How to Spot Underfunded Innovation in Your IT Budget
- Avalia
- Jun 27
- 4 min read
For many IT departments, the budget for new ideas and technologies is often the first thing to get cut. This can leave your company stuck with outdated systems while your competitors race ahead. So, how can you tell if your IT budget is stifling innovation instead of fueling it?
Here’s how to spot the red flags of underfunded innovation in your IT budget, with insights from industry experts and real-world data.
1. The 'Keep the Lights On' Trap
A major sign of an innovation-starved budget is an overwhelming focus on what's known as "keeping the lights on" (KTLO) spending. This is the money spent on maintaining existing systems, fixing bugs, and handling day-to-day operations.
What to look for:
A high percentage of your budget is dedicated to maintenance. A 2024 survey by Gartner, found that "companies on average spend over 70% of their IT budget on 'run the business' activities," which leaves less than 30% for growth and innovation. If your IT department is spending 80% or 90% of its budget on simply maintaining old systems, there's a problem.
A lack of budget for new projects. If every new idea is met with the question, "Where will the money come from?" and the answer is always "Nowhere," it's a clear sign that innovation isn't a priority.
The Fix: According to a report from McKinsey, successful companies are "shifting investment from running legacy systems to building new digital capabilities." This means actively reallocating funds from routine maintenance to strategic projects.

2. The 'Shadow IT' Surge
"Shadow IT" is a term for the technology and software used by employees or departments without the IT department's knowledge or approval. While it might seem harmless, a rise in shadow IT is a huge indicator that your official IT department isn't meeting the business's needs for modern tools.
What to look for:
Departments are using unapproved cloud services, apps, or collaboration tools. You might find marketing is using a project management tool that IT hasn't approved, or sales is using a different CRM (Customer Relationship Management) system than the official one.
Employees complain about the slowness or clunkiness of official systems. When your company's official software is outdated and hard to use, employees will find their own solutions, leading to security risks and a messy IT environment.
The Fix: This isn't just a security issue; it's a symptom of a bigger problem. As TechCrunch reported, "Shadow IT is often a direct result of IT's inability to provide the tools that employees need to be productive." The solution is to actively seek feedback from different departments and allocate budget to adopt modern, user-friendly solutions that meet their needs.
3. The 'Never-Ending Pilot'
A pilot project is a test run of a new technology. It's meant to be a short-term trial to see if something is a good fit. But when an innovative pilot project drags on forever without ever being fully adopted, it’s a sign of a budget roadblock.
What to look for:
A promising pilot project is stuck in "evaluation mode" for months or even years. The pilot might show great results, but there's no budget to scale it up for the entire company.
The technology is technically successful, but the budget for training, integration, and licenses is missing. A great new software tool is useless if no one is trained to use it or if it can't connect to your other systems.
The Fix: According to an article in Forbes, "The most successful companies have a clear process for moving from a pilot to full-scale deployment." This requires not just an innovation budget but also a deployment budget to ensure successful projects can be implemented company-wide.
4. The 'Stagnant Skills' Department
Your IT team is your engine for innovation. If they're not learning and growing, your company isn't either. An underfunded innovation budget often means there's no money for training and development.
What to look for:
A lack of budget for employee training, certifications, and conferences. If your IT staff is only working with legacy systems and isn't being trained on new technologies like AI, machine learning, or cloud-native development, their skills will become outdated.
High employee turnover. When top IT talent sees no opportunity to learn new skills or work on exciting new projects, they will leave for companies that do.
The Fix: A recent Deloitte study highlights that "investing in digital skills is a top priority for businesses looking to stay competitive." Allocate a specific budget for professional development and encourage your IT staff to experiment with new tools and technologies. This investment in people is an investment in your company's future.
5. The 'Reactive, Not Proactive' Mindset
A budget that only funds reactive solutions—fixing problems after they happen—is a budget that's ignoring innovation. Innovation is about being proactive, anticipating future needs, and building solutions before problems arise.
What to look for:
The budget is dominated by unplanned 'firefighting' expenses. Every time a system fails or a security breach occurs, it drains resources that could have been used for innovation.
There is no budget for 'future-proofing' technology. For example, not setting aside funds to upgrade to a more modern infrastructure before the old one becomes a major security risk.
The Fix: Allocate a specific portion of your IT budget to explore and experiment with emerging technologies that have the potential to give your company a competitive edge.
By paying attention to these signs, you can start a conversation about realigning your IT budget to focus on growth and innovation, not just maintenance. It’s not about spending more; it’s about spending smarter and seeing your IT department as a driver of your company's future.