Measuring Technical Debt to Manage It

Years of experience working in finance and technology with small enterprises has shown that business leaders face real challenges managing the technology their companies need to operate effectively and stay competitive. This is especially the case for small and mid-sized businesses (SMBs), which typically do not have the resources available to large enterprises. The challenge has grown in recent years as businesses have adopted technologies to meet the changing expectations of their customers and to compete for advantage in the digital world.

Recognizing Tech Debt and the Threat

The challenge is not necessarily in deploying new applications, new platforms, or new capabilities, but in managing investment in technology, balancing that investment with other business priorities. Striking that balance means recognizing and managing technical debt.

Technical debt is similar to financial debt. Unlike financial debt, however, technical debt is debt owed internally, to be paid with internal resources, such as time, diverted funding, market opportunity, and competitive standing. It is not identified in traditional financial and accounting reports. Unless it is monitored and measured, it can accumulate silently and become a destructive threat to the future of a business.

Initially, technical debt was defined as defective product rushed to the market. Today, with the widespread adoption of technology, the expanded Tech Debt 2.0® is any liability incurred in the development, acquisition, use, and retirement of technology, from hardware and software systems to the skills and people needed to support them.

Measure It to Manage It

Recognizing Tech Debt 2.0 and the harm it can do to a company is an important first step. This debt can be intentional, unplanned, or creeping. The next step is learning how to effectively manage that debt.

“Managing Tech Debt 2.0 of all types is critical for small businesses as they grow,” states Michael Swenson, experienced industry analyst and Director of the IT Ally Institute. “In the past, decisions about business processes and the technology to support them were made by one, two, or, at most, a small handful of people. Today, more people, complex processes, technology, and the debt incurred entangle and threaten businesses.”

At IT Ally, Swenson collaborated on the development of a tech debt diagnostic, a comprehensive measurement across nine dimensions of a business. “The IT Ally Tech Debt 2.0 diagnostic forces management to think systematically and stop reacting to the latest crisis or fad,” he explains. “Measuring the current state of technical debt prompts management to get more strategic about mitigating and managing the debt to enable the next phase of growth for a company.”

Assessment Framework – Nine Dimensions:

• Strategy and Governance Security and Risk
• Financial Management
• Applications
• People and Resources
• Data and Business Intelligence
• Service Planning and Architecture
• Portfolio and Project Management
• Infrastructure and Operations

The diagnostic allows a business to undertake the practice of benchmarking. Benchmarking compliments and increases the value of measurement by introducing comparison. Management can compare measurement of tech debt over time to assess the progress they are making to achieve targets for controlling it.

Flattening-the-curve is a concept we have become painfully familiar with as of late. Benchmarking efforts to control technical debt lets a management team know how well they are doing flattening their Tech Debt 2.0 curve. It gives a business an all-important means of control. A company’s goal might be to bend that curve down year-over-year, maintain a flat curve, or manage its cyclic growth between upper and lower control limits.

Benchmarking also allows a business to compare itself with other businesses, whether that is within an industry sector or, more widely, with businesses known for best practices.

The 54 questions that constitute the diagnostic measure three distinct aspects of Tech Debt 2.0:

1. The presence of organizational structures, practices and attitudes that govern tech debt.
2. Evidence of tech debt that has already accumulated and its impact on business operations.
3. Capability of the organization to execute IT projects successfully and service tech debt.

Because the assessment is so comprehensive, extending into all facets of a business, leaders are encouraged to seek input from a diverse group. That might include technical SMEs, senior staff, functional area personnel, and even outside contacts who might bring a different perspective on an area.

Using the IT Ally Tech Debt 2.0 Diagnostic to Maximum Benefit

Here are pointers for getting the most from the diagnostic:

Tech Take-away 1: Conduct an initial assessment to establish a tech debt baseline for your business. Going through this exercise will familiarize key individuals with essential aspects of Tech Debt 2.0, how to recognize it and look for it.

Tech Take-away 2: When preparing for the initial assessment, cast a broad net for knowledgeable points of input. This eliminates bias and blind spots and reveals whether or not the emperor is wearing clothes.

Tech Take-away 3: Reassess your businesses’ tech debt periodically. Benchmark subsequent assessments against your baseline. Set goals to manage your curve—flat, down, or within limits you set. Correlate your tech debt assessments with other Key Performance Indicators, such as revenue, profit margins, employee retention and customer satisfaction.

Poorly managed IT and Tech Debt 2.0 can destroy a small business. Regular assessments with tools like the IT Ally Tech Debt 2.0 Diagnostic can enable you to proactively manage and meet the demands of a quickly evolving technology environment and keep your dream alive.

[This article was originally published on businessingmag.com.]