As we approach 2025, Chief Information Officers (CIOs) and technology leaders face the significant challenge of crafting IT budgets that not only meet operational needs but also drive strategic business goals. Economic uncertainty, driven by factors like inflation and geopolitical changes, adds complexity to the budget planning process.
To succeed, CIOs need a balanced approach—one that prioritizes critical investments, identifies areas for cost reduction, and encourages innovation through strategic experiments.
Forrester’s Budget Planning Guide for 2025 offers crucial insights, providing technology leaders with a strategic framework to navigate these challenges and optimize IT investments.
High-Performance IT: A Strategic Imperative for CIOs
In an era where digital transformation is essential for business success, CIOs must lead the charge in adopting high-performance IT strategies. This outcome-focused model emphasizes aligning technology investments with specific business objectives, ensuring that every dollar spent contributes to measurable results. Given the possibility that budget increases may not keep pace with inflation, CIOs need to carefully curate a mix of investments, divestments, and experimental initiatives.
This approach is crucial for maintaining agility and resilience in a volatile economic environment.
Key Investment Areas for CIOs in 2025
1. Empowering and Retaining Talent
As technology evolves, so too must the workforce. CIOs will need to allocate significant portions of their IT budgets—projected at 34.6%—toward personnel costs, particularly in upskilling and reskilling initiatives. With the increasing importance of AI and other emerging technologies, the skills required within IT teams are shifting. For CIOs, the challenge lies in developing a workforce that is not only technically proficient but also agile enough to adapt to new tools and processes. This investment in human capital is critical for sustaining innovation and ensuring the effective deployment of new technologies.
2. Expanding Software Capabilities
Software continues to be a major focus for IT spending, with CIOs expected to direct a growing portion of their budgets to this area. Reports indicate that 73% of technology decision-makers plan to increase their software budgets in 2025. As software increasingly underpins digital transformation efforts, CIOs must carefully manage these investments to avoid redundancy and mitigate tech debt. Strategic software investments will be crucial for enhancing operational efficiency and delivering new customer experiences.
3. Strengthening Infrastructure
Infrastructure remains the backbone of any successful IT strategy. For 2025, CIOs must prioritize investments in compute and network hardware, which will account for 13.3% of IT spending. A strong, scalable infrastructure is essential not only for maintaining business continuity but also for enabling rapid innovation. CIOs should focus on modernizing their IT environments to support emerging technologies and ensure that their organizations can respond swiftly to market changes.
Strategic Budget Reductions for CIOs
Despite overall budget increases, CIOs must exercise fiscal discipline by identifying areas where cuts can be made without compromising strategic goals. For example, ungoverned cloud resources pose a significant risk of cost overruns and security breaches. By implementing a robust FinOps practice, CIOs can regain control over cloud expenditures. Additionally, the rising costs of VMware licenses following Broadcom’s acquisition necessitate a re-evaluation of these contracts, with many CIOs choosing to optimize or reduce their reliance on VMware products. Finally, automation presents a significant opportunity to reduce manual IT operations, allowing CIOs to reallocate resources to more impactful initiatives.
The Role of AI and Emerging Technologies for CIOs
1. Strategic AI Investments
AI offers tremendous potential, but Forrester advises CIOs to approach AI investments with caution and strategic intent. CIOs should focus on establishing a solid data foundation and governance framework to ensure that AI initiatives deliver real business value. Investments in data quality, AI governance, and scalable architectures are essential for harnessing the power of AI while mitigating risks. By taking a pragmatic approach, CIOs can avoid the pitfalls of over-investment in AI hype and ensure a sustainable return on investment.
2. Fostering Innovation Through Experimentation
For CIOs, fostering a culture of experimentation is critical for driving innovation and staying competitive. In 2025, this will involve investing in platform teams, which break down silos and streamline IT operations. Multimodal generative AI and synthetic data are also highlighted as key areas for innovation, offering new ways to enhance customer experiences and improve operational efficiency. Additionally, as quantum computing advances, CIOs must begin experimenting with postquantum security solutions to future-proof their organizations against emerging cyber threats.
“Planning for 2025 is even more difficult than usual — while inflation has declined, interest rates remain elevated, and it’s uncertain when and how much central banks will cut rates.”
Christopher Gilchrist, Senior Analyst at Forrester
The Wrap
For CIOs and technology leaders, the road to 2025 is paved with both challenges and opportunities. Forrester’s Budget Planning Guide offers a roadmap for navigating this complex landscape, emphasizing the importance of high-performance IT and strategic budgeting. By focusing on key investment areas—such as talent development, software expansion, and infrastructure modernization—while strategically cutting costs and fostering innovation, CIOs can position their organizations for success in an uncertain future.
The key takeaway for CIOs is clear: strategic planning, combined with a focus on business outcomes, will be essential for driving long-term growth and resilience in 2025.
