Information and technology executives deal with the notion of technical debt (tech debt) every day. It’s a notion because it’s an implied cost, not a tangible one. But tech debt has far-reaching implications for an organization. 

Yesterday’s solutions may have worked in the moment but fail to hold up well over time. While different from obsolescence or depreciation, tech debt can be far more disruptive to an organization’s success and even stock price. 

The potential harm in outdated technology — or technology that is ill-suited to a current need — can be measured in billions for most large enterprises.

Any executive’s blood runs cold to think that 20% - 40% of the value of their entire tech estate before depreciation may be tied up in technical debt. In a landmark 2023 survey of 750 C-suite information and technology executives commissioned by DXC Leading Edge, only five respondents said that tech debt wasn’t on their risk register. The other 745 indicated it is explicitly listed or is a subset of another line item. Leaders recognize that tech debt limits an organization’s ability to adapt to change.

These pockets of outdated tech, code, practices or ways of working are obstacles in other ways as well. They block the path to innovation, with 46% of IT executives noting they “very often encounter restrictions” or that “tech debt has a dramatic effect” on their organization’s ability to pursue digital transformation or grow.

Organizations do not set out to create technical debt. Yet, when a particular course of action meets with forces inside and outside the organization, they coalesce, and boom! Tech debt expresses itself in value-destroying ways. It tends to be a series of trade-offs that lead to suboptimization that becomes increasingly hard to undo. But the problem does not have to persist in this way. There is a silver-lining view to tech debt: modernization.

This report discusses how leadership teams can understand and reframe tech debt from a problem that needs to be solved to something that needs to be tackled as part of modernization efforts. We make the case that this debt needs to be dealt with robustly by uniting CIOs and CTOs with their counterparts across the enterprise. We explore tech debt through the lenses of organizational incentives — and demonstrate that, to corral and control it, organizational architecture and performance management are essential. Prioritizing and addressing these areas is step one on the path to better serving customers and stakeholders.

We close with a detailed four-step prescriptive plan to pay down today’s debt and discourage it in the future.

Reframing tech debt

The term tech debt carries negative connotations of burden and risk. It often implies that things were not done right due to constraints on time, budget or skills. Organizations might try to put numbers on it by estimating how big an investment is needed to resolve the debt and get things exactly right. But what does “right” mean in this context?

There are situations where the answer seems clear. For example, if you do not install security patches on time, not only have you accrued tech debt; you have exposed your organization and its ecosystem to security risks from third parties, which could carry significant liability.

But it’s not always clear where tech debt starts. For instance, is it tech debt if your company uses code in a beta test that is not as efficient as desired, but enables a new function to be tested? Often, the answer is no. 

The impact of tech debt lies in its ability to hinder an organization’s adaptability. 

The impact of tech debt lies in its ability to hinder an organization’s adaptability. Few people would complain about weathered but functional solutions if they are still fit for purpose. However, rapid changes in the external environment can render even once-perfect solutions problematic.

The language used to describe tech debt can be unwieldy and inconsistent. That may contribute to organizational inaction because it is all too easy for people across the business to ignore it or relegate tech debt to a tech team problem. But that would be a mistake. It is imperative that organizations adapt the language they use around it to convey not just urgency, but the need for concrete and quantifiable action.

Tech debtors

Tech debt is an erroneous moniker. In fact, tech debt encompasses infrastructure, applications, UX, data and process debt as well as knowledge debt resulting from diminishing systemic intelligence and ineffective management. These may be better understood as organizational debt (see figure below).

When organizations acknowledge these various forms of debt, they gain a clearer understanding of the challenges they face. Opening the aperture can reveal an underbelly of nontechnical factors that contribute to an organization’s deficit of adaptability.

Dealing with organizational debt requires a shift in mindset. Building flexibility within the organization and empowering people to prioritize and understand debt’s impact is essential. This transition from debt to modernization is an ongoing process that demands constant, iterative management. The bonus: It moves the conversation from tech debt to org debt, owned by all executives, not just IT.

Organizations can and should redefine their approach to tech debt and view it as part of the modernization process. Understanding that tech debt arises from various trade-offs and suboptimal decisions allows leaders to tackle it more effectively. 

Manage your technical debt

Technical debt is about the organization, the industry and the market. As the bespoke approach becomes the norm across the enterprise, business and IT leaders will need to come together to overcome the barriers that hinder progress. 

About the authors

Dave Reid is the research director of DXC Leading Edge, with responsibility for its research, strategic thought leadership and advisory agenda. Dave has significant experience in helping business and technology executives shape their plans to exploit the opportunities offered in the digital world. Alongside his leadership role, Dave has driven research into business and digital transformations; environmental, social and governance (ESG) initiatives; and leadership with C-level executives. He serves as a trusted advisor to many of DXC’s customers. Prior to DXC, Dave was a technology leader with GlaxoSmithKline. Connect with Dave on LinkedIn.

Krzysztof (Chris) Daniel is a researcher and advisor for DXC Leading Edge, teaching others how to effectively use Wardley Maps for their benefit. Chris works with customers to apply Wardley Maps to particular use cases, including outsourcing, IT modernization and business transformation. He enjoys mapping sessions with customers, guiding a process of identifying opportunities and risks and defining areas for growth. Chris is the author of the online Wardley Mapping course and an active member of the broader Wardley Mapping community. Connect with Chris on LinkedIn.

Cristene Gonzalez-Wertz is a senior researcher and advisor for DXC Leading Edge. She has experience in a breadth of industries, especially electronics, manufacturing and utilities. She applies an innovation mindset to sustainability and human-technology interaction research. Cristene brings a love of data and interaction design to business stories that span use cases and industries. She is an avid media consumer with her own podcast, Retail Done Right. Prior to joining DXC, Cristene spent over 10 years at IBM’s Institute of Business Value. Connect with Cristene on LinkedIn.

Stuart Cartwright is a director at Luxoft, a DXC Technology Company. As part of the Alliance Management team in Cross-Industry Solutions, Stuart promotes and advises on global go-to-market direction and solutioning of engineering and modernization offerings. He is focused on providing global sales and field organizations with the latest market trends, offering-related messaging, tools, training and support. He has over 39 years of experience in digital transformation, application modernization, IT strategy, and portfolio development and management. Connect with Stuart on LinkedIn.

Does your organization need help addressing technical debt and planning for modernization?

Schedule a session with our engineering, cloud and applications experts, or do a deep dive into the survey data with our researchers.