The SaaS leader's guide to technical debt: business impact + how to identify and reduce it

What is technical debt? 

Technical debt, also known as tech debt or code debt, refers to the cost of maintaining and improving software systems that have been built with shortcuts or quick fixes during the development process. These shortcuts and quick fixes are taken to meet deadlines or for ease of implementation in the short term, but they often result in technical issues and additional work in the future, leading to higher costs and longer development times. In essence, technical debt is the cost of delaying necessary work on software systems or operational infrastructure in order to achieve short-term goals.

Four types of technical debt 

Technical debt takes several different forms, including intentional technical debt, unintentional technical debt, unavoidable technical debt, and bit rot technical debt. Let's look at each of these in more detail:

Intentional technical debt 

This type of technical debt is incurred deliberately by development teams as they work towards meeting deadlines or specific business goals. For example, developers may use a quick and dirty solution to implement a feature to meet a client's deadline, even though they know the code will be difficult to maintain later on. In other words, developers knowingly choose to take on technical debt as a trade-off between short-term gains and long-term costs.

Unintentional technical debt 

Unintentional technical debt is incurred unknowingly by developers due to their lack of knowledge, experience, or resources. A novice developers might write code that is hard to maintain because they don't know a better or easier programming technique. In this case, the debt is incurred unintentionally, as the developers are not aware of the long-term costs of their actions.

Unavoidable technical debt 

This type of technical debt is incurred due to factors beyond the development team’s control. For instance, changes in requirements or external dependencies that cannot be replaced or updated may force developers to incur unavoidable technical debt. An example of this is when developers are forced to use an outdated API that is no longer maintained, and they must write a shortcode to work with it.

Bit rot technical debt 

Bit rot technical debt is a progressive devolution of software into sophisticated and hard-to-manage systems. It occurs when the individual bits that comprise a digital file are interfered with or corrupted. Over time, the code becomes increasingly difficult to manage, leading to technical debt. This type of technical debt is usually not caused by deliberate or unintentional actions but rather by the natural decay of software over time.

What is the impact of technical debt? 

Don’t underestimate the business impact of technical debt – it can undermine the ultimate success of your business, costing you resources and growth opportunities. Here are seven expected consequences of tech debt:

1. Increased costs

Technical debt can lead to higher costs for businesses as they need to spend more time and resources fixing the issues caused by the shortcuts or underinvestments made during the development process. This is true for the development of operational systems as well as product development.

2. Lower quality of service 

The quality of service you’re able to provide can be negatively impacted by tech debt. Software malfunctions are more likely to occur when developers take shortcuts or fail to address the main problems thoroughly. Maintaining and updating systems becomes challenging, leading to a higher risk of errors, crashes, and bugs. This makes for unhappy customers and increased churn rates. 

3. Reputation damage

The drop in quality of service caused by tech debt can damage the reputation of SaaS businesses. If customers experience service disruptions or other issues caused by technical debt, it can lead to negative reviews and a loss of trust in the business.

4. Difficulty in scaling 

Technical debt can make it difficult for SaaS businesses to scale their operations. As the business grows and the software becomes more complex, the technical debt can accumulate, making it harder to maintain and update tools and products.

5. Reduced innovation 

Technical debt can limit the ability of SaaS businesses to innovate. Developers may spend more time fixing a backlog of issues caused by technical debt, leaving less time for new feature development and innovation. Deadlines get missed, roadmaps go nowhere, and developer morale drops as a result.

6. Poor security

Technical debt has severe effects on SaaS security. The security of SaaS applications relies on the security of the underlying infrastructure and the code that runs on it. When technical debt is not adequately addressed, it can lead to vulnerabilities that attackers could exploit. 

7. Longer time to market 

Tech debt increases the time required to bring a product to the market, reducing a company's competitiveness. The development process is mainly slowed as developers devote significant resources to addressing technical debt. 

