Technical debt is the debt that accrues when companies implement I.T. solutions that are cheap or easy at the time. However, they can end up requiring extra time and cost to put the right solution in place when there eventually becomes no other choice.

Companies vary widely in how much money they spend on I.T. and how much planning they put into managing their I.T. budget spend. Some buy IT related products or services only when something breaks or when they hire someone new. Others have formal budgeting processes with steering committees that help set I.T. priorities. In our experience, companies with formal budgeting processes accrue less technical debt and have higher ROI on their technology spend.

Here’s a look at what it will cost you.

1. Lost productivity
Equipment slows down, and software fails to keep up with advances in design and functionality. The longer you hold on to outdated software and equipment to more you lose in employee productivity. This also has an impact on morale and your ability to recruit new employees. Younger employees expect to have tools at work that are at least as good as the tools they used in college and at home.

2. Increased risk
There are two ways outdated equipment can increase your risk of becoming a victim of cybercrime. First, software and hardware companies do not support their products indefinitely. They stop producing and distributing regular security patches, leaving you vulnerable to exploits. Second, your employees are more likely to use consumer tools to get their jobs done. They will share files via a Dropbox account instead of using your intranet; they use their home computer, phone, or tablet instead of their work laptop, and they will purchase subscriptions to the latest SaaS software instead of using your old applications.

3. Higher TCO
Investing in the right hardware, software, and infrastructure can be a hard sell for a generation of business leaders in the age of the $.99 app store. We often see the business chosoing to purchase low cost, consumer-grade solutions for their offices because they “work fine at their house.” The impact of several years of poor performance, plus the cost of ripping out the bad solution and replacing it with the right solution, and the impact on user productivity, results in a much higher TCO, or Total Cost of Ownership, for the cheaper solution.

While technical debt may not be as easy to quantify as the debt that accrues on a business loan, it has a tremendous negative financial impact on your company. Having a formal budgeting process with clear strategic goals can help you avoid in-the-moment decisions that end up costing you more and putting you at risk in the future.

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