The Agile Executive

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Archive for September 29th, 2009

Technical Debt on Your Balance Sheet

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Colleague Jonathon Golden introduced me to a new plug in to Sonar. The plug in calculates the cost to fix the technical debt accrued in a product. For example, you might find an accrued technical debt amounting to $1M in a 500KLOC application. Obviously, you will need to spend $2 per each line of code to “pay back” your debt.

The expression of technical debt in monetary terms is intriguing. Unlike financial debt, there is no credit limit on technical debt. Hence, unless a team is proficient at refactoring on an ongoing basis, technical debt tends to grow over time as the underlying software decays. Beyond a certain level of debt, no good option is available. The code decayed to the point in which fixing anything in a hazardous proposition – every fix is likely to break something else. Under such circumstances, most/all of the development team gets sucked into maintaining the software instead of developing new features and functions.

Monetizing technical debt can have two far reaching implications, as follows:

  • A credit limit on technical debt can be established.  For example, when the technical debt reaches a certain level (say 25 cents per line of code), new functionality is put on hold. The team applies itself to aggressive refactoring to reduce the debt to an acceptable level.
  • For companies who capitalize software, technical debt could become a line item on the balance sheet. It will simply be listed as a liability.

From a customer perspective, the monetized technical debt on the balance sheet of a software vendor is a proxy for the technical risk involved in licensing software from this vendor. Such monetization could be easily extended to report technical debt per product family. With such reporting in place, the technical risk associated with licensing a specific product can be assessed.

Software vendors might frown at the requirement to monetize technical debt. I would contend that such a reporting requirement is absolutely consistent with the spirit of the Agile Manifesto:

Customer collaboration over contract negotiations

In other words, if you are reluctant to list your monetized technical debt you can’t really claim you practice Agile.


Written by israelgat

September 29, 2009 at 8:18 pm