Last updated on December 11th, 2018 at 06:56 am
When some organizations first realize that their performance is being limited by technical debt, they begin by chartering a “technical debt inventory.” Their goals are to determine just how much technical debt they’re carrying, where it is, how much retiring it all will cost, and how fast they can retire it. That’s understandable. It’s not too different from how one would approach an out-of-control financial debt situation. Understandable, but in most cases, ineffective. With technical debt we need a different approach, because technical debt is different from financial debt. With technical debt, we must be guided by what I call the Principal Principle, which is:
With technical debt, MICs can vary dramatically. For assets that aren’t being maintained or enhanced, the MICs can be Zero for extended periods. For retiring assets, their technical debt can vanish when the asset is retired. For other assets, MICs can be dramatically higher—beyond the total cost of replacing the asset.
Most people regard MICs as being restricted to productivity problems among engineers. I take a different approach. I include in MICs anything that depresses net income—lost or delayed revenue, increased expenses, anything. For instance, if technical debt causes a two-month delay in reaching a market, its effect on revenues can be substantial for years to come. I regard all of that total effect as contributing to MICs.
So the Principal Principle is that a focus on Principal can be your undoing. Focus on MICs. Drive them to Zero and keep them there.
- How financial interest charges differ from interest charges on technical debt
- The concept of MICs
- MICs can fluctuate dramatically
- MICs on technical debt can be unpredictable
- MICs can differ for different instances of the same kind of technical debt
- MICs can sometimes be deferred or advanced without penalty
- MICs on technical debt can be difficult to measure
- MICs can change when other debts are retired
- Where the misunderstandings about MICs come from