Leaders struggle with budget volatility, and tech leaders are no exception. In fact, of the roughly 1,400 tech professionals questioned in Forrester’s Priorities Survey, 2025, 47% indicated that their organizations underspent or overspent their 2024 budget by 10% or more. So how do tech leaders build a budget that will come in on target? Focusing on alignment, prioritization, and flexibility will set them on the right path.
Align With Other Leaders Around The Enterprise
Savvy CIOs kick off the budgeting process by aligning with key business stakeholders on the enterprise’s strategic objectives for the upcoming year. They are contributors to the overall enterprise strategy rather than just supporters. They use the enterprise’s key results as anchors for their own planning and target setting. This is what Forrester calls value cocreation, a lynchpin of high-performance IT.
For example, a government agency CIO worked with business partners to build a strategy for modernizing core IT systems. Not only did it drive organizational value and alignment during the course of the exercise, it strengthened business partner relationships. As trust grew, future planning became easier and far more effective.
Prioritize To Maximize Business Impact And Avoid Future Technical Debt
Tech leaders with unlimited resources can spend on whatever they like. Those in the real world must take budgets into careful consideration and find ways to maximize the value of their available funds. They need to answer three questions:
How much do I want to spend?
Tech leaders partner with finance to set a target — for example, a benchmark such as percentage of projected revenue or spend per FTE, a certain percentage increase or decrease over the last year, or a targeted level of profitability. Owning and communicating this target ensures that leaders across the entire IT organization are aligned on the ultimate goal.
How much do I have to spend to keep the core business running?
“Keep the lights on” spend is not discretionary. Touching this segment will impact the enterprise’s ability to continue with normal business operations. But beware: It can take some work to understand what’s really necessary and what’s on the table for discussion. CIOs need to also be sure not to sleep on technical debt. Otherwise, they risk falling into doom loops of technical debt, the costs of which compound over time.
What do I spend the remaining amount on?
The balance between “keep the lights on” spend and the total spending target is what’s in play for the discretionary portion of the budget. CIOs who tie their prioritization methodology to enterprise priorities make budgeting decisions that are consistent and justifiable to each area that IT supports.
Incorporate Flexibility For Shifting Funding Priorities
Nothing ever goes according to plan, so leaders need to have a strategy to shift gears if spend for the year is running hot … or cold.
For example, forward-thinking CIOs build a “next up” list to extend prioritization beyond just the initial budget target, rank-ordering the items that don’t make the initial cut. This enables leaders to quickly pivot to plan B as budget funds become available. Leaders can also quickly pivot if strategic priorities change midstream and IT needs to shuffle spend.
A US insurer reported that having a next-up list saved a week of decision-making time when a certain project was canceled, which it estimated at $30,000 in effort. Rather than team members who were earmarked to work on the project sitting idle while alternatives were analyzed, they were able to quickly pivot to the next project on the priority list.
Book A Guidance Session To Discuss Your Budgeting Challenges
Deciding on what budgeting approach is right for you? Looking for benchmarking to set targets? Interested in talking about approaches to prioritization? Request a guidance session, and we can dive further into these or any other budget-related questions you have!
I’ll also be attending Forrester’s Technology & Innovation Summit North America on November 2–5 in Austin, Texas. Let me know if you’d like to connect there!
