The real cost of technical debt

The debt that doesn’t appear on the balance sheet

Technical debt is the future cost of suboptimal technology decisions made in the past. Like financial debt, it has a principal (the work required to correct it) and interest (the extra cost it generates every day it goes uncorrected). Unlike financial debt, it doesn’t appear on any balance sheet, has no creditor demanding payment, and nobody quantifies it until it’s too late.

The term was coined by Ward Cunningham in 1992 as a metaphor to explain to executives why software slows down over time. Three decades later, the metaphor is still imperfectly understood by most organizations.

Types of technical debt

Not all technical debt is equal. Distinguishing between types is essential for prioritization:

Deliberate debt: Conscious decisions to take shortcuts to meet a deadline. “We know this architecture won’t scale, but we need to launch this month.” If it’s documented and its correction is planned, it’s managed debt. If not, it’s a ticking time bomb.

Inadvertent debt: Decisions that seemed correct with available information but turned out to be suboptimal. A technology that became obsolete. A design pattern that didn’t scale as expected. It’s inevitable and doesn’t imply error. It implies that technology evolves.

Erosion debt: The most dangerous kind. It doesn’t come from a single decision but from the accumulation of small degradations: a hotfix that was never done properly, a dependency that wasn’t updated, a test that was disabled “temporarily” two years ago. Nobody created it deliberately. It simply appeared.

How to quantify it

Technical debt can be measured through objective indicators:

• Development time for new features: If a feature that should take 2 weeks takes 6, the difference is technical debt interest. The team isn’t slow. The code is fragile.
• Regression rate: Every time a change breaks something that was working, technical debt is at play. Regressions are the compound interest of debt.
• Onboarding time: If a new developer needs months to become productive, the system’s accidental complexity is high.
• Planned vs unplanned work ratio: If the team spends more than 30% of its capacity fighting fires, technical debt is actively generating interest.

The compound effect

The most dangerous aspect of technical debt is its compound nature. It doesn’t grow linearly. It grows exponentially. A system with little technical debt absorbs changes with ease. A system with heavy technical debt turns every change into a risk.

The typical pattern is this: the team works at good velocity during the first 12-18 months of a product. Then velocity starts to drop. Not dramatically at first. 10% here, 15% there. But the decline accelerates. At 3 years, the team may be spending 60% of their time maintaining what exists and only 40% building new things.

Organizations that don’t manage their technical debt reach an inflection point where the cost of modifying the system exceeds the cost of rebuilding it. That’s the most expensive possible moment to act.

Strategic management, not elimination

The goal isn’t to eliminate technical debt. It’s to manage it as a strategic decision. Some recommendations:

• Reserve 20% of team capacity for technical debt reduction in every sprint. Not as a special project. As part of regular work.
• Prioritize by velocity impact, not technical severity. The debt that most slows the team today is what should be fixed first.
• Document deliberate debt at the moment it’s created. “We made this decision because X. It needs to be corrected before Y.”
• Measure the trend, not the absolute. What matters isn’t how much technical debt you have, but whether it’s growing or shrinking.
• Make the cost visible to the business. “This feature takes 3 weeks instead of 1 because module X has unresolved technical debt.” When leadership understands the cost, they support the investment.

Technical debt as a maturity indicator

Mature organizations aren’t those without technical debt. They’re those that know it, measure it, and manage it deliberately. It’s as revealing a sign of engineering maturity as EBITDA is of financial maturity.

If your technology team can’t tell you how much technical debt they have and how they’re managing it, that’s the first problem to solve. Not because it’s an engineering question. Because it’s a business question.