Forrester CIO Budgets: Balancing Innovation and Efficiency

Today’s Chief Information Officers (CIOs) must navigate a complex landscape of technological advancements, economic pressures and evolving business needs. Despite ongoing challenges such as high interest rates and challenges in global labour markets, technology leaders are overwhelmingly optimistic about their budget prospects for the coming year.

According to Forrester’s 2025 Budget Planning Guides, a staggering 91% of global tech decision-makers are planning for budget increases in the year ahead – marking a significant shift from the cautious approach many organisations adopted in recent years due to economic volatility and geopolitical tensions.

“Optimistic budget expectations will serve leaders well as they enter 2025,” comments Sharyn Leaver, Chief Research Officer at Forrester, “but they need to be super thoughtful about investing in areas that support their firms' overall growth.”

However, this optimism is tempered by the ongoing need for fiscal responsibility. CIOs are under pressure to optimise spending and drive efficiencies across their organisations. The challenge lies in balancing increased budgets with the imperative to deliver value and support overall business growth.

Forrester: CIOs’ investment priorities for 2025

As CIOs plan their budgets for 2025, several key areas are emerging as top investment priorities. One of the most significant trends is the focus on breaking down silos within organisations. Forrester’s research indicates that companies with strong alignment among their marketing, digital and customer experience (CX) teams report 1.6 times faster revenue growth than their peers and 1.4 times better customer retention. 

CIOs are expected to play a crucial role in facilitating this alignment by investing in technologies and platforms that enable seamless collaboration and data sharing across departments. This may include enterprise-wide customer data platforms, integrated workflow management systems, and advanced analytics tools that provide a holistic view of customer interactions.

As artificial intelligence becomes increasingly integrated into business operations, Forrester also finds that CIOs are prioritising investments in frameworks and capabilities for AI governance and trust. This includes developing robust policies around data access, usage, sharing, storage and retention. 

Paul McKay, Vice President and Research Director at Forrester, emphasises the importance of this focus: “Organisations are investing even more heavily in cloud, both for AI infrastructure and services support, along with the migration of more of their workloads to the cloud.”

While cloud adoption continues to accelerate, CIOs are shifting their focus from mere adoption to optimisation. This involves developing practices to deploy workloads in the most efficient and cost-effective manner across various cloud environments. Additionally, with the increasing sophistication of cyber threats and growing concerns about data privacy, CIOs are allocating significant portions of their budgets to advanced security measures, with investments focused on advanced encryption, data masking, differential privacy and data clean rooms.

Areas of decreased Investment

While overall budgets are increasing, CIOs are also identifying areas where spending can be reduced to free up resources for more strategic initiatives. Many organisations are moving away from custom-built applications and isolated infrastructure that serve only a limited number of functions. CIOs are looking to consolidate and standardise their technology stacks to reduce technical debt and improve overall IT performance.

Forrester also identifies a growing trend to phase out standalone applications or ‘zombie products’ that result from acquisitions or legacy systems. CIOs are favouring integrated, multi-function platforms that offer greater flexibility and cost-efficiency. As AI and automation technologies mature, many organisations are reducing investments in traditional, human-operated IT service desks in favour of AI-powered solutions that can handle a wider range of support tasks more efficiently.

Emerging technologies and experimentation

While focusing on core investments, CIOs are also setting aside a budget for experimentation with emerging technologies that show promise for future business impact. Cross-functional, product-centric platform teams are gaining traction as a way to build and maintain tooling, infrastructure, and services that enable other IT and business teams to work more efficiently. Paul notes: “Platform teams deliver value to stakeholders by improving alignment and eliminating bottlenecks.”

As the threat of quantum computing to current encryption methods looms, forward-thinking CIOs are beginning to explore post-quantum (PQ) cryptographic solutions to protect their organisations' most sensitive data. The concept of personal computers capable of running large language models locally is gaining interest, potentially offering new ways to leverage AI capabilities while addressing data privacy concerns.

CIOs are also exploring technologies that can capture and process data from mobile and IoT devices at the edge, enabling faster decision-making and reducing the need for constant cloud connectivity. These edge intelligence solutions are becoming increasingly important as organisations seek to leverage real-time data from a growing number of connected devices.

Navigating economic uncertainties

Despite the overall optimistic outlook, CIOs must remain vigilant about economic factors that could impact their budgets. High interest rates continue to affect the cost of capital for technology investments, while tight labour markets are driving up the cost of skilled tech talent.

Additionally, the upcoming US election adds an element of uncertainty to the economic landscape, potentially influencing regulatory environments and business confidence. CIOs will need to build flexibility into their budget plans to account for these variables.

As CIOs finalise their budget plans for 2025, the focus is clearly on strategic investments that can drive business growth while optimising existing resources. The ability to balance innovation with efficiency will be crucial in maximising the value of increased technology budgets.

Sharyn Leaver concludes with a word of caution: “While leaders should continue to experiment with more advanced AI capabilities in 2025, those shouldn't be the only experiments they pursue. They should prioritise investments that benefit their entire firm and help establish long-term trust with customers and partners.”

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