Technical Debt and Operational Debt: Terms Borrowed from Finance

Hello there!

Debt is a common financial term and often gets borrowed by other fields and industries. No pun intended. (Last heard, there is also something called emotional debt.)

Here, we discuss mostly about physical operations and processes, and you will find these related phrases interesting: technical debt and operational debt.

Meaning: taking a shortcut today that makes things work quickly, but creates extra problems, effort, or costs later.

It has its origin in software development. Example: a team builds code fast to meet a deadline, but the code is messy or not scalable. It may work now but later becomes harder and more expensive to maintain, fix, or improve.

In physical operations, it means the same and gained usage over the past two decades when buildings and security systems started being governed by software. They inherited the exact same problems that software developers have been dealing with for decades.

In physical operations, technical debt applies to any physical process or infrastructure that becomes inefficient or risky because you didn't invest in the right system from the start.

The effect of this is business-wide and is called operational debt.

Meaning: the extra work and risk created by inefficient, manual ways of doing things. It usually happens because your technology (the technical debt) isn't doing the job, so humans have to fill the gap with manual labor.

Example: teams relying on manual workarounds, spreadsheets, disconnected systems, or temporary fixes. Things may keep running at present but over time, it creates inefficiency, errors, poor visibility, compliance risk, and higher operating costs.

The cost resulting from operational debt is also called the silo tax. Whoa! Yet another term from finance. Aren’t most part of human life governed by money?