The cost of tech debt on innovation

Published November 8, 2021

by Asad Khosa and Cody Shive

Imagine a mid-sized retail operation that’s been around for a few years. It started out as a local store with a front-end system set up to suit its specific needs. As the operation grew and the company opened more stores, it kept adding to the system in order to keep up with growing demand. The software, originally intended to run a small operation, is now overloaded and riddled with defects and the IT team is afraid to tamper with it for fear of triggering a system-wide rash.

Retailers often find themselves in this situation to keep up with a  rapidly changing digital landscape. In the rush to get new products (or new product features) out to market, companies make temporary trade-offs in technical build quality, resulting in tech debt that strains their resources.

Technical debt is the accumulated backlog of coding or technical work you have to do as a result of working within a digital market. Similar to financial debt, companies often take on planned technical debt by rushing product development to reach specific business goals—like launching a new feature by the end of a particular quarter. This debt backlog is “paid off” as scheduled work in the future by the organization’s IT department.

Unplanned or unknown technical debt is more problematic. This kind of debt accumulates and stifles your company’s innovation, as dealing with it ends up taking a large chunk of your IT department’s time and energy. This could be the result of running on outdated software, for example. Staying on top of your tech debt allows you to continue to innovate and keep up with constantly evolving customer expectations.

Tech debt stifles innovation

Paying off technical debt requires a significant amount of time and resources, which could otherwise be used on innovating. CIOs and their teams have to perpetually juggle  technical debt while staying competitive in the market by focusing on business goals.

Cracks in the system architecture—often the result of shortcuts taken to reduce time to market—are likely to cause random issues. These setbacks are some of the primary reasons why software development projects go over budget and why deadlines are missed. A recent McKinsey industry survey with industry-leading CIOs highlights the time and money tech debt consumes. It was found to occupy 10%-20% of the technology budget for new products and can amount to as much as 40% of the value of a company’s entire technology estate.

Tech debt can also take the form of data architecture that’s muddled or disorganized. This leads to incomplete or inaccessible analytics, which would otherwise be vital for informing business strategy and decisions.

If left unchecked, tech debt can all but consume a development team. According to many of the same CIOs, effectively managing your organization’s tech debt gives software engineers as much as half of their work time back to spend on innovating and helping the company achieve its goals.

How tech debt accumulates

If an organization develops or uses software of any kind, tech debt is unavoidable and can accumulate in different channels. Sixty percent of CIOs interviewed by McKinsey stated that their organization’s tech debt had increased noticeably in the last three years. Four areas in which tech debt often accumulates are business strategy, architecture, tech-team talent and company processes.


Business strategy doesn’t align with needs

Generally speaking, a lack of cohesion between an organization’s business strategy and IT can lead to the accumulation of tech debt. The right amount of funding needs to be linked with the company’s software development strategy in order to ensure business goals are met.

This also means keeping IT-related consequences and benefits in mind when making business decisions that would require changes to the company’s technology stack. A good example of this occurs during mergers and acquisitions.

Mergers and acquisitions are particularly susceptible to accumulating technical debt. During an acquisition, temporary integrations with existing systems can become permanent fixtures of technical debt. However, many larger retailers recognize this potential and choose to "rip and replace" rather than attempt to assimilate existing systems, software and processes.


Architecture is outdated

If an organization is dedicating significant time and budget to integrations and constantly maintaining its legacy code, it’s likely to have accumulated a large amount of technical debt. This could come about through a failure to update hosting environments, which keeps the software inflexible and therefore harder to adapt to the organization’s changing needs. As a company adopts more software, it’s important to use standard systems-integration processes. A poorly integrated architecture will be disjointed, more difficult to manage and more prone to security issues.

Established organizations that have grown their IT for decades also tend to be vulnerable to tech debt. These organizations may be reliant on applications written in COBOL, CICS and other legacy languages that are no longer widely used. In these cases, it can be difficult to find developers who can decode the complex business logic of these languages. Archaic systems like these need to be refactored into newer technologies.

Related: APIs are enabling the store of your future


Talent available doesn’t meet business needs

A lack of available skills (or available time) on your team can lead to the accumulation of tech debt, with limited work capacity causing delays in product updates or deliveries.

