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    • Understanding Technical Debt Meaning: Definition, Impact and Tips for Businesses

    Understanding Technical Debt Meaning: Definition, Impact and Tips for Businesses

    Understanding Technical Debt Meaning: Definition, Impact and Tips for Businesses

    Elkhan Shabanov

    May 2, 2023

    Imagine you’re a young professional working diligently at a start-up – long hours and weekend meetings are a part of your life. During this time, you grab fast food that’s quick and cheap to help you get back to work faster. Although you get ahead in the short term, your body feels slowed down due to all the greasy meals, and you start feeling sluggish after a few months.

    The quick fix you chose has cost you.

    Like poor diet habits, technical debt starts with good intentions but can result in frustrating system failures and bugs. Specific short-term fixes help developers iterate quickly, but it causes the software to accrue IT debt. When left unaddressed, it crashes software, bogs down systems, increases the cost of development, and can even cause months of delay in product launches. As of 2023, technical debt costs continue to rise, with 80% of software development teams experiencing the vast risks of not managing tech debt. According to a survey, software engineers spend an average of 50% of their time fixing bugs, which often stem from technical debt. These statistics emphasize the importance of understanding what is technology debt, tech debt impact on businesses, how to measure tech debt, the benefits of managing tech debt, and the best strategies for reducing tech debt.

    What is Technology Debt?

    Before delving deeper into the concept of technology debt, it’s essential to understand what is tech debt. In software development, technical debt, also known as tech debt or code debt, is a term that conceptualizes the trade-off software developers or companies make between the short-term benefits of rapid delivery and the long-term value of building a software system that’s easy to modify, repair, and sustain. The definition of tech debt is when development teams act to expedite the delivery of a project or functionality that later needs rework or refactoring. In simple terms, tech debt definition is the result of prioritizing speedy delivery over a perfect code or a better solution.

    To better understand tech debt meaning, let’s look at it with the same two components as financial debt:

    • The principal is the work developers must do to modernize the technology stack. It includes deferred maintenance, upgrades below the app layer, or software customizations.
    • The interest is the complexity tax that the project pays. It comes from the need to work from fragile batch data integrations or create workarounds to cut risks. The frictional losses result in lower ROI, harm budgets, and inhibit long-term velocity and productivity.
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    The Impact of Technical Debt

    According to McKinsey’s report in 2023, tech debt principal accounts for 45% of IT balance sheets, while most companies pay over 12% interest on projects. A company that spends over 60% of its budget on fixing legacy systems or integrations may get caught in a tech debt spiral that’s constantly paying interest. On the contrary, companies that operate on modern IT stacks and have little or no software technology debt can direct their tech investments to new offerings.

    In a survey called “The State of Technical Debt 2023,” 54% of engineers believed technical debt negatively impacts their team’s morale. In addition, 70% of engineers feel the team would ship 100% faster if they had a set process for technical debt. Unfortunately, although most engineers are convinced about the negative impacts of technical debt, 60% of companies don’t have any process to manage it.

    Why is it Important to Measure Technical Debt?

    Identifying tech debt is crucial for several reasons:

    • Decreased productivity: Technical debt incurs an ongoing tax in which engineers spend more time circumventing it than focusing on innovation. According to recent studies, engineers spend up to 40% of their time on technical debt, leading to lower productivity at work and delays in project delivery.
    • Unchecked growth: Technical debt grows over time unless appropriately managed. The longer it is left unaddressed, the more it accumulates, leading to higher maintenance costs, longer development cycles, and reduced competitiveness.
    • Limited innovation: If you’re in high technical debt, it can hamper your company’s ability to embrace new business models or technologies. For instance, Photoshop offered a license-based model, selling the software for $800-$4000. However, when SaaS became vogue, Photoshop started lagging as their model required selling the software. Incidentally, Photoshop redid its software and could switch to the Pay-Per-Use model, minimizing its technical debt and maintaining its position in the market.

    How to Measure Technical Debt in an Organization?

    To answer the question “How do I know if our project has technical debt?”, you can assess metrics such as cycle time, stability, developer’s happiness quotient, and backlog size. These metrics can help you understand your project’s technical debt level and provide insights into areas that require improvement. In addition, by tracking these metrics regularly, you can proactively manage technical debt and prevent it from becoming a significant issue in your project.

    Cycle Time

    Cycle time is the time taken to complete a specific task. For instance, the cycle time in programming is between the developer’s first commit in a section of code and the code’s deployment. Therefore, a shorter cycle time represents an optimized process with lower technical debt. In contrast, the opposite is true for longer cycle times.


    When a developer must solve a problem and implementing a workaround seems faster than making a change and solving the issue for good, you have technical debt. Furthermore, when one change can lead to many more changes unrelated to the system and disrupt the operations, it signifies high technical debt and instability.

