AKF Partners

Abbott, Keeven & Fisher Partners Partners in Technology

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Scalability and Technology Consulting Advice for SaaS and Technology Companies

Technical Due Diligence and Technical Debt

April 30, 2018  |  Posted By: Daniel Hanley

Over the past 11 years AKF has been on a number of technical due diligences where we have seen technology organizations put off a large portion of engineering effort creating technical debt.  A technical due diligence as introduced in Optimize Your Investment with Technical Due Diligence, should identify the amount of technical debt and quantify the amount of engineering resources dedicated to service the debt.


What is Technical Debt?
Technical debt is the difference between doing something the desired or best way and doing something quickly.  Technical debt is a conscious choice, made knowingly and with commission to take a shortcut in the technology arena - the delta between the desired or intended way and quicker way.  The shortcut is usually taken for time to market reasons and is a sound business decision within reason. 
AKF Technical Debt Definition

Is Tech Debt Bad?
Technical debt is analogous in many ways to financial debt - a complete lack of it probably means missed business opportunities while an excess means disaster around the corner.  Just like financial debt, technical debt is not necessarily bad, by accruing some debt it allows the technology organization to release an MVP (minimal viable product) to customers, just as some financial debt allows a company to start new investments earlier than capital growth would allow.  Too little debt can result in a product late to market in a competitive environment and too much debt can choke business innovation and cause availability and scalability issues.  Tech debt becomes bad when the engineering organization can no longer service that debt.  A technical due diligence should discover a proper management of a team’s technical debt. 

Tech Debt Maintenance
Similar to financial debt, technical debt must be serviced, and it is serviced by the efforts of the engineering team - the same team developing the software.  A failure to service technical debt will result in high interest payments as seen by slowing time to market for new product initiatives post investment.  Our experience indicates that most companies should expect to spend 12% to 25% of engineering effort on a mix of servicing technical debt and handling defect correction (two different topics).  Whether that resource allocation keeps the debt static, reduces it, or allows it to grow depends upon the amount of technical debt and also influences the level of spend.  It is easy to see how a company delinquent in servicing their technical debt will have to increase the resource allocation to deal with it, reducing resources for product innovation and market responsiveness.  Just as a financial diligence is verifying the CFO has accountability of their balance sheet, AKF looks to verify the CTO is on top of their technology balance sheet during technology due diligence. 

AKF Technical Debt Balance Sheet

Tech Debt Takeaways:

  • Delaying attention to address technical issues allows greater resources to be focused on higher priority endeavors
  • The absence of technical debt probably means missed business opportunities – use technical debt as a tool to best meet the needs of the business
  • Excessive technical debt will cause availability and scalability issues, and can choke business innovation (too much engineering time dealing with debt rather than focusing on the product)
  • The interest on tech debt is the difficulty or increased level of effort in modifying something in subsequent releases
  • The principal of technical debt is the difference between “desired” and “actual”
  • Technology resources to continually service technical debt should be clearly planned in product road maps – 12 to 25% is suggested

 

AKF’s technical due diligence will discover a team’s ability to quantify the amount of debt accrued and the engineering effort to service the debt.  Leadership should be allocating approximately 20% of resources towards this debt and planning for the debt in the product road map. 

Click here to see how AKF Partners can help you assess your company’s technical debt, or assess the debt and issues therein for any investment you plan to make.

 

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