CIOs across Asia face a brutal budgetary paradox: board-mandated surges in AI and cybersecurity investments clashing directly with flat overall IT expenditure.
While regional tech spending is rising—Forrester projects 9.3% growth in Asia Pacific tech spending for 2026, reaching US$874 billion—escalating costs, regulatory fragmentation, and geopolitical risks are eroding real purchasing power.
Software prices are rising at nearly five times the general inflation rate as vendors embed AI capabilities into renewal pricing, says Forrester. Consequently, technology leaders are being forced into aggressive reallocation, turning run-rate IT optimisation into a critical strategic lever for margin protection.
The macro context: Growth that masks erosion
Forrester’s Asia Pacific Tech Market Forecast for 2026 paints a nuanced picture. On the surface, headline growth appears robust—13.7% in computer equipment driven by hyperscaler AI investments, and 10.7% in software.
However, as Frederic Giron, VP and senior research director at Forrester, notes: “CIOs across the region are grappling with software inflation, hardware volatility, and increasing regulatory divergence that directly impact modernisation plans”.
The conflict in the Middle East adds further macro headwinds, with sustained energy cost inflation expected to compress GDP growth across oil-dependent Asian economies. CIOs in those markets should brace for IT budgets to come under intensified pressure.
The core trade-off: AI and cyber vs legacy
Seth Ravin, CEO of Rimini Street, observes this dynamic daily in his conversations with CIOs globally. “Everyone is trying to figure out how to run current operations, pay for innovation, and do it all with the same amount of money without having to go back to the board and ask for more,” he explains.
The solution, he argues, lies in redefining how organisations think about legacy systems.
Rather than succumbing to vendor-driven narratives that systems are obsolete every three to five years, Ravin advocates a fundamental mindset shift: “We are taking these core infrastructures and, instead of saying they need to be replaced, we are building and supplementing around them.”
This approach eliminates the costly cycle of “rip and replace” while enabling new technology to be deployed “over the top at a fraction of the cost.
Deferring ERP upgrades: Calculated risk or prudent strategy?
When boards ring-fence AI and cybersecurity spend, legacy IT operations inevitably bear the brunt of cuts—particularly ERP upgrades. Ravin characterises this as a rejection of the software industry’s model of manufactured obsolescence.
“We created this industry by saying these products are only good for three to five years. That has nothing to do with the true technical lifespan within companies,” he states.
CIOs are increasingly willing to accept operational and technical risks by deferring modernisations. Delaying upgrades, however, is not without consequences.
Industry analysis from IT Convergence highlights that outdated systems face mounting compliance, security, and operational risks—unpatched vulnerabilities, limited audit traceability, incompatibility with new compliance mandates, and rising maintenance costs.
Organisations running older releases miss out on AI-assisted features, modern API integrations, and cloud-readiness.
Yet Ravin reframes the risk calculus: “You do not buy a truck and have the truck company tell you three years later it is time to replace it. You look at its usage.” The lifespan of enterprise systems is an individual decision based on actual performance and business needs, not vendor roadmaps.
This perspective is validated by Rimini Street’s 2025 global C-suite survey, which found that 97% of executives report their current ERP systems largely meet business requirements—yet 23% of workforce time is spent maintaining them.
Third-party support: From tactical to strategic
Enterprises are increasingly leveraging third-party enterprise software support models to immediately free up capital—a shift from tactical cost-saving to a strategic boardroom lever. Ravin reports that Rimini Street replaces annual maintenance contracts for Oracle, SAP, VMware, and around 100 other products, typically cutting the maintenance bill in half while providing a superior service model.
The savings, as claimed in the Rimini Street survey, extend beyond annual spend; by avoiding forced upgrades and migrations, organisations extend asset life and unlock substantial budget for innovation.
ADAPT’s 2025 research of 214 Australian organisations reveals the magnitude of this opportunity. With 70% of CIOs planning to invest in generative AI within 12 months, finding funding is paramount. CFOs surveyed estimate that 40% of deployed technology is unused or wasted, often due to duplication and vendor lock-in.
Rimini Street estimates that ASX 200 and NZX companies alone spend $4–6 billion annually on software support, with over $2.5 billion in potential annual savings across ANZ.
SaaS consolidation and hyperscaler renegotiation
Beyond on-premise legacy systems, CIOs are aggressively consolidating SaaS contracts and renegotiating hyperscaler cloud commitments to fund AI initiatives. Ravin applies a pragmatic framework: consolidation should occur if it lowers costs, improves profits, or enhances competitive advantage.
He acknowledges that large enterprises often have hundreds of software products—sometimes multiples of the same product purchased by different departments—presenting significant rationalisation opportunities.
CIO.com’s analysis of the SaaS market confirms this trend: “The pricing pressure on the customer side is already showing up in the data,” with enterprise SaaS spend averaging $55.7 million annually, up 8% year-over-year, while application portfolios have remained flat.
Customers are paying more for the same number of platforms. Deloitte’s 2026 forecast notes that “buyers are scrutinising AI add-ons and agent pricing far more closely” and can expect broader choice and negotiation leverage.
Sector nuances in Asia
While regional patterns are broadly consistent, distinct pressure points emerge across sectors. Drawing on the same Rimini Street survey, Ravin notes that government agencies face unique challenges: when a department reduces costs, the savings typically revert to the general fund rather than remain within the department, creating perverse disincentives to budget efficiency.
In the private sector, profit margins drive decision-making—retailers operating on 1% margins or less have minimal room between profitability and loss, compared to contract manufacturers with approximately 7% margins.