These days, customers expect seamless integration between physical and online stores, whether it’s a bank, a restaurant or a retailer. This means you need to create smart spaces with metrics, establish a deep understanding of a store’s drop-off points and augmenting it all with technology.

In the short term, this requires many retailers to source talent with backgrounds in consulting or system integration. Retailers might also have to outsource tasks to other partners who are able to augment this thinking for them. By sourcing third-party services and applications, companies need to create tendrils to support them within their own systems. This is where technical debt creeps in. If done smartly, retailers can class this as serviceable tech debt and immediately take the necessary steps to address it.


Processes are not in place to address tech debt

A close look at an organization’s processes might uncover some hidden pools of technical debt. An organization that uses task-planning tools and prioritizes project backlogs is better equipped to stay in control of its technical debt. Without proper development or maintenance processes in place, organizations lose visibility on product or code quality, which can potentially lead to the build-up of tech debt over time.

When a guest walks in, and they see shelves in disarray, they may assume they will need to spend extra time hunting for a product. This can discourage many guests from in-store shopping. AI software can help combat those messy shelves by predicting demand trends, making sure you don’t order too much or too little of your products so your shelves are sufficiently stocked. The good news is, unlike last year, which you can forecast sales against.

Consider visual merchandising, make sure the shelves are staggered vertically from the lowest in front to the tallest in back. That way, when a customer walks in, they can easily see that the shelves are organized and full. When a guest first enters your store, they should be able to immediately pinpoint the direction of the item they are looking for. Try installing signage by the entrance featuring big-ticket holiday items. This will help them navigate more quickly and reduce bottle-necking by the entrance. That could deter potential customers outside.

Steps to manage your tech debt

The acceptable amount of tech debt varies from one organization another. Companies must first change their perceptions of the sort of problem tech debt is. It has to be evaluated, communicated and analyzed from both business and technological points of view. Very often, retailers are disadvantaged when they view technical debt purely as a technology issue.

Here are five core steps to help organizations stay on top of their technical debt:

  1. Identify and validate suspected tech debt. As we’ve established, unknown and unplanned tech debt is the most problematic kind for an organization. This is why it’s important to first uncover that debt by reviewing unplanned development work, unexpected errors or security issues and isolating any technical debt that could have caused them.
  2. Determine if your tech debt is short- or long-term and come up with a plan to manage it. Let’s pretend you have a homegrown point-of-sale system that will need to be replaced in the near future. Until then, servicing that system and keeping it afloat can be considered an acceptable approach to managing your short-term technical debt until it’s time for a replacement.
  3. Manage and dissolve transitory tech debt. This refers to the temporary code required to support the migration or upgrade of an existing system. Once the migration or upgrade is completed, you need to retire or remove the transitional code. Until then, it’s considered to be tech debt.
  4. Standardize your process for tracking and handling tech debt. It’s important to understand this isn’t a one-off activity. Technical debt amasses as software complexity increases and handling it is an ongoing process of identification and management. The best way to manage tech debt is to create a roadmap for handling it from identification to completion. These processes will vary based on your organization’s needs. It’s important to include processes for measuring the work done as well as the impact it has on other areas of the organization’s work. In other words, look at how much time and resources have been freed up for innovation work by effectively managing the technical debt.
  5. Consider outsourcing to a third party. Using third-party consultants or teams to manage IT infrastructure and run the online “store” can free the retailer to focus on achieving business goals. Specialized technology vendors have experience in dealing with tech debt across multiple sectors and can offer an outside perspective better equipped to finding hidden technical debt.

Bringing it together: Don’t let technical debt stunt your growth

As retail becomes increasingly software-oriented, retailers need to keep innovating to stay ahead. Consumer needs are growing and expectations are becoming more digital-focused. This means that companies need to adapt quickly and dedicate more energy to enhancing the user experience for their target markets.

The increase in technical debt that companies are currently experiencing is likely a result of this dynamic environment. It’ll challenge innovation and growth if not addressed properly. By exporting their tech-debt management needs to third-party vendors, companies can put themselves in a stronger position to focus on growth and innovation. 

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