Most CEOs are bullish on AI. Is yours?
According to the Gartner CEO and Senior Business Executive Survey, 87 percent of CEOs surveyed agree that AI’s benefits outweigh its risks. In addition:
- Three times more CEOs believe this year than last that AI will impact their industries more than any other technology.
- Half of CEOs include generative AI (GenAI) in their productivity plans, and of those that do, more than a third expect it to boost productivity by more than 15% within two years.
- Half of CEOs have used GenAI personally.
- 13% of CEOs are leading their company’s AI initiatives themselves.
And, while the vast majority of CEOs believe AI will help them maintain or grow company revenue, they’re not sure how.
If your CEO is bullish on AI, expect AI to be a prominent focus in your IT budget for 2025.
Modern infrastructure runs AI and other advanced technologies
AI can access data in the cloud much more easily than by connecting AI technology to legacy sources.
That’s why moving to the cloud to modernize your IT environment for AI is one of Leapfrog’s top three recommended focus areas for 2025 IT budgets (the other two are updating cybersecurity protocols and streamlining for efficiency).
Moving to the cloud isn’t just about using AI. You need a modern IT environment to leverage most of the innovative tools and processes driving business today. The world was already transforming digitally before the pandemic, so if you’re still operating a hybrid or on-premises environment in 2024, you’re being left behind.
While you may not be excited about cloud migration if you’ve made significant investments in non-cloud infrastructure, running a hybrid environment has become expensive — it costs an extra 20-30% to run each year. If you postpone modernizing, you’ll be even further behind next year and you will have lost advantages during the delay.
Leapfrog has seen our mid-market clients adjust their IT budgets to execute IT modernization plans successfully within 12 to 18 months.
What is the world spending to transform IT? (Hint: a LOT)
International Data Corporation (IDC), a global technology market intelligence and data provider, expects spending on cloud computing and storage infrastructure products for cloud deployments to increase by 18.5% over the next year. It also expects spending on shared cloud infrastructure, such as Azure and AWS, to grow by 21.6%. Together, that’s an increase of just over 40%.
Meanwhile, it expects spending on non-cloud infrastructure to decline by 1.4%.
Digital spending now represents a larger share of total information and communications technology spending than non-digital spending. AI and GenAI digital transformation projects are driving much of this trend.
Gartner research shows that IT spending is up 8% overall this year, largely fueled by spending on AI. The trend is clear. Companies are transitioning from talking about AI to investing in it.
Everyday AI and game-changing AI — budget for parallel paths
What’s the best strategy to budget for AI in 2025? Start by dividing AI conceptually into two categories, as Gartner suggests in Get AI Ready: Action Plan for IT Leaders:
- Everyday AI helps humans work faster and more efficiently
- Game-changing AI enables new products, services, and core capabilities
Both categories require the same IT modernizations to deliver easily accessible data and enough computing power to process complex requests and for machine learning.
Start by mastering everyday AI and then progress to leveraging game-changing AI.
Get everyday AI wins from within your operations budget
Allocate funds for everyday AI in your operations budget. Chances are you’re already racking up some everyday AI wins — you’re probably testing out a GenAI platform or two. Many of Leapfrog’s clients are having success with Microsoft Copilot. Take a look at Quick Wins with GenAI: Are You On Board for examples of how companies are using GenAI to improve productivity quickly.
Get game-changing AI wins from within initiative budgets
Game-changing AI is different. It requires its own budget. Rather than adjusting your IT operations budget to enable new platforms, game-changing AI is part of a use-case initiative that depends on AI to succeed.
You must have a modern, AI-ready environment to earn wins from any game-changing AI initiative. The last thing an executive team wants is to develop a groundbreaking idea only to discover that their IT environment can’t run the required AI.
Remember that AI needs (trained) people
Companies should invest in training their workforce on GenAI and hiring AI experts for use-case initiatives. In Should You Hire or Upskill to Leverage AI?, we look at the AI learning curve, prompt engineers (and their salaries), and enterprise integration options as the fast-track strategy.
To start training your team, you first need a written GenAI acceptable use policy and one or two GenAI platforms on board. Your in-house cybersecurity team will likely need to get additional training, too. If you outsource cybersecurity, confirm that your partner’s team is up to date with GenAI security protocols.
Let’s talk dollars — what can you expect to spend on GenAI in 2025?
Our client base is made up of midmarket companies across many industries, especially business services, manufacturing, real estate, healthcare, and nonprofits. We’ve seen that a 50-75 person company can expect to make a $100k investment in 2025 to get in the GenAI game. The investment includes:
- Infrastructure: The cost of subscriptions, monitoring, and management is about the same as owning and managing your physical infrastructure, so don’t expect to save money by moving to the cloud — it’s one of our 3 Hard Truths About Cloud Migration. For replacement assets, choose ones that are AI-ready so you’re prepared for AI-dependent initiatives.
- Software: Everyday AI apps will cost about the same as your back-office IT infrastructure. For example, subscribing to Copilot will cost an additional $30-$100 per head.
- Security: AI-related security costs vary greatly by industry and individual business infrastructure — see Safely Leap into AI Technology – Protect Your Company’s Data and Networks. At a minimum, budget for data protection and privacy, compliance, securing your AI models (and maintaining logs), employee training, and other risk areas.
- Operations: Budget to standardize as much infrastructure as possible within a single ecosystem to create the simplicity that enables you to control costs. Your costs will be primarily tactical and should pay you back within the calendar year or over a couple of years if coding is required.
- Data: The most effective way to budget for GenAI integration in 2025 is to budget for moving data to the cloud strategically. If you’re already in the cloud, your data costs won’t change much. If you’re moving to the cloud, you can expect to pay double or triple for your subscription over three years compared to what you’re paying now, which includes the investment in the hardware for the same amount of capacity.
The costs of modernization may seem high, but the benefits of migrating to the cloud outweigh the lower costs of continuing to use data centers.
With carefully considered and fully implemented best practices, you should experience a significant return on investment from GenAI and AI. This is why CEOs are bullish.
Embrace the AI evolution for your business to thrive
Adapting to disruption is rarely cheap and easy, and AI is a seismic shift. Businesses that prosper using new technology keep an eye on the opportunities and embrace the concept that tech is always (always!) changing. Companies are never “done” when it comes to modernizing and keeping up.
Regardless of where you are on the GenAI and AI journey, Leapfrog can help.
We understand that every mid-market company is different, and we work with you to find the right approach to help you modernize and operate seamlessly and securely throughout the transition. Since 1998, we’ve been guiding clients through the IT budgeting process, which invariably includes new technology integrations. If your company is interested in learning more about how partnering with the Leapfrog team can benefit you, please get in touch.
