Predictable IT spending in an unpredictable economy

Budgeting issues

Traditional budgeting -- which relies on predictable, multi-year forecasts -- isn't effective in a volatile market. When markets are unpredictable, organizational needs can vary and change so fast that it's impossible for rigid budgets to keep up or predict what needs may arise.

"Spending instability stems from unpredictable workflow demands, evolving AI usage patterns and complex compliance requirements," said Anand Narasimhan, CTO of S-Docs. "Add to that the rapid adoption of AI -- while it's a game-changer, it's also become a major contributor to spending unpredictability."

Even though traditional budgeting can be ineffective during times of uncertainty, CFOs and other board executives still demand clarity and control of the IT budget, highlighting the importance of predictable budget models -- and an executive-friendly strategy to go with it.

Expert insight

"Traditional IT spend governance is like trying to steer a ship by adjusting the rudder once a quarter," said Adrian Dunkley, founder at StarApple AI. "You need real-time instrumentation to weather the storms of unpredictability."

A strong CIO budgeting strategy should be flexible enough to respond to changing demands while staying steady.

"The leaders who maintain investor confidence are the ones who shift from rigid, static budgeting to flexible models anchored in real business drivers," said Ed Barrow, CEO of Cloud Capital. "When you ground spend in real demand signals, you create elasticity in the budget without slowing innovation."

Dynamic spend governance can help CIOs understand the changing needs across the organization in real time and quickly adapt spending to address them.

"Without strong governance, costs escalate faster and often in a silo," said Bill Hineline, field CTO at Chronosphere. "When you understand what's running, who owns it, why it exists and how it maps back to business outcomes, the spend model stabilizes. And how it connects to business outcomes, costs become more predictable and budgets stay stable."

Frameworks and strategies

Predictable IT budgeting during times of uncertainty can be a competitive advantage. Predictable spending enables an organization to steadily fund innovation and transformation even when many businesses may be pulling back.

There are several strategies and frameworks that can help IT spending stay resilient and stable, including the following:

Rolling forecast models

Rolling 12- to 18-month technology spending forecast models allow projections to be continuously updated based on business data and market shifts instead of a static projection. Real-time data integration and scenario analysis can be crucial to strategic and timely decision-making in volatile environments.

"These insights allow IT to proactively allocate compute resources, scale process queues or prioritize workflow optimizations -- avoiding last-minute spending spikes or emergency interventions," Narasimhan said.

Scenario-based budgeting

Scenario-based planning takes multiple "what-ifs" and predictions into account, allowing businesses to plan and prepare for several outcomes and possibilities.

"Instead of committing too early to fixed spending levels, they model multiple futures: a base case, an accelerated adoption case and a stress case where usage soars but margins tighten," Barrow said. This ensures businesses are ready to pivot and shift priorities when needed.

FinOps

FinOps for cloud and SaaS systems combine multiple areas of business that have an impact on cloud use, cost and business value, including business, IT and finance. By combining several different perspectives, executives can get a comprehensive view of IT spending that is more aligned with the current state of the business, allowing for more predictable spending. 

Value-tier investment prioritization

Value-tier prioritization categorizes initiatives by level of value, allowing organizations to allocate spending and resources based on the level of business value an initiative provides.

"Many CFOs are … prioritizing mission-critical innovation and margin-protecting initiatives while giving themselves the option to pause less essential projects if conditions shift," Barrow said. "[A] combination of dynamic budgeting and value-tier prioritization lets companies stay aggressive on innovation without losing financial footing."

Talent and AI resource strategy

When budgets are stretched thin, finding IT talent with the necessary skills and expertise can be a significant challenge. Organizations can use AI to offload work and reduce spending on talent and workforce resources. Organizations should develop a strategy that lays out the types of roles and duties that can be easily automated, as well as duties that should remain human-led.  

Contingency budget planning

Contingency tech budget planning preallocates funds that can be used in case of emergency -- such as disruptions in the market or supply chain, or sudden shifts in the workforce. This ensures that when unpredictable events occur, IT spending can still stay stable.

Metrics and KPIs to track

Keeping track of IT spending initiatives -- including the stability of spending and cost over time -- allows organizations to measure their value and impact on business performance. Here are several essential KPIs to help evaluate predictable IT spending:

• Forecast accuracy. Assessing the projected spending versus what was actually spent -- and where the money went to -- gives an organization insight into how predictable spending is, as well as how reliable forecasts are to optimize future forecasts.
• Innovation spend. Looking at innovation spend as a percentage of the total budget shows how much the organization is investing in transformation and innovation compared to operations and maintenance. Finding a balance between funding innovation and putting a healthy amount toward other business functions ensures an organization can grow while still prioritizing financial predictability and stability.
• Unit cost of services. Measuring the cost of services per user or per workload signals how cost-effective and efficient an organization is with its resource allocation and service delivery. Evaluating this metric from a cost-optimization perspective can help organizations find the lowest-cost option to keep spending steady without sacrificing reliability or quality.
• Cloud cost efficiency. Evaluating metrics related to cloud cost management -- such as percentage of wasted resources, reserve use and idle resource costs -- can show how well cloud resources are being used and pinpoint opportunities for improvement and optimization.
• Time to value. Determining how quickly IT initiatives deliver measurable business results can uncover how efficiently resources are being used and how effective operations are. "When you anchor investments to real business metrics such as revenue, customer experience, stability, developer velocity, then you can prioritize projects that matter and cut the ones that don't," Hineline said.

Communication strategy

Creating a communication plan is essential to getting executive and stakeholder buy-in for spend initiatives and budgets. Without a clear, well-executed communication plan, it can be more difficult to justify spending decisions. This can lead to miscommunications that can delay IT initiatives and affect strategic decision-making.

A strong communication strategy should include clear, executive-friendly language. Speaking in outcomes, value and risk terms -- rather than technical jargon -- can help executives and stakeholders better understand the real-world business impact that IT investments can have, increasing the likelihood of buy-in.

Tying IT spending and hard data to business outcomes can help create a CFO-ready narrative that resonates and aligns IT and executive priorities.

"You want the people signing the checks in your corner and aware of the value before that emergency budget meeting is called," Dunkley said.

Communication should also prioritize technology cost transparency, with access to data, real-time dashboards and performance metrics that track progress, demonstrate business impact and validate decisions.

"Organizations need real-time -- or at least weekly or monthly -- visibility into adoption patterns, because they directly impact performance, cost and where optimization is needed," Narasimhan said. "Regular reviews of these metrics ensure stakeholders understand the impact of resource allocation and system changes."

Executive action items

Prioritizing predictable IT spending is a core part of a resilient organizational strategy. It lets IT initiatives thrive even when economic conditions are uncertain.

"Stable, intentional investment turns unpredictability into manageable events. Workflows stay reliable, exceptions are minimized and IT teams can focus on innovation rather than firefighting," Narasimhan said.

To safeguard spending in an unpredictable economy, CIOs should focus on piloting rolling forecasts, standing up FinOps programs, prioritizing FinOps best practices and building a board-ready investment framework. 

"The companies that survive volatility aren't the most conservative," Dunkley said. "They're the most proactive and responsive. They build systems that can absorb shocks without losing momentum."

CIOs who embrace flexible budgeting models are better equipped to handle sudden shifts and budgeting changes. This creates a stronger, more resilient organization that is prepared to handle uncertainty while still funding innovation and transformation.

Alison Roller is a freelance writer with experience in tech, HR and marketing.