I had a conversation recently with an operations director at a large franchise network. We were talking about IT investment. Sharp person. Knew exactly what was going on.
“I agree we’re underinvested,” they said. “But you won’t get the exec team to spend any money on it.”
They had cut IT so hard, for so long, that they weren’t even spending what they should on cyber security. Not through negligence. Through a slow accumulation of decisions that each felt reasonable at the time.
That’s how far the trap can go.
And it is a trap. Because you can’t save yourself rich.
The Spiral
Every pound cut from IT feels like a win on a spreadsheet. The board gets a number that is lower than last year. Someone gets credit for fiscal discipline. And the business moves on.
But beneath the spreadsheet, something else is happening.
The team stops upgrading systems because there is no budget for it. They stop proposing improvements because they know the answer will be no. They stop attending industry events, stop building relationships with vendors, stop learning what is new — because all of that costs money, and the mandate is to spend less.
They become reactive. They exist to keep the lights on. And because keeping the lights on is invisible work — nobody notices when the email server stays up, they only notice when it goes down — the team becomes invisible too.
Invisible teams do not get investment. They get cut.
The cut justifies the next cut. Until the function exists only to absorb blame when something goes wrong, which — given the lack of investment — it inevitably will.
I have seen this pattern in franchise networks, in mid-market businesses, and in organisations that should know better. It is not unique to IT, but IT is where it does the most damage — because technology is now so deeply embedded in every part of the operation that underinvestment in IT is underinvestment in everything.
The Conversation You Already Have
Every franchisor knows this dynamic. They have seen it from the other side of the table.
A franchisee whose sales are down decides the solution is to cut their marketing budget. You sit across from them and say it plainly: the investment has to come before the return, not after it. You cannot build tomorrow’s business on yesterday’s budget.
It is one of the most common conversations in franchising. And it is one of the most frustrating, because the answer is so obvious to everyone except the person making the decision.
Stop marketing and sales will decline further. Cut the marketing budget again because sales are down. Repeat until the business is in genuine trouble and the franchisor is having a very different kind of conversation.
Most franchisors have had some version of this discussion dozens of times.
Then they walk back to the office and do exactly the same thing to their IT team.
The parallel is almost perfect. A franchise network that underinvests in technology will fall behind operationally. Its systems will age. Its data will degrade. Its ability to support franchisees will diminish. And because the decline is gradual — not a single catastrophic failure but a slow erosion of capability — it is easy to ignore until the gap between you and your competitors becomes impossible to close without a major, painful, expensive catch-up programme.
The irony is that the people making these cuts often understand the franchisee marketing trap perfectly. They just cannot see that they are standing in exactly the same one.
What Happens When You Measure
I saw the other side of this when I was at easyJet in the early days of their digital transformation.
The business was growing rapidly and the website was becoming the primary sales channel. There was a real question about how much to invest in the development team. The instinct from some quarters was the usual one: keep costs down, do more with less.
So we decided to actually measure what IT delivered. We calculated what each developer contributed in additional revenue per year, based on the features they built, the conversion improvements they delivered, and the operational efficiencies they created.
Based on our internal analysis, the answer was five times their salary.
That one number changed everything. The conversation shifted overnight — not how do we cut the development team, but how quickly can we scale it. Every developer was not a cost. They were a revenue generator with a five-to-one return.
The business went on to build one of the most effective digital operations in European aviation. Not by cutting technology costs, but by investing in them deliberately and measuring the return.
Most franchise networks have never had that conversation. Not because the numbers are not there. Because nobody has done the maths.
The Numbers Are There
The data on technology ROI is not ambiguous. It just gets ignored because it is easier to cut a budget line than to build a business case.
Start with the big picture. The Resolution Foundation’s “Ending Stagnation” report, published in 2023 with the LSE, found that UK companies have invested 20 percent less than those in the US, France and Germany since 2005 — placing Britain in the bottom 10 percent of OECD countries. The IPPR found that the UK has had the lowest total investment in the G7 for 24 of the last 30 years. This is not a technology statistic. It is an everything statistic. And it shows: ONS data puts UK productivity at roughly 20 percent below the United States.
The link between technology investment and business performance is well established. McKinsey’s research on B2B digital leaders found that companies in the top quartile of digital capability drive five times more revenue growth than their peers. Not because they spend more carelessly, but because they spend more intentionally — and they measure what that spending delivers.
MIT’s Centre for Information Systems Research found that companies with digitally savvy boards — defined as having three or more directors with meaningful technology experience — deliver 38 percent higher revenue growth, 17 percent higher profit margins, and 34 percent higher return on assets. The board that treats IT as a cost to be managed is not just making a budget decision. It is making a performance decision.
And the evidence on investing through downturns is unequivocal. Ranjay Gulati’s research, published in the Harvard Business Review in 2010, studied 4,700 public companies across three recessions. Only 9 percent flourished in the recovery — outperforming their competitors by at least 10 percent in both sales and profit growth. Every one of those companies had combined operational discipline with continued investment during the downturn. The businesses that cut hardest did not bounce back fastest. They fell further behind.
