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The CIO's playbook for reducing tech debt
Technical debt drains budgets and limits growth. CIOs must address outdated systems through audits, governance and modernization to remain competitive.
Executive summary
- Technical debt is more than an IT problem -- it is a board-level risk.
- If technical debt is not managed, it drives up costs, increases security vulnerabilities, slows innovation, and affects scalability and customer satisfaction.
- IT leaders must adopt a playbook to reduce technical debt. This includes conducting audits, quantifying debt, aligning reduction with business outcomes, embedding governance and using modern tools -- such as AI -- to phase out legacy systems.
While debt was once referred to simply as "money owed," the increasing rate of technology adoption has created a new kind of debt that plagues companies and IT leaders. Technical debt -- also known as tech debt -- refers to the costs associated with relying on suboptimal shortcuts in technology and using outdated technology to maintain business operations. The longer this debt remains unaddressed, the more expensive it becomes to resolve, so it accumulates interest -- similar to other financial debts.
Companies often find themselves drowning in tech debt. Gartner found that, on average, 40% of infrastructure systems have technical debt concerns. It may appear easy to reduce tech debt and make it a priority. However, companies typically look for short-term savings, which eventually need to be addressed.
Chief information officers (CIOs) and other IT leaders must address tech debt at the board level to demonstrate its impact on the company's performance, scalability and customer satisfaction.
Joe Locandro, executive vice president and global chief information officer at Rimini Street, said technical debt occurs when IT is more than three versions behind.
"Technical debt can limit the functionality and innovation required for the business," he said.
There are various layers of tech debt -- including infrastructure, networks, hardware, operating systems, applications and databases. Locandro said the board typically asks for a percentage of technical debt, which is the percent of time spent on new technology versus time spent fixing old technology, with a lower percentage focusing on old technology being a good indicator of effective debt management.
Leaders can reduce technical debt by gaining buy-in from across the organization, conducting a thorough assessment, and establishing ongoing governance within the infrastructure to effectively manage the life cycles of technology.
The business impact of tech debt
Technical debt can cause significant problems for a business, resulting in financial losses and hindering growth. Without a proper plan to manage tech debt, business leaders will need to discuss additional issues with the board.
Shay Levi, co-founder and CEO of Unframe AI, said that tech debt is like a web of wires, and companies can become suffocated by it. "So if you have a few wires, you can still move. But when you have 1,000, you find yourself unable to move, you're like you're completely suffocated," said Levi. He said that when companies are suffocated by tech debt, they become frozen and struggle to move forward and address this debt.
Locandro said companies are only as good as their oldest piece of technology.
"Once you start upgrading things, they don't work with the old stuff anymore," Locandro said. "You go through this big renewal process and then costs blow out."
Technical debt can lead to the following issues:
- Increased cost. Businesses with higher tech debt will need to spend more money to fix these issues, whether they were caused by shortcuts or to catch up on the newest technology. Other cost implications include downtime, resource allocation and maintenance.
- Risk and compliance exposure. When systems are outdated, security becomes a significant concern. Without proper security patches, cybercriminals can exploit outdated systems that lack the latest security features, leading to compliance exposure with the possibility of a data breach. Rogers Jeffrey Leo John, co-founder and chief technology officer at DataChat, said cybercriminals are targeting outdated systems, and if they identify a vulnerable area of code, they can expose all the company's sensitive data.
- Lack of innovation. Technical debt can limit a company's ability to innovate as developers and other IT staff spend more time fixing a backlog of issues, which leads to less time for new technology development. Howard Miller, CIO at UCLA's Anderson School of Management, said not every employee may be familiar with outdated systems, and if someone retires, the need to replace them with someone who has skills in that system is also limited to future enhancements.
- Slowing growth. Because tech debt forces businesses to work with outdated systems or spend time fixing problems, IT leaders face the dilemma of scaling their operations. As a company grows, large amounts of technical debt can restrict the completion of necessary upgrades to support this increased business, causing difficulty in updating and maintaining tools.
