IT Budget Predictions for 2025: What’s Driving Increased IT Spending, and How Can You Prepare?

2025 is set to be the year when IT spending starts to accelerate once again, after a long period of belt-tightening and frugality among most business leaders.

Studies show that executives are still concerned about impending economic recessions and diminishing budgets. For instance, 74% of companies have adjusted their technology purchasing patterns in 2024. However, overwhelmingly, market analysts agree that most organisations will be ramping up innovation, and increasing their tech spend in the year ahead.

Gartner’s new “IT Spending Projection” report for 2025 predicts that IT spend will increase by 9.3% next year – representing one of the largest increases this century.

So, as the global IT budget accelerates towards a value of $5.74 trillion, where will companies be focusing their attention next year? Perhaps more importantly, how will budget-conscious companies find the funding they need to keep up with the competition?

What will Companies Be Investing in This Year?

Gartner’s IT spending projection builds on the prediction the company made for IT spend in 2024 – which suggested an impending growth of 8.2%. In 2024, a significant portion of IT budgets was dedicated to server infrastructure, as business leaders began to prepare for the computing needs of new generative AI solutions and tools.

In 2025, Gartner, as well as various other market analysts believe IT spending will continue to increase in the data center landscape. However, there’s also likely to be a growing focus on generative AI applications, advanced software solutions, device upgrades, and cybersecurity.

Here are the key areas business leaders will likely focus on in 2025.

Advanced Data Center Systems

Spending on advanced data center systems grew by almost 35% in 2024. Although the segment is unlikely to see another jump of that magnitude in 2025, Gartner predicts over $50 billion in IT budget will be devoted to data center systems.

Server sales, in particular, are set to almost triple in the year ahead. Companies are investing in advanced data center solutions to prepare themselves to leverage emerging technology swim lanes in the future.

Companies need more flexible, scalable, and powerful server environments to take advantage of cutting-edge Gen AI tools – whether they’re investing in pre-made software or building their own apps. Additionally, the rapid growth of data volumes throughout enterprise environments will drive further demand for advanced storage and processing tools.

We’re likely to see a growing demand for highly flexible and scalable storage systems, agile data centers, and accompanying services (like managed server solutions) in the year ahead.

Generative AI Solutions and Applications

In 2024, the majority of IT spending on generative AI solutions came from technology companies that were building the supply-side infrastructure for new systems. Gartner says that in 2025, CIOs will begin to spend more on Generative AI tools, moving beyond proof-of-concept strategies.

Over the last year, these executives have been developing a deeper understanding of what generative AI systems can actually do for their operations. This has led to the creation of more detailed and meticulous spending plans for 2025.

In many cases, CIOs and IT leaders will be focusing their attention on generative AI add-ons offered through subscription models. For instance, we might see more companies experimenting with Microsoft Copilot for Microsoft Teams, or Salesforce Einstein.

However, IBTM’s forecast suggests that the variety of use cases for generative AI will evolve in the years ahead. Already, companies are turning to new generative AI solutions to help with planning meetings (50%), and accelerate content creation (41%).

Advanced Software Solutions

On a broad level, spending on software is expected to increase 14% in 2025, to a value of $1.23 trillion. It’s not just an increasing demand for generative AI tools that’s increasing software spending either. Companies are spending more on a wide range of tools designed to improve productivity, enhance customer experiences, and boost profitability.

For instance, two-thirds of IT decision-makers in EMEA are planning on making a significant investment in enterprise resource planning systems in the next 12 months. Another 46% say they’ll be looking for software to help them with supply chain management.

Demand for software-as-a-service (SaaS) solutions will continue to increase across all sectors, as companies shift into agile cloud-focused strategies. Companies will continue to shift their communication and contact center solutions into the cloud to adapt to new market trends, and deal with the challenges of the PSTN-ISDN switch-off.

Plus, we’ll see the emergence of new cloud-based platforms that support companies with everything from customer relationship and data management, to workforce management. This trend will further be enhanced by the growing focus on “sustainability” in the technology landscape, allowing companies to reduce their e-waste footprint.

IT Services and Device Replacements

IT Services are another area experiencing significant growth in the 2025 IT spending landscape. In 2025, spending on IT services is expected to increase by 9.4% up to a value of $1.73 trillion. This trend is being driven by a wider range of service solutions offered by innovative vendors.

Companies in the technology landscape are offering services that help companies with everything from AI adoption, implementation and customization, to analysing and managing cybersecurity risks.

One particular area where many companies will be looking for extra help from service providers, is in their quest to replace legacy, outdated devices, with new technologies. Gartner is predicting a 9.5% increase in device spending in 2025, as companies look for effective ways to replace laptops, mobile phones, tablets, and other hardware purchased during the initial work-from-home revolution in 2020.

Companies will be turning to service providers for help not only choosing and implementing the right technologies, but making decisions that help them to enhance sustainability and reduce long-term costs. Gartner also believes there’ll be a growing demand for AI-enabled devices in the years ahead, such as the laptops and computers from Microsoft that offer instant access to Copilot features.

Cybersecurity Enhancements

Although Gartner didn’t mention cybersecurity investments in it’s latest report, mounting evidence suggests that business leaders will be spending more on security solutions in the years ahead. In 2024, only around 11% of IT budgets were allocated to cybersecurity needs – despite half of the organisations in the UK dealing with cybersecurity threats on a weekly basis.

A survey from Vanta found that 54% of firms agree their security risks have never been greater – particularly as advanced phishing strategies and new malware attacks emerge. What’s more, companies are beginning to recognise the costs of undervaluing their cybersecurity technology.

According to the survey, IT decision makers are spending around seven hours each week just reviewing vendor risks and managing threats. This suggests that companies will begin to spend more on advanced cybersecurity solutions and services in 2025.

A survey from TechTarget validates this prediction. 46% of the respondents in the survey said that they are going to increase their IT spending in the year ahead. The majority of the respondents in the survey also said that security is their “number one priority” when investing in new tech.

Preparing for Increased it Spending in 2025

An increase in IT spending is going to be a necessity for most companies moving forward. Whether you’re replacing outdated devices, updating your cybersecurity strategy, experimenting with new data center strategies, or investing in AI, 2025 will be the time to start loosening your purse strings.

The problem is, many companies will still struggle to find ways to increase their IT budget, without making significant cuts in other areas. According to Aberdeen’s research, 84% of companies are bracing for an economic recession as of 2024.

The demand for advanced technology doesn’t eliminate the economic and financial challenges businesses are facing today. However, it does place additional pressure on firms to find new ways of optimising their spending strategy.

At Tech Grants, we’re working to make it easier for companies of all sizes to adapt to the latest technology trends, and stay competitive in the modern landscape. Our innovative transformation grant funding gives companies from every industry access to crucial financial support they can access for any business growth strategy.

This funding is accessible to all of our clients, with no strings attached, ensuring organisations have an easy, risk-free way to increase their IT spending budget in the years ahead.

Looking to the Future of IT Spending

Gartner, as well as countless other analysts agree that IT spending will continue to increase in the years ahead. Even with economic concerns and financial constraints to consider, businesses will need to spend more if they want to adapt to changing workplace, technology, and customer experience trends, and stay competitive in an evolving market.

Investing in AI innovations, new software, and services isn’t just a way to “keep up with the competition”, it’s the key to making sure you don’t end up wasting resources in 2025 and beyond.

The key to success is taking a strategic approach to your budget. Do your research, identify your investment priorities, and work with a leader like Techgrants to access the funding support you need to bring your vision to life.

Contact us today to learn more about how you can make the most of your IT budget in 2025.