The success (or lack thereof) that state CIOs have in funding modernization is frequently pinned to the funding model — but that’s a myth. Talk to enough state CIOs, and a different picture emerges: Modernization succeeds or fails more because of how leaders manage competing priorities, stakeholder expectations, and organizational realities than because of the funding model.
Forrester recently partnered with NASCIO on the research report, State Government IT Investment Management: 2026 State CIO Insights And Recommendations. We interviewed almost 20 state CIOs, and these interviews revealed five tensions that every public-sector technology leader should learn how to manage.
The Early Bird Sometimes Gets The Worm But Always Gets The Bill
Cloud platforms, AI capabilities, and shared services often create value across an entire state. The challenge is that the first agency to adopt them typically bears the initial costs and risks. State CIOs repeatedly described situations in which agencies were reluctant to champion innovations whose benefits would eventually be shared by everyone. Without mechanisms to spread both risk and reward, innovation slows.
The lesson is straightforward: Successful modernization efforts mitigate risks and even create incentives for early adopters rather than penalizing them. CIOs must think beyond technology architecture to design funding and governance approaches that encourage agencies to participate in enterprise innovation.
Predictable Budgets And Agility Are At Odds
Government budgeting processes are built around accountability and predictability. Technological change, meanwhile, rewards speed and adaptability. Many CIOs described the challenge of budget cycles that require making technology decisions years in advance while operating in a market where capabilities evolve constantly. In the AI era, a two-year planning cycle can feel like two decades. Yes, it helps governments manage taxpayer dollars responsibly, but it also makes it harder to respond to opportunities and risks that are evolving at light speed.
The strongest leaders treat budgeting like GPS: The destination stays the same, but the route adapts to traffic and road conditions. They don’t choose between discipline and flexibility. Instead, they look for governance mechanisms, review processes, and funding adjustments that help them revisit assumptions as circumstances change.
Temporary Funding Creates Long-Term Challenges
Federal grants, ARPA funding, and special appropriations enabled states to accelerate modernization efforts that otherwise would not have been possible. But nearly every CIO acknowledged the same reality: Temporary funding eventually disappears. Whether the investment involves infrastructure, applications, staffing, or new digital services, leaders must plan for the ongoing run costs of transformation investments from the beginning. Organizations that fail to do so often find themselves managing difficult transitions once funding expires.
This highlights an important principle for technology leaders everywhere: Funding an initiative is only the first step. Leaders need to also plan for the long-term cost impact that the new capability will have, as well as manage the technical debt of the legacy capability.
Statewide Priorities Must Be Balanced With Agency Priorities
One of the most consistent themes from the interviews involved tension between local agency needs and statewide goals. Consolidating platforms, standardizing services, or implementing shared cloud environments can create significant statewide value. Yet those same decisions may increase costs or reduce flexibility when they are divided across agencies.
Successful CIOs resist framing the conversation as a choice between statewide and agency interests. Instead, they focus stakeholders on mission outcomes and citizen value. When leaders connect technology investments to measurable outcomes, discussions become less about who wins or loses and more about how the state delivers better services.
Relationships Matter More Than Authority
Perhaps the most important lesson from the research is that modernization remains a people challenge as much as a technology challenge. The most effective CIOs know when to act as diplomats and when to act like sheriffs. They build consensus, create trust, and invest in relationships long before they need support for a major initiative. At the same time, they recognize that consensus alone is not always enough. There are moments when executive sponsorship, governance authority, or political backing becomes necessary to move critical projects forward.
The difference is that successful leaders earn the right to use authority because they have already established credibility and trust with stakeholders. They understand that modernization is as much about bringing people together through change as it is about implementing technology.
The Bigger Finding
The most encouraging insight from this research is that no single funding model, organizational structure, or governance approach guarantees success. A far better indicator of success is a CIO’s ability to balance competing priorities while maintaining alignment, adaptivity, and trust. These CIOs understand that modernization is a continuous process of making smart trade-offs and advancing incrementally rather than through a large transformation program.
I’ll be participating in a panel at NASCIO’s upcoming Annual Conference in San Diego on September 27–30. If you’re attending and would like to meet up, email me at gzorella@forrester.com. If you’d like to connect outside the conference, set up a guidance session with me.