- Decreased quality of service. Service can also be affected by tech debt. If the underlying problems causing software malfunctions are not addressed, the systems can lead to issues with service due to improper functioning. There can be a higher risk of errors and bugs if it is impossible to upgrade legacy systems. In turn, these failures can affect customer service, hinder growth and compromise customer satisfaction.
How to diagnose the debt
The first step in reducing the technical debt is to diagnose the problem. This can be achieved through technical audits and maturity model reviews, which help determine when a system or infrastructure requires an update.
- Using tools and metrics can help analyze indicators of technical debt. This includes allocating the IT budget between maintenance and innovation.
- Complete internal infrastructure audits to check for inefficiencies, outdated systems or performance issues. In this audit, verify the absence of dependencies on outdated or unnecessary frameworks.
- Quantify the debt by assessing the following three factors:
- Effect. This is how it slows down innovation or business.
- Fixed cost. This is the difficulty to fix.
- Spread. This is how everything is affected by this issue.
Then compare the estimated cost of fixing the debt with building a new system.
The playbook for tech debt reduction
IT leaders can balance and reduce technical debt. Here are some steps IT leaders can take limit this debt.
- Prioritize strategically. Tie debt reduction to business outcomes such as the speed to market and maintenance reduction costs.
- Create a debt reduction plan. Make it visible, quantifiable and trackable. Collaborate across departments to align priorities and resources -- such as security, IT and operations.
- Invest in modernization wisely. Using modern tools such as low-code and no-code platforms can help minimize coding errors, and improve and speed up development. John said pulling a database could be disruptive, but gradually phasing in AI tools and coding agents is less disruptive.
- Embed governance. Implementing data governance and other automation tools can help manage and track debt effectively. These also prevent new debt accumulation by monitoring code quality, tracking backlogs and finding bottlenecks in the system.
- Lead through change. Technical debt is more than just IT hygiene. It drives the culture for innovation, growth and moving forward as technologies evolve, such as AI.
- Train employees. Investing in training and developing the skills of team members will address tech debt by making sure multiple people know how to use the systems and remove any knowledge debt.
- Automate testing. Creating automated testing practices helps identify any issues early in the process.
Levi said AI has paved the way to help focus on addressing tech debt.
"Making the transition from non-AI native to AI-native has a lot of upsides. It's not just, 'Let's get rid of the debt,'" he said.
There is a greater focus on AI because it can help resolve issues and assist companies in quickly getting out of debt, making it highly valued. AI can transform the way people work, enabling companies to innovate more quickly.
How to measure success
Technical debt is inevitable as technology changes. Reducing tech debt is not a one-time initiative but a strategic capability. By adopting a playbook, leaders can reduce risk, future-proof the organization and continue innovation at a steady pace.
Leaders must adopt key performance indicators (KPIs) to determine the defect rates of programs and any system uptime. Other main KPIs include the following:
- Technical debt ratio. This measures the future cost of technical debt relative to development cost. A decrease in this ratio shows reduced debt.
- Change failure rate. This calculates the percentage of changes that result in any outage or failure, and a lower rate indicates more reliability.
- Mean time to resolve. This tracks the average time to fix a bug or issue. A shorter time says the code is reducing tech debt.
- Customer issues. These also help track any defects or problems in software, programs or code.
Read more about other KPIs to measure and reduce technical debt.
In addition to KPIs, John said managing technical debt also requires human insight. He has his team leaders tell him what needs to be addressed, so regular communication within an organization is crucial.
Levi said picking a starting point and not focusing on all areas of technical debt is valuable. Focusing on too many areas to address at once can freeze a company and prevent it from moving forward. He said there are many vendors out there that can help and fast-track efforts with AI.
John said having zero technical debt is nearly impossible due to the nature of the software and technology industry. He said when companies reach a certain level of maturity, they need to step back and assess what they have, then invest in areas that need improvement -- if it will bring a better long-term outlook in critical areas such as customer satisfaction and security.
"When I got to UCLA Anderson, we didn't have a cloud strategy. I decided to make things cloud first as an opportunity to innovate," Miller said. He went on to say that technical debt is an innovative strategy because it guides leaders on what to update and address.
Amanda Hetler is a senior editor and writer for Informa TechTarget, where she writes and edits technology explainers and IT strategy articles.
