Where the misunderstandings about MICs come from

Last updated on July 8th, 2021 at 12:50 pm

The differences between technical debt and financial debt are numerous and significant. We often overlook them, in part, because of the metaphor itself. Managing technical debt as we would manage financial debt is risky for two reasons. First, such an approach would most likely fail to exploit properties of technical debt that can be advantageous. Second, such an approach would likely cause us to overlook opportunities because of reticence about addressing the technical debt problem to the extent necessary for effective control.

The right tool for the wrong job
Managing technical debt using approaches drawn from finance is analogous to using the right tool for the wrong job.
The debt metaphor itself is probably at the root of the misunderstanding. The financial metaphor evokes the conventional concept of fixed or slowly varying interest rates. But the reality of technical debt involves loss of enterprise agility or lost revenue. Connecting these two ideas is intuitively challenging.

For the more familiar kinds of financial debts, the interest rate and any rules for adjusting it are set at the time of loan origination. Moreover, financial debts are unitary in the sense that each loan is a single point transaction with a single interest rate formula. For example, the interest rate formula for the most common kind of credit card balance is the same for every purchase. Technical debt isn’t unitary. Each kind of technical debt and each manifestation of that kind of technical debt is, in effect, a separate loan that can carry its own independently variable MICs.

Last words

The cost of carrying technical debt can vary with time. It can vary for a given class of technical debt, or it can vary instance-by-instance. Costs depend on the nature of the work underway on the assets that carry the debt. This fact is a source of flexibility useful for planning technical debt management programs. To manage resources, planners can exploit this flexibility to set priorities for enterprise efforts. For example, planning technical debt retirement programs to retire all instances of a given class of technical debt might not be the best choice.

When making technical debt management decisions, respect the constraints that technical debt imposes. Exploit the flexibility that technical debt provides.

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