Technology Debt: The Hidden Balance Sheet Item

Are you ignoring technology debt on your balance sheet? Turning a blind eye now, will only make costs go up in the future.

The word ‘debt’ seems to get lumped in a list of other four-letter expletives, especially in the business world. Given the revulsion the word can cause, it’s no surprise that directors, owners and managers are afraid to look too closely at the hidden ‘technology debt’ lurking within their company’s balance sheet.

The term ‘technology debt’ refers to the investment required to get your organisation up to scratch with the latest technology.

There are two ways technology debt is commonly manifested; firstly, where your company is using outdated tools such as Excel spreadsheets or older desktop-based software instead of more contemporary mobile applications and cloud-based services. Secondly, your company could be employing a modern approach but is failing to update to the latest versions or updates being released by the vendor. The second scenario can also commonly occur when custom software has been invested in. It’s very common in these situations to see, after initial deployment, for a drop off in investment in keeping such software up to date.
In either case, it’s likely that considerable technology debt is being racked up that often remains unseen and un-noticed by management and shareholders alike.

So, what does it all mean? If you’re using old or aging technology, it’s quite obvious that your processes are likely less efficient, your staff are probably less productive, and you’re more than likely providing an inferior service compared to your more tech-savvy competitors. But even more importantly, the amount of technology debt in a company is often not understood until it’s too late. If you attempt to sell your business, for example, any technology debt will need to be considered, and is often only fully recognised, when due diligence is being performed.

Turning a blind eye to technology debt won’t make it go away and the longer you leave it, the more expensive it will be to remedy. Talking to a trusted independent professional is the best option to get your business back on the right track.

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