Money Matters: Four Methods to Unlock Investment Capacity in IT

The IT industry is caught in a tug-of-war over funding. Despite rising IT budgets, companies struggle to find investment funds. Resources are often used to maintain existing systems instead of supporting innovation. Analysts project global IT spending will reach $5.7 trillion in 2025, a 9.3% increase from 2024.

Yet across the industry, a challenge persists.

Budgets expand while innovation stalls. Many organizations allocate 70%-80% of their IT spending budget toward business-as-usual activities, leaving little room for new advances. Companies need to keep the lights on, but this budgetary allocation stifles growth and leads to a bottleneck that prevents businesses from innovating.

Several factors contribute:

Budgeting inertia. IT leaders often receive the same funding year after year, making it difficult to shift priorities.

Fear of change. Migrating to new systems requires investment, and many companies avoid migration due to potential risks.

Lack of cross-department collaboration. Business leaders and IT teams often operate separately, making it hard to align budget priorities with strategic goals.

Escaping the Cycle: Four Key Tactics

The following four tactics will help you overcome this IT funding struggle and aid growth.

1. Zero-Based Budgeting (ZBB)

Zero-based budgeting (ZBB) creates a new budget from scratch for each period instead of rolling over the previous period’s budget. Leaders analyze each department’s needs and costs, which makes it easier to find waste and reallocate funds based on organization-wide goals.  Once you establish digital transformation as a goal, you can use ZBB to unite IT, business, and finance teams on identifying funds to support that goal.

You can use Agile methods to implement ZBB. Divide the process into sprints and review expense categories in one-week cycles. Cross-functional squads can manage spending areas and use standups to discuss their progress and challenges. Organizations identify waste more effectively with multiskilled teams and transparent data.

The process gains momentum through scenario analysis, which allows teams to test funding options and shift direction based on results. By reviewing costs in sprints, you can respond to market changes in weeks instead of months and refine budget practices.

2. Innovation Capacity Reinvestment Program

IT organizations can use an Innovation Capacity Reinvestment Program (ICRP) to shift money from operations to innovation projects. An ICRP converts money saved through efficiency improvements into investment capital. Resources are allocated to growth opportunities rather than local budgets, so IT can create funding for innovation without requesting budget increases. ICRPs transform IT from a cost center to an investment engine and break dependency on annual budget cycles for transformation work.

Start by identifying which team consumes each service. Let’s use AWS Cloud expenses as an example: Rather than pooling costs at the enterprise level, assign charges to departments that consume services. Assigning direct responsibility transforms budget owners from observers to owners of their technology spend.

Success depends on federating budget authority. When product teams reduce their AWS expenses, they get to keep 80% of those savings for future investments. Budget owners can fund innovation without needing approval.  Developers will view cost reduction as a way to fund their technology roadmaps and backlog features instead of a remedy for the rest of the organization’s overspending.

3. Modern FinOps for Cloud Optimization

Financial Operations (FinOps) aligns finance, technology, and business teams to optimize cloud spending and drive value. FinOps establishes transparency and accountability for technology spending so organizations can maximize value from cloud investments while maintaining financial control. Businesses can maximize the value of each dollar invested in technology infrastructure. Companies that excel at FinOps redirect funds from inefficient areas to high-return opportunities, unlocking capital for innovation and growth without increasing overall expenditure.

To begin practicing FinOps:

1. Form a virtual team with IT, finance, and business personnel.
2. Instruct the team to develop cloud cost management policies and principles to guide behavior across the organization.
3. Deploy cost-tracking systems to monitor spending in real time.
4. Make the system send automated alerts to application owners and use it to inform standard financial reviews, creating visibility across departments.
5. Set optimization targets and frequent assessments to track progress.
6. Establish continuous education and publicly recognize the behaviors you want personnel to emulate.

4. Portfolio Rationalization

Portfolio rationalization evaluates, organizes, and optimizes an organization’s technology assets and applications. It assesses each item’s business contribution and operational expenses to create a technology environment that aligns with business priorities, reduces technical debt, and eliminates duplication. This approach allows you to redirect resources from maintenance to innovation initiatives and drive competitive advantage.

To begin portfolio rationalization:

1. Inventory technology assets to uncover redundancies and identify platforms that are underused.
2. Reduce the number of vendors and cut inefficiencies by combining technologies into core solutions that use existing architectural patterns.
3. Organize work into time-boxed sprints to test outcomes and gather feedback before scaling changes.
4. Have teams meet weekly to inspect progress, remove barriers, and adapt through continuous improvement cycles.

This process reduces costs, enhances system performance, and positions the organization to respond quickly.

The Path Forward

Break the cycle that keeps investment focused on maintenance rather than growth. When executives unite on priorities, they make spending decisions that advance organizational goals instead of departmental interests.  Your organization’s ability to innovate grows when you unlock the hidden value of your daily operations.

Sources:

Gartner Forecasts Worldwide IT Spending to Grow 9.3% in 2025

Is Your Legacy IT Infrastructure Draining Your Budget? Here’s What You Need To Know