Technical Debt & Total Cost of Ownership (TCO) for Regular Business

I’ve been meeting with a lot of wineries lately. Talking about their businesses, their digital initiatives, and more. What’s become evident is that so many companies treat digital as a “project” versus infrastructure.

We need a new economic model to account for the debt associated with building something (and the debt accrued by not building) coupled with maintaining it. Perhaps you’ve heard of “technical debt.” Technical debt is a programmer’s term that represents the decision to choose a faster type of programming instead of a more stable, scalable code, realizing that you will most likely have to go back and re-code it in the future. But on a more fundamental level, it’s the understanding that things you build must be repaired, reinforced, or rebuilt over time. The more use/pressure, the faster you have to address repairing or reinforcing those items.

When you take this abstraction, ANYTHING you build creates technical debt. When you construct a house, a website, a relationship with a customer, a fence, or a garden, the clock starts ticking, and the debt begins to accrue. You can pay down the debt regularly or wait for it to accrue and pay it in a lump sum. Know that, like regular debt, technical debt carries interest. Deciding not to pay down debt incrementally or wholesale can have tragic results. For example, PG&E’s failure to upgrade or replace aging equipment or proper vegetation management resulted in the Camp Fire (and others) that burned over 18K structures and killed 85 people. For those old enough to remember, Y2K was a case study in technical debt and the extensive and incredible costs and effort it took to remedy it — despite it coming in like a lion and leaving like a lamb.

Why do I say this needs a new economic model? We often don’t associate buildings with technical debt. They’re treated as objects with completion, and rarely do we include future technical debt or the total costs of ownership (TCO). Instead, they need to be budgeted with a perpetual pay-down budget for eventual upgrades over time, the choices in original building infrastructure, and the advancements of technology/society that mandate upgrades. This is not just a suggestion but a necessity. We need a new economic model that accounts for technical debt to ensure the sustainability and safety of our infrastructure.

I’ve used the house analogy in the past, as it’s a great metaphor. Anyone who owns a house understands the costs over time. This is not just from family use but also requires the additional equation of time (decay and evolution). For example, think of a house built in the 50s. Over the decades, we’ve had continual improvements in technology for the original elements of the house (wiring, pipes, roofing, lighting) and new elements that were not even contemplated at the time (internet, solar).

Installing and retrofitting these are not easy or inexpensive endeavors. In fact, modern house loans should estimate the technical debt incurred during the loan term and include it as an addition to the mortgage with line items budgeting for repairs (TCO), upgrades/improvements due to time (technical debt), and a multiplier based on use.

This applies to everything we build. A website, for example, requires constant upkeep: new browser specifications, responsive design, new payment methods, improved shopping carts, ADA compliance, content, etc.., etc. It is a perpetual investment to keep it up-to-date and effective and to make choices intentionally for the appropriate size of the business. You can pay it down continually or allow it to run for years until you need to invest a considerable sum to upgrade it.

Building customer relationships also creates a TCO and accrues debt. This is too often overlooked unless you are truly a customer centric business. You need to invest to retain or react to the customer and to support new customer expectations, emerging technologies, and innovations. One of the easiest ways to understand if a company is serious about being customer-centric is to ask if they have a budget for customer retention.

What’s essential for modern businesses is the mental and financial shift to recognize TCO and technical debt in all activities. Unfortunately, business sustainability is not just about building things; it’s about maintaining and even regenerating operational initiatives. Regenerative business . . . I like the ring of that.