As we near 2025, economic challenges such as persistent inflation, high interest rates and volatile stock markets create a complex environment for IT Spending leaders. Despite these uncertainties, a substantial number of CIOs anticipate a moderate increase in IT budgets in the coming year.

According to Forrester’s 2025 Budget Planning Guide for Technology Executives, more than nine out of ten IT decision-makers expect budget growth but with varied expectations on the extent of this increase. In this article, you will learn how IT leaders are planning their IT spending for 2025.

How CIOs Are Planning IT Spending For 2025?

Here is how IT leaders are planning for their IT spending for 2025.

1. A Closer Look at IT Budget Growth Projections

Most IT leaders predict an increase in their budgets for 2025. The expected growth rates are modest. Forrester's survey reveals that about 40% of IT leaders foresee a budget increase of less than 5%, while a similar percentage expects growth between 5% and 10%.

Only a small fraction (8%) anticipates an increase of more than 10%, and 9% expect their budgets to either remain flat or decrease slightly. These projections indicate a cautious approach to budget planning, with CIOs strategically navigating through economic uncertainties and prioritizing spending in essential areas.

2. Talent and Software Investments Take Priority

Personnel and software continue to dominate IT budgets, with a significant portion allocated towards these areas. According to Forrester, personnel costs account for nearly 35% of IT budgets, reflecting a strong emphasis on human capital.  CIOs are channeling additional funds into employee training, particularly in emerging technologies like artificial intelligence, which are critical for future business growth.

Software spending, which currently constitutes about 21% of IT budgets, is projected to grow at a compound annual growth rate of 10.5% through 2027. This growth signals an increasing need for CIOs to reassess their budgets and possibly reduce expenditures in other areas to accommodate this rise.

3. Strategic Spending Amidst Economic Pressures

Given the economic outlook, with inflation projected at 3.3% for 2025 by the World Economic Outlook, IT budget increases may not suffice to cover all desired expenditures. Forrester advises CIOs to strategically plan their investments, focusing on areas that yield the highest return on investment (ROI).

This includes cleaning up data, establishing robust governance frameworks and selectively investing in technologies like artificial intelligence. Furthermore, IT leaders are encouraged to identify and eliminate inefficiencies such as cloud sprawl and redundant services to optimize their spending.

4. Incremental Progress Over Grand Transformations

In response to budget constraints, many organizations are shifting from large-scale IT transformation projects to more incremental approaches. Forrester’s principal analyst, Christopher Gilchrist, suggests that companies will increasingly compartmentalize their long-term projects into smaller, manageable segments.

This shift allows organizations to make steady progress without overextending their resources, enabling them to adapt to changing economic conditions while still advancing their technological capabilities.

5. Investing in AI Despite Economic Uncertainty

Despite the cautious spending environment, some organizations view the current economic conditions as the best time to invest in artificial intelligence. Companies like SnapLogic are actively increasing their IT budgets to capitalize on artificial intelligence’s potential to drive efficiencies and innovation. Jeremiah Stone, Chief Technology Officer of SnapLogic, emphasizes that even with budgetary pressures, investing in artificial intelligence is crucial to staying competitive.

He notes that organizations are beginning to see tangible results from early artificial intelligence implementations, which bolsters confidence in further investments. This trend underscores the importance of adopting cutting-edge technologies to enhance business operations and maintain a competitive edge.

6. Prioritizing Cloud Investments

Many IT leaders are continuing to shift toward cloud-based infrastructure. Cloud investments offer scalability and cost-efficiency, allowing businesses to reduce capital expenditures on hardware while enhancing flexibility just like you do when you gaming server. Leaders will likely focus on hybrid and multi-cloud solutions to manage costs and mitigate vendor lock-in.

7. Edge Computing and Internet of Things

The growth of edge computing and internet of things solutions is leading IT leaders to allocate resources for decentralized infrastructure. This allows for faster data processing at the edge of the network, which can improve operational efficiency and support the expansion of smart devices.

8. IT Infrastructure Modernization:

Upgrading aging infrastructure such as dedicated server hosting,, especially in industries reliant on legacy systems, will be a critical focus. IT leaders will need to allocate budget for modern hardware, software and network upgrades, including adopting technologies like 5G.

Diverse Approaches to IT Budget Planning

The strategies employed by CIOs in response to budgetary pressures vary significantly across organizations. While some, like Freshworks, are focusing on automation and artificial intelligence to streamline operations and reduce workload, others are taking a more conservative approach.

For instance, Barco ClickShare is opting for incremental improvements rather than large-scale investments. This reflects their strategy of cautious spending amid economic uncertainties. This diversity in approaches highlights the importance of aligning IT spending strategies with broader organizational goals and the specific economic realities faced by each company.

Conclusion

As CIOs prepare for 2025, the dual challenge of managing budget growth while navigating economic uncertainties requires careful planning and strategic decision-making. By prioritizing investments in talent and software, adopting incremental approaches to transformation and selectively investing in high return on investment technologies like artificial intelligence.

IT leaders can effectively manage their budgets and drive their organizations forward. In this dynamic environment, the ability to adapt and make informed, strategic investments will be key to thriving in the years ahead. Did this article help you in planning for IT spending in 2025? Share it with us in the comments section below.