Last updated on July 3rd, 2018 at 08:02 am
For a financial debt, creditors regularly inform debtors of periodic interest charges, principal remaining, and other parameters of the loan. In many cases, laws require regular reports and explicit statements about interest charges when prospective creditors interact with prospective debtors. By contrast, for technical debt, metaphorical interest charges (MICs) can be difficult to compute with useful precision, even if we know that they’re accumulating. Many decision-makers are actually unaware that MICs are accumulating at all. For an organization to appreciate the full financial consequences of carrying technical debt, everyone in the enterprise must appreciate the concept of MICs.
Unlike financial debt, for technical debt there are no legally required reports or disclosures. We can sometimes estimate MICs, but most organizations don’t track the data necessary to estimate MICs with useful precision. Indeed, developing useful estimates is often technically impossible.
The difficulty of measuring MICs arises from three sources. First, people whose productivity is most directly affected by technical debt — usually engineers — often have difficulty determining with precision the extent of the impact of technical debt on their efforts.
Second, many people are unaware of the impact technical debt has on their results. For example, if a product arrives late to market, the financial costs attributable to technical debt can be computed if we realize that technical debt is partially — or wholly — responsible for the delay. Too often, those who could perform such calculations aren’t sufficiently familiar with the concept of MICs, and in any case, the data they would need for calculating a useful estimate is rarely available.
Finally, a more insidious form of the consequences of technical debt is what we might call the terrifying opportunity. This situation arises when the organization rejects (or fails to recognize) a market opportunity because exploiting it would involve modifying an existing asset or product offering that harbors a heavy load of technical debt. The debt causes decision-makers to assess that the probability of success is so depressed by technical debt that the opportunity seems terrifying, and they therefore reject the opportunity. Typically, terrifying opportunities would be exploitable if the debt-bearing assets didn’t exist at all, because then we would be starting fresh. But given that terrifying opportunities require modifying existing assets that bear heavy loads of technical debt, commitment requires faith that the technical debt can be addressed successfully.
The sense of risk isn’t a reflection on the capabilities of the technical organization. Rather, it’s a result of the challenges involved in working with assets that bear high levels of technical debt. Given past performance of the technical organization relative to these debt-bearing assets, success can seem unlikely.
Computing the cost of a terrifying opportunity requires estimating the cost of not exploiting the opportunity, a difficult task in the best of circumstances. But whatever that cost is, it’s a form of MICs that we rarely recognize.
Building expertise in estimating MICs in all their forms is advantageous to any organization that seeks to make its technical debt more manageable. By making MICs visible, we can bring about better recognition of the cost of carrying technical debt, thereby providing an appropriate motivator for retiring technical debt.