to decide how much you are prepared to live with.

As with financial debt, it can be seen as an enabler (see below), so not all debt is bad.

There will obviously come a point where it will cost too much for your business to afford on a day-to-day basis.

This will be similar to any risk analysis – impact + frequency. If it has minimal impact, but happens all the time then the net affect can be high. By the same token, it may have a high impact but happens exceptionally rarely, you could choose to accept the risk and carry on.

How much us too much?

If you’re Development Team are spending any level of time keeping a sub-optimal system running, then I’d start to question if the debt shouldn’t be paid off.

If they are spending 5% of their time a week, that soon becomes a considerable impact over the longer term. If the “cost” to pay off the debt is two weeks development, then that will of course pay off over the lifetime of the Software.

Again, there isn’t a simple rule for this – however I err on the side of caution and advise paying off any technical debt as soon as possible.

Like financial debt, it is easy to ignore until the debt becomes un-serviceable. And as I say, technical debt can be difficult to measure (even with consider effort).

Debt as an enabler

I wanted to end with the acknowledgement that debt can be an enabler. It can be a good thing.

If you choose to actively cut corners to get some value quickly – great.

Just make sure to have a plan of how & when to service your Technical Debt. If it isn’t going to be a priority to service the debt, then I’d really advise against incurring it.

If used wisely, using Technical Debt (in the same way you use Financial Debt) can be hugely advantageous – but only is used wisely.

About the author:

Mark Taylor is an experience IT Consultant passionate about helping his clients get better ROI from their Software Development.

He has over 20 years Software Development experience - over 15 of those leading teams. He has experience in a wide variety of technologies and holds certification in Microsoft Development and Scrum.

He operates through Red Folder Consultancy Ltd.