Technological Debt – The Invisible Force that Is Destroying Your Business

Technological debt is quite a new phenomenon and little has actually been written about the topic. Unfortunately, technological debt is one of the biggest obstacles to technology and internet businesses in my opinion. Unlike other business challenges, technological debt is hard to track and doesn’t make itself present until its often times too late or very hard to overcome.

What Is Technological Debt?

Technological debt is real monetized and operational debt your business accrues from various flaws in the technology your business is built from. The scary thing about this debt is that it doesn’t show up on your accounting books and thus continuously becomes an anchor on businesses unknowingly unless otherwise addressed. Technological debt accrues when your technology systems are ignored and can only be seen when those system failures are addressed – often times paid for in labor costs and loss of revenue.

The three most popular forms of technological debt are:

  • Poor System Design
  • Not Keeping Your Software Up to Date
  • 3rd Party Provider Debt

In the short-term these issues are virtually not noticeable. However, over time (1 – 5 years) these issues tend to build and can potentially tear your business to shreds. Over time your competitors innovate, software system degradate and you become more indebted to your legacy systems. The longer you take to react to these forces the more debt your company builds and when you do try to address the issues the problems can be costly to fix. If you wait too long they may cost more then cash you have on hand. Thus, becoming the core culprit of your businesses demise.

Paying Down Your Technological Debt

When paying technological debt, its much like real debt, and you have two options. First, you can pay the interest in the form of extra effort to deal with the systems or you can pay down the principal by fixing the issues entirely. Though it may cost more to pay down the principal up front you will reduce your interest payments and hopefully improve revenue.

Types of Technological Debt

#1 Poor System Design

This is the most familiar form of technological debt. Poor system design often shows itself in poorly written codebase.

Examples:

An example would be a poorly planned web app that works but is hard to maintain or manage due to its ill conceived architecture or poorly written code. Often times very buggy codebase can lead to high interest payments on that software over time as bugs begin to build on one another and the system begins to break down.

#2 Not Keeping Your Software Up to Date

Even though this isn’t the most common form of technological debt it is in fact the one that I run in to the most. Often times, this comes in the very simple form of a website being very out of date. Perhaps the design and platform hasn’t been updated in five years. The fact is the longer you take to update your website the more principal you have to pay up front to pay it off. Sure the design itself may not be more expensive but things like changing a CMS, updating your site architecture become very costly if they haven’t been updated over time.

Examples:

The most clear example often comes from eCommerce websites since there are alot of moving parts with these websites. If an eCommerce site hasn’t been updated in say 5 years principal has to be paid to update the categories, products, design and development and if you have 20k – 50k products this can be very costly. Now say the CMS is super outdated and the client needs to migrate away from some CMS you’ve never heard of to Magento or some other open source CMS. Not only is there labor cost but cost in losing search traffic from new url structures.

If you have an eCommerce business – this should be the thing that keeps you up at night.

#3 3rd Party Provider Debt

When building a website it can often be very enticing to use 3rd party tools to build your site. This can be in the form of the actual CMS like Volusion, Shopify, etc. or can come in the form of actual plugins. The allure of 3rd party tools is super tempting. I get it! However, in the long run your business can become indebted to them and if you need to innovate 3rd party tools can’t grow with you. Thus, the cost of paying to innovate racks up huge principal costs over time.

This form of technological debt is actually the most sneaky in my opinion. Often hitting small businesses the most since they are more budget conscious. The bad news is that small businesses often times fail to be able to dig themselves out of this form of debt.

Examples:

I often see this scenario the most with hosted CMS solutions. The intrigue of building a quick website on something like Shopfiy, Volusion, or BigCommerce can be appealing. They promise that you can build an eCommerce site for cheap. And, you can. However, what they don’t tell you is that your competitors that use Open Source platforms will be able to out compete you and innovate much quicker then you in the long run.

If your business gets to a point where you truly need to innovate, you’ll be faced with a situation where it is going to cost you a ton of principal capital up front to migrate your entire site and information to a new platform. Moreover, the interest is often compounding. Meaning the longer your on the hosted CMS paltform the more risk and loss in revenue you will encrue in the short-term as your url structure changes and you are penalized form Google.

Conclusion

In the end building technological debt is simply a failure to innovate. The longer you take to innovate, whether it be your software, or infrastructure, the more costly it will become to take the leap forward. The moral we should learn from this formidable invisible foe is to stay nibble, constantly be innovating and never become beholden to third party providers.

We recommend logging your technological debt in to “debt list” with time and effort, and continually work it off. In fact, doing so can be a morale boost for employees and stakeholders.

Are there other forms of technological debt you can think of?

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