In the software world, the term “technical debt” is common, but its impact is often underestimated by business leaders. It’s a metaphor, but also a real-world burden. 

What is Technical Debt?

Staying on outdated systems for too long can create inefficiencies and vulnerabilities, and add to technical debt, which we’ll discuss in more detail.

When development teams take shortcuts—perhaps to meet a deadline or launch a product faster—they often create code or systems that need to be fixed or rebuilt later. Like financial debt, it accrues interest in the form of inefficiency, higher costs, and lost opportunities.

And that interest adds up. A 2022 report from the Consortium for Information & Software Quality (CISQ) estimated that the principal of technical debt in U.S. companies has reached $1.52 trillion. Even more striking, the total cost of poor software quality, including maintenance and downtime, is estimated at $2.41 trillion annually.¹ That’s a figure hard to ignore.

Other Ways It Impacts Your Business

Time is another currency technical debt consumes. Developers report spending between 33% and 42% of their work time dealing with rework, bug fixes, and maintenance.² It’s like paying full salary and getting only two-thirds of productive output. In business terms, it’s waste—and it’s largely invisible.

McKinsey’s research suggests that 10 to 20% of IT budgets are swallowed by technical debt payments.³ In some sectors, like logistics and healthcare, the figure rises even higher. These funds, meant to drive innovation or improve the customer experience, are diverted toward just keeping systems from falling apart.

For businesses running on legacy software—or ones struggling to modernize—the impact of technical debt can be especially severe. It slows down the ability to deliver new features, raises the risk of system failures, and decreases responsiveness to market changes. Companies with high technical debt often find it harder to scale or to attract buyers or investors. After all, nobody wants to inherit someone else’s outdated, expensive-to-maintain code.

What To Do

So what can a business leader do about it? The first step is to make the invisible visible. Track how much of your team’s time is spent on maintenance versus new work. If you’re not a technical founder, ask your IT lead or software provider to help assess the state of your systems. Many tools now exist to measure software quality and code maintainability.

Once you know where you stand, prioritize the areas of greatest pain—slowdowns, recurring bugs, or security vulnerabilities—and begin chipping away at the debt. Think of it like refinancing a financial loan. A planned, structured approach is better than trying to fix everything all at once.

Reducing technical debt isn’t just about code. It’s a cultural and operational decision. Teams need the time and permission to clean up legacy systems, not just deliver the next new thing. Some organizations now allocate a portion of each sprint or IT budget specifically to debt remediation, treating it as a standing obligation.

The upside of all this is substantial. Cleaner systems lead to faster development, more innovation, happier developers, and more satisfied customers. Businesses that invest in paying down their technical debt often experience a measurable boost in productivity and agility.

Technical debt may not appear on your balance sheet, but it weighs heavily on your company’s growth potential. The good news is: it’s manageable. Like all forms of debt, it takes attention, intention, and a little long-term thinking.

1. 1. Consortium for Information & Software Quality (CISQ) – The Cost of Poor Software Quality in the US: A 2022 Report.

2. 2. Stripe Developer Report via McKinsey & Company – Tackling Tech Debt to Improve Developer Velocity.

2. 2. McKinsey Digital – Measuring and Managing Technical Debt.