    Developer’s Happiness Quotient

    Developers enjoy working on new ideas and innovations rather than reworking old code or updating systems. Unhappy developers in a particular system are an indicator of high IT debt.

    Backlog Size

    Measuring how many items you have in the backlog files and how long your development team will take to resolve all the pending things is essential. Often, non-critical features must be updated in the software for a long time. Measuring and monitoring the size of your backlog and its age (old items) can help determine your technical debt. If you have a 6-7 developers’ team, and it takes them more than 3-4 sprints or over six months to resolve the backlog, it is a cause for alarm.

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    How to Deal With Technical Debt? 8 Top Tips for Businesses

    Technical debt can significantly affect the productivity and success of software development projects. While measuring technical debt is significant, knowing how to handle technical debt for long-term benefits is equally important. Companies can reduce maintenance costs and improve their development teams’ efficiency by managing technical debt effectively. Some strategies for reducing tech debt include:

    Monitor the Debt Regularly

    One of the ways how to manage technical debt effectively, it’s essential to monitor it regularly. Technical debt can take various forms and impact a business in different ways. Companies can address their debt before it grows out of control by closely monitoring it. For instance, Twitter faced IT debt challenges when it built its platform’s front end using Ruby on Rails. It led to difficulties in adding new features and improving search performance. After identifying tech debt, the company paid it off by switching to a Java server, leading to a 3-fold decrease in search latency.

    Reframe Your Software Development Strategy

    Technical debt indicates that your software development strategy needs a makeover. For technical debt reduction, adopt an agile approach and implement a sprint-by-sprint approach. For instance, when Instagram launched its iPhone app in 2010, it faced a significant setback as the operations were run from a single server in LA, which couldn’t handle the influx of traffic, and the server crashed. To prevent such disasters, Instagram had to pivot to an EC2-hosted database within three days, which the co-founder likened to open-heart surgery. This incident highlights the importance of managing tech debt proactively.

    Refactor the Source Code

    One of the key strategies how to reduce technical debt is to apply code refactoring. This technique involves improving the quality of the source code without changing its behavior. In cases where the code was written in a rush to meet tight deadlines or by inexperienced developers, rewriting the code can take time and effort. However, regular refactoring can significantly enhance the code’s readability, maintainability, and performance. This practice ensures that the code remains relevant and adaptable to changing business needs while reducing the risks of not managing tech debt.

    Conduct Unit Tests Regularly

    One of the best practices for managing tech debt, it’s essential to conduct unit tests regularly. Unit testing allows developers to catch regression bugs early in the development cycle, reducing the chances of accumulating technical debt. By identifying and addressing bugs early, developers can improve the quality of their code and make the coding process more agile. Furthermore, automating the testing process can help ensure that tests are conducted consistently and reliably, reducing the risk of human error.

    Maintain Documentation to Make Repayment Easier

    Another option how to solve technical debt is maintaining comprehensive documentation of the project is crucial. This documentation serves as a knowledge base for the development team and facilitates problem-solving when dealing with challenging situations. In addition, with detailed documentation, engineers can quickly understand the code and its dependencies, reducing the time required to resolve issues and contributing to the overall agility of the development process.

    Advocate Regular Maintenance

    One of the tools for managing tech debt, it’s crucial to advocate regular maintenance. Conduct weekly sprints to focus on paying down technical debt and cleaning up the codebase. Start with addressing the code causing the most significant impact on the product’s functionality. Then, to ensure that technical debt is addressed, involve product managers in the process so they can understand the scale and cost of the debt. Regular maintenance, which includes updating the code and migrating old data to new systems, can reduce technical debt and keep the system running smoothly. A dedicated clean-up team can also help ensure that technical debt is managed and addressed regularly.

    Plan Reasonable Workloads

    When you choose tight deadlines to get the first-mover’s advantage, there are chances that your developers will choose a rigid framework. Refactoring the app to a more flexible framework will lead to a high debt payback. Work on reasonable deadlines that don’t compromise the quality of the project.

    For example, when discussing technology challenges in healthcare, it is crucial to understand the complexities of the industry and the different stakeholders involved. One possible approach could be to break down the topic into smaller subtopics, such as the impact of technology on patient care, the role of electronic health records (EHRs), or the challenges of interoperability.

    By setting reasonable deadlines for each subtopic and allocating resources accordingly, content writers can ensure enough time to research and write a comprehensive and insightful piece. Additionally, this approach helps to avoid relying on rigid frameworks or outdated information that may lead to a high debt payback in the future.

    Move Away from Monolith Architecture

    Moving away from monolithic architecture is essential for technical debt reduction in enterprise IT solutions. Monolithic architecture refers to a traditional unified model for software program design where the application is composed in one piece. While it may be simple to set up initially, it becomes more work to incorporate more data, functions, and users as your business grows. In addition, if any program needs to be updated, the entire application must be rewritten, leading to more time and money investments.