Technical debt in your payments & billing infrastructure

Technical debt in a business’s payments and billing infrastructure is a growing concern for leaders, especially in the SaaS industry. It can cause a variety of problems:

1. Payment failures

If technical debt is not managed, it can lead to issues with the payment gateway or billing system, resulting in payment failures. This can negatively impact customer satisfaction and lead to revenue loss.

2. Compliance issues

Payment and billing systems must comply with various regulations, such as PCI DSS, GDPR, and CCPA. If technical debt is present in these systems, compliance can be difficult to achieve, leading to legal and financial risks.

3. Inefficient processes

Technical debt in payments and billing tooling can lead to inefficient processes and manual workarounds, increasing the risk of errors and creating more technical debt. This can impact the scalability and agility of the business.

4. Time-consuming maintenance

Technical debt in payments and billing systems can result in complicated and time-consuming maintenance processes. This can lead to longer development cycles and increased costs for the business.

5. Security risks

Technical debt can increase the risk of security vulnerabilities in payments and billing systems, putting sensitive customer data at risk. This can lead to data breaches, regulatory fines, and reputational damage for the business.

The leading causes of technical debt 

Technical debt can creep up on you. Get ahead of it by staying on top of the common causes. These include: 

• Poor or incomplete requirements: When requirements are not clearly defined or are incomplete, developers may take shortcuts or make assumptions that lead to technical debt.
• Tight deadlines: When developers are under pressure to deliver software quickly, they may take shortcuts or use quick fixes that lead to technical debt.
• Lack of expertise: Developers who are not well-versed in a particular programming language or technology may create technical debt by using suboptimal coding practices.
• Legacy systems: Outdated software or hardware can create technical debt if developers are forced to work with them and cannot easily integrate new technologies or approaches.
• Changing requirements: When requirements change mid-project, developers may need to make quick fixes or take shortcuts that lead to technical debt.
• Poor testing practices: Insufficient testing or testing that does not cover all use cases can lead to technical debt if bugs or issues are not caught early on.
• Inadequate documentation: Lack of proper documentation can lead to technical debt because it makes it more difficult for developers to maintain or update the code in the future.

What is the technical debt quadrant? 

The technical debt quadrant is a 2x2 framework introduced by software development expert Martin Fowler that helps organizations understand and prioritize technical debt. Let’s take a closer look at each of the four quadrants, in clockwise order:

Deliberate but reckless

"We don't have time for design"

This quadrant represents technical debt that is created intentionally but without enough consideration of the long-term consequences. It includes technical debt that is created to meet a short-term goal but has a significant impact on the software's quality or maintainability. This type of technical debt is often irreversible and can lead to significant problems in the future.

Prudent and deliberate 

"We must ship now and deal with the consequences"

This quadrant represents technical debt that is incurred intentionally for a specific reason. It includes technical debt that is created to meet a deadline, respond to a customer request, or take advantage of an opportunity. This type of technical debt can be reversible and is usually managed and monitored carefully.

Inadvertent but prudent

"Now we know how we should have done it"

 This quadrant represents technical debt that is created unintentionally, but for a good reason. It includes technical debt that is created because of unforeseen circumstances or external factors that are beyond the developer's control. This type of technical debt can be reversible, but it requires careful management and monitoring to prevent it from becoming a problem in the future.

Reckless and inadvertent 

"What's Layering?"

This quadrant represents technical debt that is caused by a lack of discipline or expertise. It includes technical debt that is created by inexperienced developers or those who take shortcuts to save time and effort. This type of technical debt can have a significant impact on the software and is often irreversible.

How to identify tech debt 

Here are three ways you can identify tech debt that are worth building into your workflows and ways of working:

1. Code reviews

One of the easiest ways to identify technical debt is to review the code. You can look for code smells or bad coding practices that can lead to maintenance issues in the future. Code smells are indicators that the code may have a design problem or may be difficult to maintain.

What is a code smell? A "code smell" is a term used to describe any characteristic of the code might have issues that could lead to problems in the future. Some common examples of code smells include overly complex code, duplicated code, long methods or functions, and excessive use of comments. Code smells are often subjective, and what one developer considers a code smell may not be considered a problem by another developer.

