As we approach 2025, the technology landscape continues to evolve, and Chief Information Officers (CIOs) remain at the forefront of driving organizational growth and resilience through strategic IT investments. Insights from the Morgan Stanley 3Q24 CIO Survey and other sources provide a nuanced view of spending priorities, projected growth rates, and emerging trends for enterprise IT budgets in the coming year.
IT Budget Growth Expectations
According to Morgan Stanley’s latest survey of CIOs, IT budget growth is projected to moderately accelerate in 2025. CIOs expect a +3.6% year-over-year (YoY) increase in IT budgets, up from the +3.4% growth expected in 2024, despite remaining below the long-term 10-year average of +4.1%.
Regional Growth Highlights
- US Enterprise IT Spending: Expected to grow at +3.8% in 2025, compared to +3.6% in 2024, outpacing European growth rates.
- EU Enterprise IT Spending: Projected to grow at +3.2%, marking an +18 bps YoY increase.
- US growth continues to outpace the EU, with +27 bps YoY acceleration versus Europe’s more modest improvement.
Sector-Specific Growth
The survey revealed varying levels of growth across IT sectors:
- Software: Continues to lead with a +3.7% growth rate, up +17 bps YoY.
- Communications: Anticipated to grow by +2.9%, an +11 bps YoY improvement.
- IT Services: Expected to increase by +2.7%, also marking an +11 bps YoY rise.
- Hardware: The only area of deceleration, with growth expected to slow to +1.6%, a -10 bps YoY decline.
Strategic Priorities for CIOs in 2025
CIOs’ spending priorities reflect a commitment to innovation, resilience, and enabling digital transformation.
Key Investment Areas
- Software and AI Technologies: Software remains the fastest-growing IT industry, with spending dominated by Artificial Intelligence (AI) and Machine Learning (ML) initiatives.
- Cybersecurity: Consistently cited as the top priority, with 88% of CIOs in regions like Australia and New Zealand prioritizing it.
- Data Analytics: A core area for 84% of ANZ CIOs, reflecting the increasing importance of data-driven decision-making.
- Cloud Platforms: Emphasized by 83% of ANZ CIOs, as organizations continue their transition to scalable, flexible cloud solutions.
- Generative AI (GenAI): A key focus for 81% of ANZ CIOs, highlighting the growing interest in advanced AI applications for creativity and efficiency.
Emerging Technologies Driving Strategy
- Digital Transformation: A crucial area for modernization and competitive advantage.
- DW/BI/Analytics: Advanced data warehousing and business intelligence tools remain critical for operational efficiency.
- Cloud Computing: Essential for scalability and cost efficiency.
Regional Differences in IT Spending
The priorities and growth expectations vary by region:
- US CIOs emphasize innovation and digital transformation, with spending growth projected at a higher rate compared to Europe.
- European CIOs are focusing on cost containment while still investing in critical technologies like cloud computing and cybersecurity.
Challenges and Considerations
CIOs face the challenge of balancing budgetary constraints with the need for innovation. In regions like ANZ, managing cybersecurity risks (82%) and IT financials (59%) are leading priorities, alongside demonstrating the value of IT investments to business stakeholders (52%).
Looking Ahead
The modest acceleration in IT budget growth for 2025 reflects optimism tempered by fiscal prudence. CIOs continue to focus on transformative technologies such as AI, cloud platforms, and cybersecurity while navigating the complexities of global and regional economic conditions.
As enterprises prepare for 2025, the key to success will be aligning IT spending with strategic business goals, ensuring resilience, and embracing innovation to stay ahead in an increasingly digital world.