Rimini Street’s regional expansion underscores its commitment to the Asian market, with plans to add 1,000 engineers in Malaysia and significant leadership engagement across Southeast Asia. The region’s digital economy has shifted from user acquisition to monetisation, with digital services income reaching US$11 billion in 2024—2.5 times higher than in 2022.
The evolving CIO-CFO dynamic
The relationship between CIOs and CFOs is undergoing profound transformation. Ravin highlights that 50% of CIOs now report to CFOs, yet the two roles frequently speak in different languages, with “often mistrust between them”.
KPMG’s 2025 survey reinforces this finding: 39% of CFOs and 49% of CIOs consider the definition of technology ROI a contentious area, and nearly one-third of CIOs consider innovation budgets insufficient while a similar number of CFOs deem them excessive.
CIOs, by nature, would pursue every upgrade and migration if resources allowed—their instinct is to be on the latest technology. CFOs, as custodians of company finances, view spending requests with caution. This tension is exacerbated by the fact that CIOs present technical, operational, and security risks that CFOs cannot easily challenge.
Grant Thornton’s 2025 research found that 38% of CIOs liaise with their CFOs “rarely” or “never” on strategy, and 25% are not confident their CFO understands their long-term technology strategy.
However, the dynamics are shifting. Finance leaders are increasingly driving IT vendor negotiations, particularly as cloud costs spiral and the ROI of AI investments faces greater scrutiny.
Ravin observes that bridging the CIO-CFO gap requires establishing a common language and shared objectives.
Sustainability beyond 2026
Looking ahead, the sustainability of funding AI and cyber costs purely through legacy cuts is questionable. Ravin argues that security will remain paramount—”protecting the organisation and protecting government is one of the key things we do”. Yet he cautions against the assumption that spending more on security products equates to effectiveness.
“Spending money and effective security do not necessarily go hand in hand. You can spend a lot and still have terrible security.” Seth Ravin
Most breaches, Ravin notes, occur because someone clicks on a phishing email—not because organisations failed to purchase security products. This suggests that smarter, more targeted security investments, rather than indiscriminate spending, will become essential as budgets remain constrained.
Three recommendations for an innovation-focused budget strategy
Ravin offers three guiding recommendations for CIOs and CFOs navigating this landscape:
First, set an independent course. Vendor roadmaps are designed for the vendor’s business, not the customer’s. Organisations must develop plans that reflect their unique needs, objectives, budgets, and challenges rather than simply following vendor advice, suggested Ravin. This requires CIOs and CFOs to become comfortable making independent decisions and seeking advisers who provide accurate, unbiased information.
Second, apply the three principles of business discipline: lower total cost of operations, improve profits, and avoid investing in anything that doesn’t achieve these objectives or provide a competitive advantage. These principles keep organisations focused on what matters.
Third, acknowledge the impossibility of “doing it all.” With hundreds of software products, each now claiming AI-enhanced releases requiring upgrades, there are simply not enough people, time, or money to pursue all projects. CIOs and CFOs must make difficult choices about which projects to pursue and which to defer—a departure from the vendor-driven model that has dominated for 50 years.
In this environment, third-party support and software rationalisation are not merely cost-cutting tactics but strategic enablers of innovation. By redirecting resources from low-ROI activities—including costly, vendor-dictated upgrades—towards agentic AI and automation, organisations can achieve measurable results, faster payback cycles, and greater flexibility in budget allocation.
The traditional ERP model is being reimagined as new technologies redefine expectations for speed, flexibility, and intelligence. Executives increasingly want the freedom to modernise and innovate on their own terms.
Click on the PodChats player as FutureCIO explores why IT budget strategies need to shift from cutting waste to driving innovation.
Setting the macro context
- With overall IT budgets remaining largely flat across Asia despite surging AI demands, how are CIOs fundamentally restructuring their 2026 budget cycles to accommodate these new priorities without asking for more money?
The core trade-off: AI vs legacy
- In your conversations with customers, when boards ring-fence AI and cybersecurity spend, which specific legacy IT projects or ‘run rate’ operations bear the brunt of the cuts?
- You have highlighted the deferral of ERP upgrades; what operational and technical risks are CIOs willing to accept by pushing these critical modernisations down the line?
Executing the cuts: ERP, SaaS, and cloud
- How are enterprises leveraging third-party enterprise software support models to free up capital immediately? Is this shifting from a tactical cost-saving measure to a strategic boardroom lever?
- Beyond traditional on-premise legacy systems, are we now seeing CIOs aggressively consolidating SaaS contracts and even renegotiating hyperscaler cloud commitments to fund AI initiatives?
Regional and sector nuances
- CIOs in different sectors: manufacturing, healthcare, logistics, and financial services, approach how they manage their IT budgets. Are there distinct budget-cutting patterns or unique pressures specific to these sectors in the Asian market?
The CIO and CFO dynamic
- How has the conversation between the CIO and CFO evolved in the region? Are finance leaders now driving IT vendor renegotiations, or is the CIO leading this charge to protect innovation budgets?
Strategic and financial implications
- Looking beyond 2026, if AI and cyber costs continue to scale without a corresponding increase in overall IT budgets, is the current model of funding them purely through legacy cuts sustainable?
- Let’s round out what we’ve covered so far. Our topic is IT budget strategies that focus on innovation rather than cost-cutting. What are your top 3 recommendations for IT budget strategies for focusing on innovation and not cost-cutting?