The Gartner 2025 CIO survey tells you where the rest of the market is heading: over 80 percent of CIOs plan to increase investment in cyber security, AI, data analytics, or integration technologies this year. If your business is cutting while your competitors are investing, the gap is not standing still. It is accelerating.
The Cyber Security Time Bomb
The conversation I opened with — the operations director who admitted they were underinvesting in cyber security — deserves special attention. Because this is where the cost-cutting trap becomes genuinely dangerous.
Cyber security is the ultimate invisible investment. When it works, nothing happens. When it fails, everything happens at once.
IBM’s Cost of a Data Breach Report puts the UK average cost of a breach at £3.6 million, once you include lost customers, operational downtime, reputational damage, and regulatory consequences. Even for a medium-sized business, the Hiscox Cyber Readiness Report found that one in eight companies that suffered an attack faced costs of £200,000 or more. For franchise networks, where a breach at one location can compromise data across the entire network, the exposure is greater still.
And yet cyber security is almost always the first budget to be trimmed when costs need to come down. It is the definition of a risk that feels theoretical until it is catastrophic.
I wrote about this in more detail in a previous post on cybersecurity questions for boards, but the short version is this: if your IT team tells you they are worried about your security posture and your response is to tell them to do more with less, you are not managing risk. You are accumulating it.
The Three Answers
So here is a question worth asking your IT lead this week:
“If I added 20 percent to your budget tomorrow — what would you deliver, and what would it add to the bottom line?”
The answer will tell you more about the state of your technology function than any audit or review.
If they answer in technology terms — “we would upgrade the servers” or “we would migrate to the cloud” — you have a communication problem. Your IT lead is thinking in inputs, not outcomes. That does not mean they are wrong about the investment. It means they have not been asked to connect technology decisions to business results. That is a fixable problem, and often it is not their fault — they have never been in a boardroom conversation where that connection was expected.
If they cannot answer at all — if they stare at you blankly or say something vague about “improving things” — you have probably been cutting too long. The team has been in survival mode for so long that they have lost the ability to think strategically. They do not know what good looks like because they have been too busy firefighting to look up. This is the most dangerous answer, because it creates a self-reinforcing cycle: the team cannot articulate value, so the board does not invest, so the team falls further behind, so they can articulate even less value.
If they answer in bottom line terms — “we would automate the franchisee onboarding process, which currently takes three weeks and costs us an estimated amount per new location, and reduce it to five days” — protect that person. They are rare. They understand that technology is not an end in itself but a means to business outcomes. And they are almost certainly frustrated, because they can see the opportunities but have not been given the resources to pursue them.
Breaking the Cycle
If you recognise your business in any of this, the good news is that the cycle can be broken. But it requires a deliberate shift in how the board thinks about technology.
Start with visibility. Use the Run, Grow, Innovate framework I have written about before. Categorise your IT spend so the board can see where the money goes. Most boards are surprised to discover that nearly all of their technology budget is in the “Run” category — keeping things going — with almost nothing in “Grow” or “Innovate.” That is not a technology problem. It is a strategy problem.
Measure outcomes, not costs. Stop asking “how much does IT cost?” and start asking “what does IT deliver?” The easyJet example was not complicated. We took the output of the development team, attributed revenue to the features they built, and divided by headcount. Most businesses could do something similar with the data they already have. They just have never tried.
Invest counter-cyclically. The instinct when times are tough is to cut technology spending. The evidence says the opposite: Gulati’s study of 4,700 companies across three recessions found that the 9 percent who flourished afterwards had all invested during the downturn. It takes nerve. But so does telling a franchisee to keep spending on marketing when sales are down — and you know that is the right advice.
Give your IT lead a seat at the table. If your technology leader is not in the room when strategic decisions are being made, they cannot connect technology investment to business outcomes. MIT’s research found that it takes a minimum of three digitally savvy directors to produce a statistically significant impact on business performance. If your board has none, you are not just missing a perspective. You are leaving 38 percent revenue growth on the table.
The Real Cost of Saving
The operations director I spoke to knew all of this. They could see the underinvestment. They could see the risk. They knew that the business was falling behind its competitors and that the gap was widening.
But they also knew the culture of their board. And that culture — the culture of treating every technology pound as a cost rather than an investment — had become so entrenched that changing it felt impossible.
It is not impossible. But it does require someone to make the case. With numbers, with evidence, with a clear connection between investment and return.
Because the alternative — continuing to cut, continuing to fall behind, continuing to accumulate risk — is not fiscal discipline. It is a slow-motion decision to become irrelevant.
You cannot save yourself rich. At some point, you have to invest in the business you want to become.
Colin Rees is the founder of Xpera, where we help franchise networks and multi-site businesses make smarter technology decisions. If this conversation resonates — or if you would like help building the business case for technology investment in your network — get in touch.