How technical debt increases Total Cost of Ownership

Total Cost of Ownership (TCO) is one of the most important metrics in large organisations. Many important decisions are based on it. Any innovation or transformation journey is heavily influenced by TCO.

Technical debt, an unfortunate and sometimes unavoidable casualty of innovation, can have various knock-on effects for large-scale projects. Elements of programme management that involve testing, architecture design and development are just some that can increase TCO by accruing technical debt.

How does Total Cost of Ownership increase due to technical debt?

Total Cost of Ownership (TCO) is a vital metric for Product Owners in particular. Without this metric, it’s nearly impossible to make the important decisions that are necessary with innovation.

If the new product is rapidly gaining cost over time (to maintain, for example – not just running costs) this metric increases. TOC is metric investors and stakeholders look to for the bigger picture. Technical debt must be taken into account when calculating TOC. It is not just a running cost for an IT department. Unintentional technical debt can sneak in through a multitude of ways (listed above) and become a nasty surprise for budget holders.

Insurers are not immune to the hidden nature of technical debt on their transformation journeys. The main issue with technical debt is that it can creep up on you without you realising it. The ‘hidden cost’ nature of technical debt often means that TCO is directly impacted at the worst moments during a project. Without proper planning, technical debt can accrue quite easily. Sometimes, it can save a business a lot of time, money and hassle if they plan in their technical debt deliberately.

Total Cost of Ownership can make or break a project. Delays and unexpected costs can derail a project that took months (or even years) to come to fruition for insurers. Operating and maintenance costs cannot all be predicted right down to the penny; however massive savings can be made if insurers partner with proper assurance experts and address their technical debt early on. Total Cost of Ownership can then go back to being a true representation of the project’s long-term value to a business.

If your organisation has accrued immense amounts of technical debt, TOC is impacted by teams’ productivity. They’ll be slowed down due to fixing rushed, poor quality code rather than implementing innovative solutions. This, in turn, affects velocity. When a talented team is forever presented with unhappy surprises in poor quality code, it can really knock their motivation and morale. Your developers, product owners, scrum masters and project managers should all be able to have a transparent outlook on the ‘true state’ of what they’re working with. Lack of predictability on a project negatively affects everyone’s roles.

How can I protect the TCO on my project?

One of the biggest recommendations we have is to ensure there is a proportional relationship between funding and strategy. This must tie into your understanding of the Total Cost of Ownership from the very beginning of the project.

Essentially, it comes down to proper planning (most things do). Additionally, ensuring that you’re using a Solution Assurance partner can take the stress away of unpleasant surprises cropping up. Solution Assurance is designed as your guidance system. TCO can be better defined when Solution Assurance is helping you along the journey.

You can read more about technical debt via our whitepaper here.