How is IT like Personal Financial Planning?


As business and IT leaders, you have undoubtedly used some “go-to” analogies to help discuss complex IT planning activities. For example, as an IT leader, when you say “we plan to update the statistics in the database this weekend, so we’ll need an outage for a couple hours” and you get back nothing but a blank stare, you immediately might jump to “what we are about to do is like changing the oil in your car, and we can’t do it while the car is running, so we need a little time with the engine off.”

Car analogies work great, because they are obvious examples of something we all use all the time, they require regular maintenance, and every once in a while we all like to get a new car with lots of new bells and whistles (note the embedded analogy!).  I recall many conversations about complicated software upgrades where we would have to  “change the tires on our truck while it’s doing 80mph down the highway.”

I have a passion for personal financial planning, so much so that I took a Certified Financial Planning class just for fun (Nerd-alert!!). When I combine that with my love for technology, my experience working for a major financial services firm, and desire to help businesses find real value in their IT investments, I land on personal financial planning as a useful analogy for discussing IT planning.

Below are what I think are a few very sound personal financial planning habits. Alongside them are some ideas about how these translate into IT planning activities that will result in making IT a real asset to any business.  I hope you find these useful in your next conversation between business and IT leaders.  Please share your thoughts and reactions!!

Have a budget that captures ALL income and expenses. Translation:

Have an IT budget visible to C-Level decision makers

The best budgets help you look in the mirror and honestly tell you how you are spending your hard earned money, so that you can make tough decisions if needed. The IT budget must be visible to the decision makers who can make those decisions, and must be detailed enough to distinguish between non-discretionary Core and Maintenance (C&M) expenses and discretionary new capability development.  Often, the total cost of all required C&M is not captured, leading to unrealistic expectations about how much new capability development can be done by scarce IT resources. 

Reduce or Eliminate Debt. Translation:

Reduce or Eliminate Technical Debt

Technical Debt is the implied cost of additional rework caused by choosing an easy (limited) solution now instead of using a better approach that would take longer. Like personal debt, the cumulative impact of technical debt, if not serviced, can be debilitating.  Delaying required upgrades to vendor supported applications is a great example. This is equivalent to the revolving credit trap in personal finance because you can dig yourself so deep it’s impossible to get out without declaring bankruptcy.  Unlike personal debt, where you can at least calculate the interest you are paying, the real cost of technical debt can be much more difficult to understand. It might be easier to understand the real, long term cost of technical debt if we assign an “technical interest rate” to the future required work and add that to the total cost of the solution over time.  

Build an Emergency Fund. Translation:

Build an “IT Operations Support” Emergency Fund

Knowing you can meet your critical needs in an emergency is a very comforting situation. Are you confident that your customers and business can meet their critical needs if there was a catastrophic failure to the IT platforms?  Think of business and IT continuity investments as your emergency fund. You must have disaster recovery platforms and plans that can sustain the crucial business processes through an IT crisis. Ideally these capabilities are built into the business and technology architecture so that you can simply “route away” from issues, but either way these processes must be regularly exercised to ensure they will operate when the emergency hits.

Invest for your future: Pay yourself first, diversify, and think long term. Translation:

Invest in IT as a strategic asset that returns real business value

Pay yourself first.  IT is not just a cost center/utility, so you must plan for the C&M costs, but you should also plan for key strategic investments to move your business forward as a SEPARATE budget, otherwise you risk it being consumed by the ongoing C&M costs. Ideally, as you reduce technical debt, you can shift those funds into new capability development.

Diversify. IT investments should be managed in a portfolio where decisions/trade offs can be made using the overall budget at the senior levels in alignment with the business strategy. Just like your retirement portfolio, different IT initiatives have different risks and returns and should be evaluated as such.

Think long term. IT investments should be part of the overall business plan and not just  tactical purchases to solve the problem of the day. Ideally, key IT new capability investments are discussed in C-suite and aligned with the strategic multi-year business plan.