Where the misunderstandings about MICs come from

Last updated on December 21st, 2017 at 04:27 pm

The differences between technical debt and financial debt are numerous and significant, and often overlooked, in part, because of the metaphor itself. Attempting to manage technical debt as one 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 reduce the costs of both carrying and retiring technical debt. More important are the opportunities lost or unrecognized because of reticence about addressing the technical debt to the extent necessary if we were to exploit those opportunities.

The right tool for the wrong job
Managing technical debt by using approaches that work well for financial debt is analogous to using the right tool for the wrong job.

The debt metaphor itself is probably at the root of the misalignment between the conventional concept of fixed or slowly varying interest rates and the reality of loss of enterprise agility or lost revenue due to technical debt. 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.

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 undertaken on the assets that carry the debt. This fact is a source of flexibility useful for planning technical debt management programs, which can exploit it to set priorities for debt retirement and debt prevention efforts. That flexibility implies, for instance, that planning technical debt retirement programs to satisfy the urge to retire all instances of a given class of technical debt might not be sensible.

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

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