The digital transformation of the public sector constitutes a major challenge for public sector organizations and governments alike. At the core of this transformation lies the increased emphasis on utilizing digital solutions to develop and deliver services that assure the continued relevance of the public sector. This study aims to explore how municipalities are utilizing the investment instrument for digital transformation. The Precursory findings present the digital transformation of the public sector and the role of investments in the public sector digital transformation. The research is based on a qualitative case study with an inductive approach. Key was to discover the practitioners’ perspectives on how they perceive the investment instrument for digital transformation. The findings show that municipalities manage digital transformation in a short term perspective as an operating expenses (OPEX) rather than in a long-term capital expenditures (CAPEX) perspective to finance digital transformation.