How To Optimize IT Spend Amid Escalating Costs

Forbes

18-07-2025

Mota El Bawab is the CIO of N3XT Sports and Cofounder of Friday365 and N3XTAI. He writes about the intersection of tech and business.
The pace of digital transformation is accelerating, but so are the costs associated with maintaining and upgrading IT infrastructure. CIOs, CTOs, digital managers and IT directors are facing an increasingly difficult challenge: how to sustain innovation while managing rising IT expenditures.
Global IT spending is expected to increase by nearly 10% in 2025, with cloud and SaaS expenses rising by nearly 9%. These figures reflect not just the cost of adopting new technologies but also the premium being placed on maintaining existing systems, securing data and ensuring compliance with ever-evolving regulations.
Understanding The Cost Surge
According to Gartner, IT leaders anticipate an 8.9% rise in IT product and service costs due to inflationary pressures, increased cloud computing expenses and higher operational costs for managed services and SaaS applications. The global IT expenditure is projected to reach $5.62 trillion in 2025, up from $5.11 trillion in 2024.
While this increase may suggest greater investment in innovation, the reality is that much of the additional spending is allocated toward sustaining current IT operations rather than introducing transformative new capabilities. Vendors are raising prices across cloud, software and infrastructure services, often bundling AI-driven enhancements that may not directly benefit businesses' immediate needs. This leaves digital leaders with the challenge of discerning necessary expenses from nonessential upgrades.
Strategic Investment Prioritization
CTOs must adopt a more disciplined approach to IT spending. Here are five key steps to ensure that investments yield maximum impact.
IT investments must be evaluated based on their ability to drive business outcomes, aligning investments to a cohesive business strategy, rather than tailoring a strategy to incoming technologies or the latest IT trends. Decision makers should ensure that every IT dollar contributes to operational efficiency, customer satisfaction, revenue growth or risk mitigation. Projects that do not align with broader strategic goals should be deprioritized.
Traditional cost-based budgeting models no longer suffice. Organizations should move toward value-based budgeting, where IT expenditures are measured in terms of business impact. This requires establishing clear key performance indicators (KPIs) and conducting continuous cost-benefit analyses. Business data analytics is a key component for doing this.
Whereas analytics have been embedded in athlete performance in sports, our research at N3XT Sports shows that sports clubs and organizations are now investing in business-data specialists, as well as their tech leaders. That said, disparities still exist between the leading franchises in the NBA (100%) and the NFL (96.8%), for example, compared to International Federations in the Olympic Movement (31.4%).
Example Of A Value-Driven Approach: A retail company seeking to optimize its e-commerce operations faces a choice between investing in a new AI-powered recommendation engine or upgrading its existing cloud storage infrastructure.
By conducting an ROI analysis, the leadership determines that the AI-powered recommendation engine has the potential to increase online sales by 15% through improved customer engagement, while the cloud upgrade primarily enhances backend efficiency. Since the AI initiative aligns directly with revenue growth, it is prioritized, while the cloud upgrade is phased in gradually.
The rapid increase in cloud costs demands greater financial oversight. Businesses should conduct periodic audits of cloud consumption, eliminate redundant services and negotiate better contracts with cloud vendors.
Automation can significantly reduce labor costs and improve efficiency, but only when applied strategically. IT leaders should assess automation opportunities based on their ability to eliminate repetitive tasks, improve service delivery and enhance decision making processes.
While AI presents enormous potential, not every AI-driven solution delivers measurable business value. IT leaders should prioritize AI initiatives that enhance productivity, reduce operational costs or unlock new revenue streams. Experimental AI projects with unclear ROI should be approached with caution.
How To Prioritize AI Initiatives: A Strategic Framework For Maximizing ROI
American businessman and Dallas Mavericks owner Mark Cuban famously stated, "There [are] two types of companies in the world: Those who are great at A.I. and everybody else."
Despite the enthusiasm around AI, research from Boston Consulting Group highlights the reality:
• Only 4% of companies adopting AI have realized significant value.
• Twenty-two percent have developed AI strategies and are beginning to see returns.
• Seventy-four percent struggle to scale and derive meaningful outcomes.
AI investments must be carefully selected and strategically executed.
Key Steps To Maximize AI ROI
1. Clearly define business objectives. Without a clear objective, AI projects risk becoming expensive experiments with little impact.
2. Integrate AI into existing workflows. AI solutions should seamlessly integrate into existing IT infrastructure and business processes. Standalone AI applications that do not connect with core business systems often fail to scale effectively. (P.S.: Read about RAGs.)
3. Build an AI-ready workforce. AI implementation is not just about technology—it's also about people. Organizations should invest in AI training programs to upskill employees and ensure that teams have the necessary expertise to leverage AI effectively.
4. Establish clear success metrics. AI projects should be evaluated using business-centric KPIs, such as revenue impact (increase in sales or efficiency gains), operational efficiency (reduction in time spent on manual tasks) and customer experience (improved satisfaction scores and retention rates).
5. Iterate and continuously improve. AI adoption is not a one-time initiative. Businesses must regularly assess AI performance, refine models and adjust strategies based on new insights and evolving market conditions.
Final Thoughts: The AI Playbook For 2025
A company's approach should reflect a clear understanding of the market and an ability to adapt to rapid technological changes while staying focused on creating impactful applications.
As IT costs continue to rise, digital leaders must take a strategic, value-driven approach to technology investments. The focus should be on optimizing cloud expenditures, embracing automation selectively, prioritizing high-impact AI projects and embedding governance into AI initiatives from the outset.
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