Hello there, business owners and decision-makers!
Today, I want to shed some light on an often overlooked aspect of acquiring tech companies: technical debt. As a web developer with over 15years of experience working for all kinds of organisations in the public and private sectors —including my current role at The Code Registry—I’ve seen first hand the impact this can have
What is Technical Debt?
Think of technical debt like financial debt. Just as you might take out a loan to expand your business (incurring interest), developers sometimes cut corners or make choices that seem good in the short term but lead to issues later on.
In the world of software, this could mean using outdated tools, neglecting code maintenance, or rushing through development without proper testing. While these shortcuts might help meet deadlines or stay within budget initially, they can lead to costly problems down the line—our ‘interest payments‘.
Why Should You Care?
*Acquiring a company with a mountain of technical debt is like buying a beautiful house that’s been built on shaky foundations. It might look great at first glance, but it could come crashing down around you eventually.*
When you take ownership of someone else’s code, you’re taking on their technical debt too. Here are some reasons why this matters:
- Increased Maintenance Costs: Outdated tools and sloppy coding can make maintenance more time-consuming and expensive.
- Integration Challenges: Merging systems with lots of technical debt can be difficult and may require significant resources.
- Security Risks: Old software often has known security vulnerabilities that could put your new acquisition—and your entire business—at risk.
- Limited Innovation: Technical debt can stifle innovation by making it hard to implement new features or adopt modern technologies.
How Can You Protect Yourself?
Before acquiring a tech company, consider the following:
- Conduct a Thorough Code Review: You will need a way to audit the codebase to understand its structure, dependencies, and any signs of excessive technical debt. This can either be done via developers (if you have specialist skill in-house), by 3rd party specialist consultancies (who will have a combination of technical knowledge and tooling – but can be highly expensive) or try out a tool such as The Code Registry and our automated Technical Due Diligence service
- Ask About Maintenance Costs: High maintenance costs could indicate a significant amount of technical debt, you want to ask how many hours per month are spent by the incumbent team of developers on updating and maintaining the code. This maintenance will involve bug fixing, installing security patches and updating outdated components. Another aspect to understanding future maintainability is understanding the level of complexity of the codebase, generally speaking a highly complex codebase will cost more to maintain – you can ascertain this using a tool like our code complexity scanner.
- Check for Outdated Technologies: Legacy systems can be a red flag that there’s lots of technical debt waiting to be uncovered. This is possible to identify through most code auditing tools which should identify things such as outdated open source components, outdated dependencies, old legacy versions of languages and packages – all of which will contribute to inheriting a system that could be due a re-build.
- Consider the Team: If key developers leave after an acquisition, it might be harder (and more expensive) to maintain their code. Therefore it is imperative you have an understanding of who has contributed to the code, over what periods and if they are still involved. For instance if a single developer has built 70% of a platform – but has since left, then there is likely a huge knowledge gap which can lead to elongated issue resolution or slow development of new features. You can understand this by undergoing a full developer contribution analysis similar to The Code Registry’s developer history reporting.
Remember, preventing and managing technical debt is an ongoing process. It’s not just about acquiring companies; it’s about how you handle your newly acquired tech too.*
So, business owners, next time you’re considering a tech acquisition, don’t forget to factor in the hidden costs of technical debt. Your future self will thank you!
Until next time, this is Nicholas Shiell, signing off from The Code Registry.
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