2. Metrics tracking 

Metrics tracking can also help identify technical debt. For example, tracking the number of bugs, the time taken to fix those bugs, and the amount of time it takes to add new features can give you an idea of how much technical debt your project has accumulated.

3. User feedback

User feedback can also help identify technical debt. If users are complaining about slow load times or crashes, it may be an indication that there are underlying technical debt issues that need to be addressed.

Best practices to reduce technical debt 

Reducing technical debt is not easy, but it’s critical for the long-term success of your software projects and your business. Here are six best practices to consider:

1. Refactoring 

Refactoring is the process of restructuring existing code without changing its external behavior to improve its readability, maintainability, and performance. Refactoring legacy code can help reduce technical debt by eliminating code smells and improving the overall code quality.

2. Automated testing 

Automated testing ensures that the codebase functions as expected and prevents the introduction of new bugs when new features are added or changes are made. By implementing automated testing, developers can catch issues early on and reduce the need for manual testing, thereby saving time and resources.

3. Prioritization

It is important to prioritize tasks and issues based on their severity and impact on the software project. This will help ensure that critical issues are addressed first, reducing the risk of technical debt accumulation.

4. Documentation

Proper documentation helps developers understand the codebase, making it easier to maintain and debug. It can also help new developers onboard more quickly, reducing the risk of introducing new technical debt.

5. Continuous integration and delivery

Continuous integration and delivery ensure that changes to the codebase are continuously tested and integrated, reducing the risk of integration issues and technical debt accumulation.

6. Buy vs build

Leveraging existing technology or infrastructure from an established vendor, rather than building and managing your own systems, can reduce development time and offload ongoing maintenance and support. It can speed up implementation, without the risk of taking shortcuts in order to meet deadlines.

Technical debt tools to add to your arsenal 

There are several tools that businesses can use to help manage and reduce technical debt in their software engineering. Here are a few examples:

Code analysis tools

These tools analyze code for issues, such as code smells and potential bugs, and can provide recommendations for improvement – very useful for keeping on top of code quality. Examples of code analysis tools include SonarQube, CodeClimate, and Coverity.

Automated testing tools

Automated testing tools can help developers catch bugs and issues early on, reducing the likelihood of technical debt. Examples of automated testing tools include Selenium, Appium, and JUnit.

Issue tracking and project management tools

These tools can help businesses keep track of technical debt-related tasks and prioritize them alongside other tasks. Examples of issue-tracking and project management tools include Jira, Trello, and Asana.

Continuous integration/continuous delivery (CI/CD) tools

CI/CD tools automate the process of building, testing, and deploying code, which can help prevent technical debt from accumulating by catching issues early on. Examples of CI/CD tools include Jenkins, CircleCI, and Travis CI.

Knowledge management tools

Knowledge management tools can help businesses document and share knowledge about their codebase, which can help prevent technical debt from accumulating due to developer turnover or lack of institutional knowledge. Examples of knowledge management tools include Confluence, Notion, and GitHub Wiki.

Technical debt FAQs 

How do I know our project has technical debt? 

Difficulty in adding new features or making changes to the code could signify a possible technical debt. Also, frequent code changes or updates due to unexpected issues and regular systems errors or crashes may signify a techy debt. 

Is technical debt bad? 

While technical debt is not entirely bad, it can have negative repercussions if not properly managed. 

How to measure technical debt? 

Conducting a code review, analyzing complex metrics, and monitoring code modification can help to measure technical debt.

How to solve technical debt issues? 

To address debt, developers can refactor code to improve maintainability, allocate additional resources to address technical debt, and prioritize technical debt repayment in the development process. 

Who should manage technical debt? 

Technical and non-technical stakeholders should jointly work towards managing technical debt. While developers should identify and address technical debt in the code, project managers should prioritize tech debt payment in the development process and allocate requisite resources.