Despite the economic uncertainty caused by global conflicts, inflation, and shifting market dynamics, one trend remains clear: companies are not pulling back from digital transformation. While spending patterns have become more cautious and strategic, investments in digital capabilities continue at a steady pace. Why? Because digital transformation is no longer optional — it’s a core part of how businesses stay competitive, resilient, and future-ready.
Based on current forecasts, digital transformation (DX) investments are projected to reach almost $4 trillion by 2028, accounting for about 70% of total ITC spend. Organizations understand that digital maturity is directly tied to resilience, agility, and competitive advantage. Whether it’s AI-powered analytics, supply chain automation, or cloud-based operations, the message is clear: pause now, fall behind later.
Strategic Spending in a Costly Tech Landscape
The rising costs of technology, driven in part by tariffs on hardware and components, are impacting budgets. In the first quarter of 2025, the IT spend remains robust and CIOs continue to prioritize their original IT goals. Organizations continue to invest heavily in digital transformation, with hardware accounting for an estimated 40% of total digital transformation investment. IT budgets seem more resilient than in the past as more have been moved from capex to opex. Companies are getting smarter about how they spend. They are revisiting contracts, renegotiating terms, and shifting sourcing strategies to adapt to a more expensive tech landscape. However, extending tariffs to digital services will increase costs and complexity of managing IT. Together with the economic slowdown, that is likely to trigger cuts and delays in business and DX initiatives. On the other hand, previous disruptions have accelerated major technology shifts and leading companies will likely seize the opportunity to accelerate their transformation.
Hardware is undoubtedly the most impacted area in today’s digital economy. Semiconductors, edge devices, data center infrastructure, and networking equipment are all directly affected by tariffs, labor shortages, and material price spikes. Despite these cost climbs, organizations remain committed to their hardware roadmaps. Digital transformation can’t happen without hardware, whether it’s deploying AI models, migrating to hybrid cloud environments, enabling IoT ecosystems, or powering real-time edge processing. Infrastructure is the foundation.
AI: The Cornerstone of Digital Transformation
AI is quickly becoming a cornerstone of digital transformation, and hardware is the foundation enabling that shift. As organizations race to adopt AI technologies driven by talent shortages, rising labor costs, and the urgent need for efficiency, there is growing demand for systems that support autonomous decision-making at scale. From our data, we see that AI-related investments currently account for 17% of total digital transformation spend, a figure expected to rise significantly in the coming years.
At the same time, the fact that 40% of digital transformation budgets are dedicated to hardware reveals a clear pattern: companies are laying the infrastructure needed to support these AI-driven futures. This strategic emphasis on hardware isn’t about today’s needs — it’s a signal that organizations are preparing the groundwork for the next wave of intelligent, automated systems.
Regional Flavor of Global Priorities
Regions differ in terms of the maturity of their organizations’ digital transformation. The US and Western Europe are at the highest level of digital maturity, while others are catching up. Regardless of maturity level, the primary focus of digital initiatives is optimizing business operations and enhancing cyber resiliency. Modernizing infrastructure in data centers, as well as cyber recovery and resiliency, are the top drivers of increased IT spending in preparation for greater AI use in business. In the US and Western Europe, the modernization of applications is prioritized more than in other regions. Digital sovereignty influences technology strategies strongly in Europe.
The Strategic Continuum of Digital
Digital transformation is no longer a linear journey—it’s a strategic continuum. Success in 2025 will belong to the organizations that invest in strong foundations, leverage AI wisely, and adapt with intention—not hesitation.
Key Takeaways
- Invest in scalable infrastructure: Build AI-ready, flexible hardware and cloud systems to support long-term growth.
- Build for resilience: Diversify vendors, localize supply chains and prepare for ongoing disruptions.
- Act fast, but strategically: Move decisively on transformation – optimize for adaptability and not perfection.
