Transforming budgeting amid rapid technological change

In the face of rapid technological evolution, public sector organizations are tasked with the complex challenge of modernizing their IT budgeting and planning processes to keep up. This is critical not only for keeping pace with technological advancements but also for ensuring improved business outcomes through effective tech implementations. Traditional budgeting methods, which are often rigid and incremental, fall short in accommodating the fast-paced nature of today’s technology landscape. Public sector leaders are thus faced with the imperative of adapting to prevent lagging behind, with the stakes being potentially higher costs associated with not keeping up with technological progress.

A case in point is the US General Services Administration and its approach for fiscal year 2024. GSA has outlined its annual performance plan, incorporating a strategic framework that defines performance goals, baselines, targets, and results for its strategic objectives. This method ensures that budget allocations are directly linked to intended technological outcomes, highlighting the importance of defining key performance indicators for tech projects.

Governments have the opportunity to leverage technology to better serve their constituents, foster innovation, and enhance overall well-being by adopting more responsive planning and budgeting practices. This includes the ability to swiftly adjust and reallocate resources as needed, a capability that is crucial in today’s ever-changing environment. To achieve this, it’s essential to advance budget performance measures, management and governance by integrating elements from various budgeting processes into a hybrid, custom-fit approach.

To enhance the performance of their planning and budget cycles, public sector leaders should follow three principal guidelines:

1. Efficiency. Regular maintenance and upgrades of essential systems are crucial to avoid failures and inefficiencies. Optimizing software and infrastructure through priority-based budget planning keeps the business competitive. The Defense Innovation Board’s adoption of the Software Acquisition Pathway exemplifies this approach by providing a more flexible budgeting model for software to accommodate evolving technology trends.

2. Effectiveness. Utilizing AI and data analytics can significantly improve processes and decision-making. Cocreating and expanding capabilities, products, and services through value-based budget planning allows for the adaptation of priorities and the realization of more opportunities. The City of Tacoma’s practice of cross-departmental data sharing for optimized budgeting and initiatives is an illustrative example of enhancing effectiveness.

3. Productivity. Introducing new concepts with phased rollouts helps balance innovation risks with potential returns. Aligning change pace with operational capabilities ensures that innovation does not outpace the ability to manage it effectively. For example, Baltimore’s outcome-based budget planning, which links funding to desired outcomes and performance metrics, showcases how to create continuity and extend value capture.

Public sector organizations stand to gain significantly from reforming their IT budgeting and planning approaches in response to technological advancements. By embracing responsive budgeting practices, these organizations can become more agile and responsive, optimizing resource usage and improving public sector service efficiency and effectiveness. This in turn delivers tangible benefits to the communities they serve, highlighting the critical nature of evolving public sector budgeting practices in the digital age.