A Three-Year Case Study on a $1 Million Enterprise System
Executive summary
- Technical debt compounds like high-interest credit. Un-serviced debt grows ~30 % every year, eating velocity and reliability.
- Skipping monthly refactors is a false economy. Over three years the debt on a $1 M build can swell to $679 k—then costs another $1.0–$1.3 M to dig out.
- Ring-fence 30-35 % of the original build per year (≈ $29 k/mo) split between maintenance (run + keep-current) and structured debt-pay-down.
- Treat debt KPIs as first-class citizens. What you don’t measure—or budget—balloons silently until it blocks innovation.
What we mean by “technical debt”
Ward Cunningham’s 1992 metaphor compares rushed code to borrowing money:
“A little debt speeds development so long as it is paid back promptly.
The danger occurs when the debt is not repaid.”
Debt shows up as shortcuts, ageing dependencies, and architecture drift. Left unpaid, it levies “interest” in the form of slower delivery, outages, security risk, and developer churn.
Modelling for three years with zero debt service
| Year | Opening debt | Interest 30 % | New debt (features) | Year-end balance |
| 0 (launch) | $200 k (20 % of build) | – | – | $200 k |
| 1 | 200 k | +60 k | +60 k | $320 k |
| 2 | 320 k | +96 k | +60 k | $476 k |
| 3 | 476 k | +143 k | +60 k | $679 k |
Result: Debt balloons to 68 % of the original build in just three years.
The “big-bang” clean-up cost
| Component | Calculation | Cost |
| Direct refactor | 1.5–2 × backlog | $1.0–1.35 M |
| Lost roadmap capacity | 33 % productivity hit, 10 devs × $180 k | $600 k |
| Risk & governance buffer | 10–15 % | $130–200 k |
| Total | $1.3–1.6 M |
That is 130–160 % of the original build—just to get back to a healthy codebase.
Three guard-rails to avoid the trap
- Budget refactor work as non-discretionary (≈ 15 % of sprint capacity).
- Track a debt KPI quarterly—e.g., maintainability index, cyclomatic complexity.
- Never skip two consecutive framework versions. The longer the jump, the steeper the migration bill.
Recommended run-rate for a $1 M system
| Category | Annual % of build | Annual $ | Monthly reserve |
| Maintenance & keep-current | 20 % | $200 k | $16.7 k |
| Planned debt pay-down | 15 % | $150 k | $12.5 k |
| Total | 35 % | $350 k | ≈ $29 k |
Ring-fencing this $29 k per month is cheaper—and far less risky—than the seven-figure rescue mission later.
Take-aways for executives
- Technical debt is not a line-item you can defer indefinitely. It accrues interest whether you acknowledge it or not.
- The discipline to pay it monthly is a competitive advantage. Organizations that keep debt below 20 % of their estate ship features 50 % faster and experience 80 % fewer severe incidents (Gartner 2024).
- Start tracking it today. Even a rough metric beats flying blind.
Pay your debt like rent—every sprint—before it turns into an eviction notice.
Authored by CyTech Consulting, April 30, 2025.
Sources: Gartner “Evolving IT Spend”, McKinsey “Next-Gen Tech Debt Management”, Stripe Developer Productivity Report 2024.
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