In my previous posts about tech debt, I focused on how we can help organizations remember their debts, and on understanding how tech debts are funded and paid back.
These topics hit a raw nerve with coders and testers. Those in the trenches often feel very keenly the cost of doing things in a messy way, and it’s common for them to worry that others don’t “get it.”
They’re not wrong to worry.
However, today I’d like to put on my executive hat and discuss tech debt from a perspective that code jockeys sometimes miss, because blindness is not just an executive disease.
Debt as Leverage
When you hear the word “leverage” in business circles, people are talking about debt: a “highly-leveraged” firm is one financing large portions of its strategy through debt; “leveraged buyouts” are transactions where the buyers borrow vast sums of money from a risk-taking lender to take a company private.
Technogeeks (like me): business people are not dumb. Why did they settle on this metaphor of debt as leverage?
The answer is that debt can allow a company to concentrate enough capital in a short enough timeframe to make high-impact strategic moves that would otherwise be impossible. It’s an enabler and multiplier.
Debt is a fundamental machine in the business toolkit, just as levers are a fundamental machine for mechanical engineers. Almost all businesses use debt to some extent. If a CEO can borrow capital at 9% and produce 12% ROI with it, and Continue reading