Strategic Approaches for CIOs to Shape Their 2025 Transformation Investment Plans

5 Strategic Ways CIOs Can Prepare Their 2025 Transformation Investment Plans

As CIOs and IT leaders gear up to plan their digital transformation budgets, it's crucial to consider both internal company indicators and global economic factors to decide whether to take an aggressive or conservative approach.

Early Signs Suggest a Balanced Approach

Recent data shows that U.S. inflation in August dipped to 2.5%, the lowest since February 2021, leading analysts to anticipate potential interest rate cuts by the Federal Reserve. However, lingering risks like persistent inflation in Europe, political transitions in the U.S., and protectionist trade policies could impact the global economy.

In the IT sector, The Wall Street Journal reported a 6% unemployment rate in IT amid overall U.S. job growth. This suggests that many organizations are not refilling positions or are implementing hiring freezes. Companies like PwC have laid off 1,800 employees and are restructuring to focus on client services and generative AI. Tech giants such as Intel, IBM, Apple, and Cisco collectively cut 27,000 tech jobs in August, and over 136,000 tech positions were eliminated across more than 420 companies in 2024. On a brighter note, Gartner predicts a 15% growth in global information security spending in 2025.

The Impact of AI in 2024

Artificial intelligence was a significant IT priority in 2024, influencing talent strategies, operations, and overall IT priorities.

• An EY study revealed that 82% of tech business leaders plan to increase their AI investments, with 50% expecting both layoffs and new hires due to AI adoption.
• Research by Augury and IndustryWeek indicated that 90% of manufacturers have 11% to 50% of AI pilot projects scaling at their sites, and 83% are investing more in AI compared to 2023.
• A Rafay survey found that 96% of enterprise platform teams emphasize the importance of efficient methods for developing and deploying AI applications, with 83% believing that pre-configured AI workspaces with built-in MLOps and LLMOps tools could save teams over 10% of their time monthly.

Navigating Mixed Economic Signals into 2025

"In planning and presenting their budgets, CIOs must navigate a range of uncertainties, including election years, economic conditions, AI impacts, hybrid work models, and other factors," says Massimo Peselli, CRO of Global Enterprise and Public Sector at Verizon Business.

Reflecting on my own experience during the 2008-09 financial crisis and the late 1990s as a CTO, I often developed multiple budgets based on varying financial scenarios.

Today, CIOs not only need to prepare multiple scenarios but also consider timing, as some businesses may delay finalizing budgets into 2025. Here are five strategic ways CIOs can hedge their transformation investment plans:

1. Cultivate Transformation Leaders

In economic downturns, cuts often begin with consultants, services, and leadership development programs. Conversely, when budgets increase and there's a higher demand for transformation, leadership development is frequently overlooked.

While skill development is essential, it may not address the core challenges hindering CIOs' transformation efforts. Allocating budget to develop the extended leadership team can enhance planning, execution, and change management in digital transformation initiatives.

How to Hedge: Leading CIOs invest in their top talent even during tight budget periods. Creative solutions like establishing book clubs, hosting workshops, and reinforcing key leadership attributes promote continuous learning without significant costs.

2. Leverage Relationships for Commitment

According to Peselli, "CIOs can align technology investments with business transformation to make organizations more agile, efficient, and adaptable to political, social, and economic changes."

He recommends:

• Securing support not just from business and operational leaders but also from the CFO, CHRO, and procurement officers.
• Selecting a few trusted partners who can ideate, design, and execute on the CIO's objectives—the "North Star" guiding partners toward common goals.

Investments in organizational agility, like improving network performance and enhancing hybrid work capabilities, can lead to quick wins (increased productivity) and long-term benefits (cost savings and reduced risks).

How to Hedge: Focus on continuous improvement in core competencies like agile planning, DevOps practices, and change management. Align these improvements with strategic priorities to enhance business agility.

3. Plan Multiple Scenarios and Communicate the Strategy

Mike Lee, President and GM at AND Digital, emphasizes, "In uncertain times, scenario planning is essential for ensuring technology investments deliver maximum ROI. CIOs can stay agile by preparing plans A, B, and C—for allocating capital in both market upturns and downturns."

Companies that invest strategically during volatile periods can gain a 1-2 year advantage in bringing new technological capabilities to market, securing a competitive edge.

One strategy is to prioritize "force multiplier" investments that address multiple business objectives. For instance, investing in generative AI for marketing and sales can boost revenue while enhancing productivity. Lee also suggests hackathons as an efficient way for cross-functional teams to solve pressing issues and rapidly prototype solutions.

Michael Werblun, CEO of Consulting Solutions, adds, "CIOs must adopt a flexible, scenario-based budgeting approach, with contingency plans for economic shifts and the ability to adjust rapidly. Align IT initiatives and spending with business priorities, focusing on projects that drive efficiency, innovation, and enhance customer acquisition and retention."

How to Hedge: Develop strong business cases for promising initiatives. Once strategic goals are finalized, select appropriate initiatives and update your digital transformation strategy accordingly.

4. Balance AI Investments with Risk Mitigation

While many companies are investing heavily in AI, CIOs should consider the potential for a slowdown due to factors like hype, overinvestment, and skill gaps.

Prudent AI investments are essential to avoid falling behind in productivity gains and AI-enabled products and services. However, budget fluctuations are likely, especially if positive AI news turns negative in 2025. CIOs should pair AI strategies with risk reduction measures.

For example, Idan Plotnik, co-founder & CEO of Apiiro, notes, "AI code assistants accelerate coding, leading to rapid changes that can impact software quality, compliance, and security, creating new vulnerabilities. Manual processes for security reviews are no longer sustainable."

Yakir Golan, CEO of Kovrr, advises, "CIOs must shift from a cybersecurity mindset to proactive cyber risk management. By leveraging Cyber Risk Quantification (CRQ) models, CIOs can objectively understand financial exposure to various loss scenarios, optimizing limited budgets by prioritizing initiatives that reduce exposure and deliver positive ROI."

How to Hedge: Bundle AI investments with related security measures. Creating agile data teams that address both innovation and security increases the likelihood of success.

5. Seek Force Multipliers in Application Modernization

Budgeting for application modernization is challenging. Delaying upgrades to legacy systems or addressing technical debt can impact operations. CIOs also face pressure to enable AI capabilities in primary systems, which may require investments in SaaS features, data quality improvements, and training.

It's rare for CIOs to have sufficient resources to invest in all top priorities. Budgeting often involves tough decisions about focus areas and disciplined resource allocation.

Jason Forget, President and CRO of Cockroach Labs, suggests, "CIOs should start budgeting by examining their current application stack for cost improvement areas while leveraging new technologies for competitive advantage. Systems needing updates should be handled incrementally and prioritized based on business impact."

How to Hedge: Develop a flexible prioritization process using an agile PMO to assess initiatives across strategic drivers. This disciplined approach helps justify the timing of each investment. As strategic goals evolve, adjust strategies, priorities, and roadmaps accordingly.