How to Rethink IT Budgeting
How do organizations decide which IT projects to prioritise – and which to postpone?
Often, it’s an invisible boundary, the so-called “Red Line” that determines which projects receive funding and which remain on the wish list.
In the latest episode of the Uffective Boost Podcast, Markus Lause and Dr. Mark van der Pas discuss this “Red Line” – and how organisations can learn to move it.
What is the Red Line?
Every year, the same budgeting ritual begins in many organisations:
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- Analyse last year’s IT budget
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- Hold workshops and meetings where business units submit their IT investment requests for the coming year
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- Evaluate all demands – IT assigns each idea a price tag (a “T-shirt size”) in an Excel sheet
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- Prioritise – the organisation sorts all ideas and decides: everything above the Red Line gets funded, everything below does not.
The problem:
Creativity in organisations always exceeds available budget. There are more ideas than funds to realise them. The Red Line stays in place — and rarely moves.
Dr. Mark van der Pas calls it “the invisible border that consumes energy instead of creating value.”
The goad: Move the Red Line
Dr. Mark van der Pas focuses his research on one core question: How can an organisation move its Red Line downward? If we currently deliver 50 projects – what needs to change to successfully deliver 60 or more, without increasing the budget?
His answers are deliberately unconventional – and they start with a radical idea:
1) Stop doing annual IT budgeting
Why?
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- It consumes vast amounts of time and resources – around 13% of total working time is spent solely on creating and reviewing these plans.
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- The process is outdated in today’s fast time-to-market reality – we already know what will happen over the next six months, and planning ongoing work adds no value.
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- It is inefficient – huge effort goes into planning topics that will ultimately fall below the Red Line and never be funded.
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- It undermines trust in the IT department – stakeholders become frustrated when their initiatives are not delivered simply because they are below the line.
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- New demands emerge continuously throughout the year, yet the process forces organisations to wait until the next planning cycle – an unnecessary delay.
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- It leads to uneven spending – little investment at the start of the year, followed by over a third of the budget being spent in the final quarter – much to the frustration of finance teams.
Conclusion:
End the annual IT budgeting process – and replace it with a continuous, demand-driven investment approach.
2) Stop putting IT projects under time and cost pressure
Roughly 50% of IT projects are not completed on time or within budget. According to Dr. Mark van der Pas, the constant pressure to deliver “on time and in budget” leads to misjudgements and inflated initial estimates: Project managers overstate risk, raise cost projections, and thereby increase overall demand.
Conclusion:
More effort, less trust, lower efficiency. Instead of pressure, organisations need room for improvement – project managers want to deliver when they are empowered, not pushed.
3) Optimise the decision-making process
In many organisations, up to 97% of all investment requests are approved. This shows that decision boards are no longer effective instruments for prioritisation. At the same time, countless To-Do’s are cancelled before ever reaching these boards. Operational decisions often diverge from the strategic priorities of senior management.
Dr. Mark van der Pas’ advice:
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- Influence the thousands of operational decisions made every day by clearly communicating the “why” behind your goals.
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- Make strategy, focus and priorities transparent across all levels of the organisation.
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- Strengthen understanding and purpose – when employees know the importance of their tasks, it empowers the organisation both culturally and strategically.
Rethinking the Red Line
To “decrease the Red Line” does not mean starting more projects – it means changing how energy flows within the organisation:
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- Less time planning, more time delivering.
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- Less pressure, more trust.
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- Less bureaucracy, more impact.
You can find more insights in the paper by Dr Mark van der Pas and Joris Kaizers, or contact your Customer Success Manager for further discussion.
