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The Mounting Cost of Technical Debt – And How to Get Ahead of It

Technical debt is no longer just an IT maintenance issue – it's a growing business liability. According to IDC, it's the #1 driver of overspending on digital infrastructure and is projected to cost Canadian organizations $25 billion by 2028.

If left unchecked, technical debt can stall innovation, derail digital transformation, and become a major obstacle to AI adoption. But it doesn’t have to.

What Is Technical Debt?

Technical debt refers to the long-term consequences of short-term IT decisions – typically made to accelerate delivery or reduce upfront costs. While these choices may yield speed or cost savings in the moment, they result in a tangled, inefficient, and fragile IT environment over time.

Real-World Examples of Technical Debt:

1. Outdated CRM platform that no longer integrates with modern marketing tools, requiring manual workarounds that slow down sales.
2. Custom-coded business logic buried in legacy ERP systems that only a few long-time employees understand.
3. Hardcoded data flows between systems that break when a cloud migration or AI initiative is introduced.
4. Unpatched operating systems still in production because no one has the time or resources to test compatibility.
5. Excel-based reporting running off siloed data exports instead of real-time dashboards.

How Technical Debt Shows Up

Technical debt isn’t always visible, but its effects are real – and expensive. Common manifestations include:

1. Integration issues between legacy and modern systems
2. Inconsistent data and reporting across business units
3. High support and maintenance costs to keep outdated systems running
4. Slow response times to market demands due to inflexible infrastructure
5. Security risks from unpatched or unsupported software
6. Resource drain, as teams spend time on break-fix tasks instead of innovation

Ultimately, it’s a silent killer of progress – draining time, money, and opportunity.

The Business Impact: Revenue, Agility, and Innovation

According to IDC, technical debt is now one of the most serious threats to competitiveness. Organizations saddled with it experience:

1. Lost revenue: due to system downtime, delays, or operational inefficiencies
2. Reduced agility: limiting the ability to respond to customer needs or pursue new market opportunities
3. Inhibited innovation: as resources are diverted from transformation to remediation
4. AI barriers, since outdated architectures struggle to support large-scale, real-time data processing

Organizations chasing digital transformation and AI readiness simply can’t afford to ignore their technical debt.

Why It Persists: The Underlying Challenges

Despite the known risks, technical debt continues to grow – and often remains deprioritized. Key reasons include:

1. Short-term thinking: Budgets and decisions are often made quarter-to-quarter, prioritizing urgent fixes over long-term improvements
2. Lack of visibility and governance: Without clear ownership or tracking mechanisms, technical debt remains invisible and unmanaged
3. Resource constraints: IT teams are already stretched thin, making it difficult to invest in modernization
4. Unclear business impact: Many executives don’t see the connection between technical debt and business KPIs

A Major Obstacle to AI and Digital Maturity

One of the most overlooked consequences of technical debt is its impact on AI adoption. AI requires clean, accessible, real-time data – and legacy systems, fragmented environments, and outdated architectures make that nearly impossible.

IDC notes that many organizations are investing in stopgap measures to force AI initiatives to run on unstable infrastructure, undermining performance, scalability, and reliability.

To move from experimentation to real outcomes with AI and automation, organizations must first address their foundation.

What Organizations Can Do: A Strategic, Phased Approach

Addressing technical debt is a journey – but there are clear steps organizations can take to regain control and build a more resilient future. Here’s how:

1. Acknowledge Technical Debt as a Strategic Risk

Don’t treat technical debt as just an IT backlog. Elevate it to the executive level and treat it like any other form of business debt –one that accrues interest in the form of cost, risk, and lost opportunity.

Action Steps:

1. Include technical debt metrics in quarterly business reviews
2. Assign executive ownership to track and report on it
3. Educate leadership teams on the financial and operational impact

2. Establish Governance and Visibility

What’s not tracked can’t be managed. Create a formal governance framework to identify, assess, and prioritize technical debt.

Action Steps:

1. Conduct regular technical debt audits with cross-functional input
2. Create a central inventory of known debt across systems and applications
3. Use tools to track code quality, versioning, and architectural health

3. Prioritize Based on Business Impact

Not all technical debt is equal. Focus on the systems and infrastructure that are most critical to revenue, customer experience, security, and growth.

Action Steps:

1. Map technical debt to business processes and customer touchpoints
2. Score systems based on cost of maintenance, frequency of failure, and impact on agility
3. Tackle the top 20% that drive 80% of the pain

4. Embed Modernization into IT Roadmaps

Rather than treating debt remediation as a separate initiative, embed it into ongoing transformation efforts.

Action Steps:

1. Modernize systems as part of new projects, not separate from them
2. Align application modernization with cloud migrations or AI initiatives
3. Build phased upgrade plans that minimize business disruption

5. Secure Dedicated Funding

Many organizations stall progress because debt remediation isn’t explicitly budgeted. Create a dedicated technical debt fund — just as you would for innovation or R&D.

Action Steps:

1. Build business cases that show ROI through cost reduction, risk mitigation, and agility
2. Tie funding to specific KPIs (e.g., reduction in incidents, improved uptime, faster delivery cycles)
3. Consider cost-sharing across departments impacted by the debt

6. Shift the Culture: From Quick Fixes to Sustainable Design

Ultimately, reducing technical debt is as much about mindset as it is about tools. Shift your organization from reactive to proactive.

Action Steps:

1. Train teams to consider long-term architecture in every solution
2. Set architectural and documentation standards
3. Celebrate modernization wins, not just delivery speed

Final Thought: Build the Foundation for What’s Next

Whether your organization is exploring AI, cloud transformation, or improved customer experiences, the foundation you build on matters. Technical debt is invisible — until it isn’t.

Tackling it now means fewer constraints tomorrow. By addressing the root causes, investing in governance, and making modernization part of your business strategy, you can turn technical debt from a liability into a competitive advantage.