Tech debt, like financial debt, is neither good nor bad. Debt helps you buy a house today when you don’t have the cash. It helps an early-stage startup write code rapidly so as to win its first customers and funding. But, the interest on a debt may reduce the cash you have to invest in other opportunities. In the worst case, debt can bankrupt you. 

The Federal Trade Commission (FTC) advises consumers to make a budget, pay down the debt they already have, stop adding to the debt, and call their creditors. This simple advice is relevant for tech products.  

Making a budget starts with knowing exactly how much debt you owe. McKinsey defines the debt’s principal as all the work that must be done to modernize the entire technology stack. The interest paid on the debt is the extra time and effort needed to get a valuable feature released to win over customers and win against the competition. Sometimes, the debt may grow so large that new releases and wins are completely blocked—this may be the time for bankruptcy and replatforming. 

Tech debt is a product problem and a business problem, and not only an engineering problem. It could be related to code and architecture, or product and design. This is like how family members make a budget together. Product and business teams must have appreciation and visibility into the tech debt’s impact on time to market, customer satisfaction, and business competitiveness.  Engineering teams must have appreciation and visibility into the business goals. 

Tech debt needs to be paid down at the right time, not necessarily at the earliest. For example, if other opportunities yield a better (risk-adjusted) return on cash, then it may be wiser to keep the debt and not pay it down in part, or in full to zero debt. 

Debt is a type of liability, and so is tech debt. Then the question is: of all the liabilities to address now, is the company’s cash and other resources best applied to reducing the tech debt liability or other liabilities? 

In short, use tech debt responsibly. 

PS: Check out more articles on building products. I write to pay it forward and to clarify my thinking.