5 ways technical debt may be draining your growth

Technical debt isn’t just a technology budget item. It’s a business risk. For middle market companies—where artificial intelligence adoption, cybersecurity resilience, and mergers and acquisitions activity define future value—legacy systems and outdated infrastructure can be an issue. Technical debt can drain enterprise valuation, stall innovation and weaken customer trust while eroding growth, agility and profitability. Leaders must recognize the warning signs and take proactive steps to mitigate the impact. Here are five clear indicators your organization may be drowning in technical debt and practical strategies to address each.

1.     Your operating costs are impeding innovation.

When “keeping the lights on” consumes 70% to 80% of your IT spending, buyers will mark down enterprise value. Companies are discounted if technical debt signals future capital expenditures and integration hurdles. Inorganic growth is an essential strategy in the middle market playbook. During diligence, buyers walk away or slash valuations when they see outdated enterprise resource planning (ERP) systems, green-screen supply chain systems or unsupported databases.

If most of your IT spending goes toward maintaining outdated systems, there’s also little left for innovation. This imbalance stifles growth and limits your ability to invest in emerging technologies like AI, automation, business intelligence, modern ERP systems or cloud platforms. What looks like savings today quietly undermines your value.

2.     Cyber risk is evolving faster than your defenses.

Legacy systems often carry vulnerabilities that can’t be patched or monitored effectively, creating prime targets for attackers. Outdated code, unsupported databases and fragile integrations expand your attack surface while slowing down your ability to respond. For many middle market companies, this means cyber teams are always playing catch-up, leaving critical business data and operations exposed.

Regulators, insurers and investors view cyber resilience as a board-level obligation. A breach traced to outdated systems disrupts operations, damages customer trust, raises compliance risks and can depress valuations during M&A transactions. Technical debt can quickly become a reputational and financial liability.

3. You’re losing digital native talent.

The best talent won’t stick around to build careers on obsolete platforms. Developers in the age of AI don’t want to maintain older ERP platforms or green-screen systems. Operations staff grow frustrated with tools that lag behind industry standards. The result is higher attrition, weaker recruiting pipelines and rising costs to fill roles. In a difficult labor market, technical debt drives away the people you need to grow.

4. Your customer experience is suffering.

Customer trust erodes when back-end limitations create inconsistent pricing, slow responses or failed personalization. These are symptoms of technical debt affecting the front end. When back-end systems can’t support seamless digital experiences, customer satisfaction and loyalty decline.

In a digital-first market, technical debt is visible at every touchpoint.

5. You can’t keep up with the pace of business change.

When system updates take 12 to 18 months but the business needs results in half that time, technical debt holds you back. Legacy applications often lack the flexibility to support expansion, new product lines or market entry. Obsolete systems can make process automation difficult and impede new AI and analytic capabilities due to fragmented data models.

When your systems can’t integrate cleanly, your AI ambitions stall. Models trained on fragmented data deliver weak insights, and customer-facing AI experiences (e.g., chatbots, personalization, pricing) collapse without unified systems at a time when AI readiness defines competitive edge.

The takeaway

Technical debt isn’t an IT problem as much as it is an enterprise value problem. It affects your AI readiness, M&A prospects, cyber resilience and customer trust. Leaders who ignore it will see valuation decline well before systems collapse. The question isn’t whether you have technical debt. It’s whether you know how much enterprise value it’s actually costing you.