    Modular architectures, on the other hand, are relatively independent and allow for more accessible updates and maintenance. By breaking down the application into smaller, more manageable modules, you can reduce technical debt and improve the quality of your software development. For example, instead of having one large bookcase for all your books, it’s better to have smaller, separate bookcases that can be easily expanded and updated as needed. This approach allows for scalability and long-term flexibility while maintaining the quality and security of your application.


    Understanding the risks of not managing tech debt is crucial for any business that wants to stay competitive in the long run. Skipping proper technical debt management may provide short-term benefits. Still, it will eventually result in time loss and decreased effectiveness.

    Technical debt reduction not only improves the product’s quality but also boosts the morale and productivity of the development team. At Digicode, we regularly monitor technical debt and ensure that our software developers are in control with the right metrics and strategies.Our team provides various IT company services, including evaluation and refactoring of software systems. Digicode also provides smb technology solutions, software re-engineering services, custom mobile application development services and AdTech development services. As a result, we can minimize and manage technical debt and work towards a healthier future for our business and clients and be the leading IT solutions provider company.

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    • What is tech debt?

      IT debt means the extra costs a company incurs when it takes a shortcut in the software development process. These shortcuts may include using low-quality code, ignoring testing, or delaying essential updates to the software. Although these shortcuts may help to deliver software faster, they often result in problems that must be fixed later, leading to higher costs and longer development times. Tech debt meaning is similar to financial debt in that it must be repaid. The longer it goes unpaid, the more expensive it becomes. As a result, technical debt can affect a company’s ability to innovate, keep up with industry standards, and respond to customer needs. To manage technical debt effectively, companies must prioritize it, monitor it regularly, and allocate resources to pay it off.

    • How does tech debt impact businesses?

      Tech debt impact on businesses is significant. In the short term, it can result in faster development times and quicker time to market. However, long term, it can slow down a company’s effectiveness, increase costs, and hinder innovation. Maintaining and updating systems becomes increasingly complex as technical debt accumulates, leading to longer development cycles, more bugs, and more downtime. It can decrease productivity, lower customer satisfaction, and reduce revenue. Additionally, technical debt can make it harder for businesses to attract and retain top talent, as developers may be less interested in working on outdated or poorly maintained systems. Managing and reducing technical debt is essential for businesses to remain competitive and agile in today’s fast-paced digital environment.

    • What are the different types of tech debt?

      Several types of tech debt can affect software development projects:

      • One typical tech debt is called design debt, which occurs when shortcuts are taken in the early stages of a project’s design and planning. It can result in a poorly-structured codebase that is easier to maintain and update over time.
      • Another type of tech debt is code debt, which arises when developers use quick and dirty solutions to meet tight deadlines or need more knowledge or experience to write high-quality code. This tech debt can lead to a lack of scalability, decreased performance, and increased risk of bugs and security vulnerabilities.
      • Infrastructure debt is another type of tech debt that arises when a company needs to keep its technology stack up to date, leading to outdated or unsupported software components. It can result in higher maintenance and upgrade costs and an increased risk of system failures or security breaches.
      • Finally, testing debt occurs when companies must conduct thorough testing and quality assurance processes during the development cycle, which can result in uncaught bugs and issues discovered only after deployment. This tech debt can lead to costly rework and decreased customer satisfaction.
    • What are the strategies for reducing tech debt?

      There are several strategies for reducing tech debt:

      1. Conduct regular code reviews and refactoring to improve code quality and eliminate technical debt.
      2. Adopt an agile development process emphasizing iterative development, continuous testing, and continuous integration.
      3. Invest in automated testing tools to help catch and prevent technical debt issues.
      4. Prioritize and plan technical debt repayment, allocating resources and time to address the most critical issues first.
      5. Choose reasonable deadlines and take your time with development to prevent accruing technical debt.
      6. Maintain good documentation to make it easier to understand and manage technical debt issues.
      7. Move away from monolithic architecture and adopt a modular architecture that is easier to maintain and update.

      By adopting these best practices for managing tech debt, businesses can effectively manage technical debt and prevent it from hindering their growth and success.

    • How does managing tech debt benefit enterprises?

      Managing tech debt can benefit enterprises in several ways. Firstly, it ensures enterprise IT solutions are maintainable, efficient, and easy to enhance. It, in turn, helps businesses stay competitive by allowing them to iterate quickly and release new features without encountering significant obstacles.

      Secondly, managing tech debt can reduce the cost of software development in the long run. By addressing technical debt early in the development cycle, businesses can avoid more extensive problems down the line, which are often more challenging and costly to fix.

      Thirdly, managing tech debt can improve the quality of the software, making it more reliable and less prone to bugs or crashes. It can help enterprises maintain their reputation and satisfy their customers, ultimately leading to higher revenue and profitability.
      Overall, knowing how to manage technical debt for the long-term success of any enterprise can help businesses stay agile, reduce costs, and improve the quality of their software.

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