Key Factors Driving IT Spending Growth

AI and Cloud investments are surging in lockstep 📊 as companies ruthlessly reallocate IT budgets for 2025. BCG's latest data shows tech leaders are aggressively funding AI (48% increasing spend) and cloud services (36% growing) while simultaneously slashing legacy infrastructure budgets. This insight comes from Boston Consulting Group (BCG)'s just-released IT Spending Pulse—a major survey of 602 tech leaders conducted in December. The elephant in the room: this predated US tariffs, but the fundamental direction of travel remains clear and compelling. ⚡ What's fascinating is how #AI, #cloud, and security are growing hand-in-hand, creating a powerful flywheel effect. To fully leverage AI capabilities, companies must consolidate their data and modernize infrastructure—driving cloud migration and creating demand for enhanced security. This virtuous cycle explains why these three categories dominate spending increases while traditional categories face deep cuts. “Cloud services and security infrastructure are indispensable for scaling, resilience, and safe and reliable operations. They’re prerequisites for unleashing transformative technologies like AI.” - BCG 🔄 Perhaps most interesting is the ongoing vendor consolidation trend Organizations are actively reducing vendor counts in nearly every area EXCEPT AI—where 50% are expanding their roster while just 20% are consolidating. For established technologies, companies are moving toward integrated solutions over patchworks of standalone tools. 🛒 Here's why cloud marketplaces are becoming mission-critical for software sellers: They perfectly align with this dual strategy. As buyers consolidate vendors and optimize spend, marketplaces offer a streamlined procurement channel where they can leverage existing cloud commitments for third-party purchases—creating a win-win for both buyers and sellers in this new landscape. 💲 For those questioning the AI investment surge, the ROI data is staring to look appealing: High-maturity AI companies are seeing 15% returns—nearly 70% higher than limited adopters. Even more telling, AI agents are delivering 13.7% ROI, outperforming traditional GenAI applications. With AI adoption reaching 80% of surveyed companies and 58% already implementing AI agents, the message is clear: companies not prioritizing AI-cloud integration risk falling behind competitors who are reaping measurable rewards from their investments. 📈 This is precisely why we're launching our "2025 State of Cloud Marketplace & Co-Sell" research with Clazar As software sellers scramble to align with these new buyer priorities, data on what's working in cloud GTM has never been more valuable. Our comprehensive study dive into tactics that correlate most with marketplace success and why some teams drive >20% of revenue via marketplaces while others stall. Live launch on April 24: https://hubs.ly/Q03fKS200 Join our webinar on what's actually working for top-performing Cloud GTM teams

As we step into 2024, the landscape of IT spending is evolving rapidly, influenced by a range of factors from global economic conditions and political instability to technological advancements. This article by Splunk consolidates insights from a wide range of sources, including Gartner, IDC and others, to provide a comprehensive overview of the IT spending trends expected in 2024 Gartner’s forecast for worldwide IT spending in 2024 projects a substantial growth of 8%, reaching a total of $5.1 trillion. This increase is driven by investments in #cloud, #cybersecurity, #AI and #automation, which are seen as critical for enhancing operational efficiency and bridging IT talent gaps. Although generative AI (GenAI) hasn't significantly impacted IT spending yet, it's expected to become a part of IT budgets starting from 2025 CIO Priorities Driving Spending Changes: 💲Increasing operational efficiency (45%) 💲Increasing cybersecurity protections (44%) 💲Transforming business processes (38%) 💲Improving customer experience (36%) 💲Improving profitability (27%) 💲Increasing employee productivity (25%) 💲New product development (22%) 💲Increasing topline revenue (20%) 💲Developing new digital revenue streams (19%) 💲Improving employee experience (19%) 💲Enhancing hybrid work technologies (18%) 💲Improving talent acquisition/retention (17%) 💲Meeting compliance requirements (16%) 💲Monetizing company data (14%) 💲Adhering to environmental, social, and governance (ESG) standards (11%) What other areas are you prioritizing? Any of this more relevant than others in your industry? We have plenty of challenges (including unexpected shakeups at the companies leading the next frontier of tech), but we are also seeing signs of resiliency, so I remain optimistic about the future, and believe Technology's role extends beyond innovation; it carries the responsibility to ensure inclusive representation from all to reduce inequalities and leverage diverse perspectives #2024outlook #techspend #CIOpriorities #latinosintech #responsibletech

