Leaders plan to reinvest savings from cost optimization and productivity gains in transformation and customer experience enabled by AI
“This will impact how organizations manage their provider ecosystem and how they source the skills they need for these new investments.”
“Overall IT budgets are expected to rise 1.8 percent in 2025 – in line with inflation – but AI, security, applications and customer experience initiatives are seeing higher increases directed at strategic long-term investments,” said Alex Bakker, ISG distinguished analyst and co-author of the study. “Our study found the biggest spending increases will go to AI, where enterprises are looking to establish a foothold and drive growth.”
The newly released ISG Market Lens 2025 IT Budgets and Spending Study found global IT spending on AI will rise an average of 5.7 percent 2025, with nearly a quarter of respondents planning to increase spending on AI initiatives by 10 percent or more. With an overall average IT budget increase of approximately $11.5 million for 2025, AI is expected to account for an average spending increase of $3.4 million, or 30 percent of the overall budget increase.
Spending on IT security solutions and services, IT applications (including software-as-a service), platform-as-a-service, infrastructure-as-a-service and customer experience initiatives will also outpace the average budget increase.
“Enterprises are continuing to focus on cost optimization and efficiency programs to fund transformation and customer experience enabled by AI,” said Michael Dornan, principal analyst and co-author of the study. “This will impact how organizations manage their provider ecosystem and how they source the skills they need for these new investments.”
Almost half of IT spending goes to internal staff, external augmented staff or fully outsourced staffing, which drives the focus on productivity improvements. Overall spending on staff is expected to increase marginally by 1.1 percent for internal staff and less than 1 percent for outsourced or augmented staff in 2025.
The study indicates the overall number of providers engaged will stay the same for most enterprises, with more provider consolidation than expansion. More than one-third of organizations expect to expand engagement with their largest provider, and around half of respondents expect to engage with new providers for niche projects or related skills and capabilities.
“In 2025, service providers have a unique opportunity to act as strategic partners for transformation and as sources of innovation around critical niche capabilities such as AI,” Dornan said. “The number of providers in a typical enterprise ecosystem that are neither strategic nor niche will likely shrink next year, reinforcing the importance for providers to have a deep understanding of their clients’ business challenges and a capabilities roadmap that aligns with industry needs.”