McKinsey & Company report examines the evolving landscape of #enterprise #technology #spending and its relationship to productivity in an AI-driven world. ➡️ Current State of Enterprise Technology Spending - Enterprise technology spending in the United States has been growing by 8 percent per year on average since 2022. - Labor productivity has grown by only close to 2 percent over the same period, creating a significant gap between investment and returns. - These disparities help explain why executives are often skeptical about requests for additional IT investments. ➡️ Key Forces Driving Change Several fundamental shifts are reshaping technology economics: - Cloud adoption and as-a-service models are shifting large costs from capital expenditures to operating expenditures, with some 79 percent of IT spend now going to operating expenditures. - This shift, combined with token-based pricing through large language model services, is providing businesses with clearer understanding of unit-level costs and spurring the growth of financial operations (FinOps). - Generative AI integration is pushing up usage costs while simultaneously causing CIOs and CHROs to rethink talent strategies and spend models. Promise of AI agents is already influencing training and career pathing decisions. ➡️ Strategic Recommendations for Improvement 💰 Move to Consumption Metering - Organizations should transition their technology estate to a metered consumption model that tracks and attributes tech usage at a unit cost level. - This requires building all technology services as consumable products with standardized APIs, metering capabilities, ID and authentication systems, and algorithms for calculating unit costs. - Every technology product should have a balance sheet providing true measurement of tech debt and indirect costs. AI and generative AI are already enabling greater transparency and faster decision-making in FinOps, with capabilities for tagging, data cleanup, attribution, and rule development. 📈 Implement Business-Wide Product Operating Models - Organizations need to manage all technology initiatives as products run by cross-functional teams with autonomy, accountability, and incentives to deliver. - Top companies in product operating model maturity have 60 percent greater total shareholder returns than companies in the bottom half and a 16 percent higher operating margin. 🚀 Focus on High-Impact Domains - Technology leaders should concentrate resources where they can have the greatest impact by focusing on domains (end-to-end processes) rather than individual use cases. 🤖 Transform Talent Models for AI - Increasing adoption of agentic AI is opening doors to revolutionary changes in technology operations. - Traditional talent strategies and team configurations will fundamentally change, with some roles absorbing new responsibilities. Aamer Baig | James Kaplan | Jeffrey Lewis | Pablo Prieto, Ph.D.

In the US, enterprise tech spending has grown 8% annually while labor productivity has grown less than 2%. The tech spend to productivity relationship is showing up in mid-year budget discussions currently underway at most companies. The economics of IT/tech/digital/AI are (again) under a microscope. It was the same last year, and the year before that and every year prior for as long as I have been a professional adviser to CEOs, CFOs, and CIOs.  Tired of this Groundhog Day moment every year, we decided to dig into the economics of enterprise tech. There is some “new news” and some new insights on “old news”. The “new news” – what’s driving up costs: 1. Cyberattacks increased over 25% last year, resulting in a 15% increase in cybersecurity spend this year. While much of this is necessary, it doesn't correlate with an ROI a company can point to. 2. Increase in AI and geopolitical-related spending. On AI, most companies haven't seen value from their investments (only 1% describe themselves as “mature” in their AI deployments).     The new insights on “old news” are: 1. Indirect costs of product development (cloud/security services/tool licenses) can account for 80% of a product’s lifetime costs.   2. Incentive misalignment leads to poor decisions on enterprise tech spend and results in a 20-30% loss of value.  3. Companies pay an additional 10-20% to address tech debt on top of the costs of any project, creating a significant drag on productivity.  4. 5-10% of IT productivity improvements can be lost to vendors (for example, when providers don't pass along reduction in hardware costs).     Clearly, there's a need for deeper understanding and transparency into the economics of enterprise tech. In this new analysis with my colleagues Pablo Prieto, Ph.D., Jeffrey Lewis, James Kaplan, we lay out 4 ways to optimize these investments.  1️⃣Meter and measure: Track tech usage cost at a granular level to foster accountability and minimize tech debt, use models like FinOps. 2️⃣Treat everything as a product: Manage all technology initiatives as products with autonomous, accountable, and incentivized cross-functional teams (led by product managers) to ensure cost responsibility and value capture. 3️⃣Go big: Prioritize domains (end-to-end processes) over single use cases, leverage analytics to pinpoint and amplify initiatives with the most impact. 4️⃣Embrace and accelerate: Optimize agentic AI to modernize and rethink talent models with more flexible systems. In this season and beyond, the choices CEOs, CFOs and CIOs make now will be the cornerstone of success in an AI-driven future.  Looking forward to discussing this more with clients over the rest of the year to ensure 2026 decisions and priorities are better planned, executed, and value is fully realized. #NeverJustTech #McKinseyTechnology #TechEconomics #CIO #CFO https://lnkd.in/grFUuQks