Should CIOs and CISOs rethink how they invest in IT?

Investments in the cloud and software continues to be crucial to enterprise IT spend across the Asia-Pacific region growing in double-digit percentage year-on-year. Globally, spending on software is predicted by many analysts to surpass a trillion US dollars by the end of this year.

However, as we go into 2027, this spending growth now faces a tide of countervailing pressures at a time when enterprise CIOs and CISOs are under a lot of scrutiny to justify technology ROI.

AI spending is also facing a reality check, moving from an experimentation phase towards a greater focus on measurable financial and operational outcomes.

In 2027, many boards are less inclined to look at technical features or software upgrades, instead they will ask for clearer proof of tangible outcomes such as investing in IT that can be measured by future revenue growth or lead to cost reduction.

A check to spending will increasingly centre on cost leakage. Proxima’s State of Spend research, reveals that external vendor spend continues to represent the largest source of cost leakage in digital investments globally. Worryingly, it found that third-party supplier costs today consume up to three quarters of total enterprise spend and almost two-thirds of revenues for major global firms.

Within the technology stack, Proxima, part of Bain and Co., identifies fragmented SaaS licensing, unmanaged cloud commitments, and complex AI deployments are quietly eroding enterprise EBITDA — as challenging areas that can be mitigated by up to 15 percent through more strategic technology sourcing and C-suite alignment.

How can CIOs and CISOs bridge this gap? Do they need to rethink their commercial strategy before entering critical enterprise contract renewals, ensuring choices align with long-term cost governance?

To learn more about making your IT spend effective, iTNews Asia talks to Chris Hampden, Senior Vice President at Proxima, to find out the reasons for the cost leakage and discusses what CIOs and CISOs can do when AI-related costs are expected to continue rising.

iTNews Asia: Have third-party costs been rising over the recent years? What is accounting for this rise?

Yes, they have been rising. Proxima's State of Spend report research found that Fortune 500 companies spend, on average, three quarters of their total expenditure with suppliers, with the remaining quarter going on employment costs. With average EBITDA at around 20 percent of revenue, supplier spend is the single largest lever on margin, and technology is one of its fastest-growing components.

Three forces are driving the rise.

Firstly, price: vendor markets have consolidated, perpetual licences are being retired, products are being bundled into higher tiers, and annual uplifts are now standard at renewal.

Secondly, volume: cloud is consumption-based, so spend grows with usage unless it is actively managed, and AI workloads have added sharply to that.

Thirdly, structure: businesses are outsourcing more non-core activity and renting what they used to own, turning one-off purchases into recurring costs that are renegotiated every few years, usually upwards.

Companies expect this pressure to continue. Proxima's Global Supply Chain Resilience Outlook Survey found that 44 percent of Singapore firms are willing to pay between 11 percent and 20 percent more to suppliers to secure their supply chains.

iTNews Asia: Why does external vendor spend represent the largest source of cost leakage?

External vendor spend represents the largest pool of spend with the least continuous ownership.

External vendors often add real value, delivering specialised capabilities and innovations at a speed that would be difficult to build in-house. But internal costs are reviewed every month by someone accountable for them, while vendor contracts tend to be negotiated intensively once every few years and then left alone.

Leakage happens in the gap between contract signature and invoice: licences nobody uses, auto-renewals nobody challenged, cloud commitments that were never fully consumed, and invoices that are never checked against the contracted rate.

Technology buying is also often fragmented. Companies may work with hundreds of suppliers across different functions and markets, and a business unit can subscribe to a SaaS tool on a corporate card in minutes without IT ever knowing. This can result in fragmented purchasing, inconsistent pricing, duplicated services and limited visibility over the total cost of external suppliers.

- Chris Hampden, Senior Vice President at Proxima

Over time, small inefficiencies across a large supplier base can translate into significant cost leakage.

Analysing external vendor spend is an important area for sustainable EBITDA improvement. Rather than simply reducing supplier numbers or cutting costs, companies should conduct internal audits to understand where external spend is delivering value and then identify where the business is overpaying. They can then consolidate, renegotiate and align costs with what is actually being delivered.

iTNews Asia: With rising hardware costs, fragmented SaaS licensing, unmanaged cloud commitments and complex AI pricing models, do you expect the investment and spend go up even more in 2027? 

We expect technology and AI-related third-party spend to keep rising in 2027 as organisations move from pilots into scaled deployment, creating additional costs across infrastructure, cloud consumption, software licences, data and AI related tools, training, and services.

Research by Bain and Co, found that more than half of CFOs are increasing enterprise-wide AI investment by over 15 percent in 2026, and 83 percent expect AI budgets to rise by more than 15 percent over the next two years.

iTNews Asia: Do you feel AI licensing costs are now outpacing proven returns?

In many organisations, AI licensing costs are currently running ahead of demonstrated value. A common pattern is AI tools licensed per seat across large user populations before anyone has established which roles will use them, how often, or what the measurable benefit is.

Adoption is then uneven, while the cost is fixed. Businesses need to understand what they are paying for and identify overlapping capabilities across their technology stacks.

The organisations seeing returns are those that start with a narrow, measurable use case, prove it and then scale. The challenge will intensify as pricing shifts to tokens, credits and usage-based fees, which make costs much harder to forecast, track and manage.

Organisations require stronger visibility over their technology expenditure, tighter controls around usage and a clear understanding of the value each technology investment is delivering. Technology leaders need a clear view of total cost against value for every AI investment, not just the headline licence fee.

iTNews Asia: Will these spiralling costs force management and boards to demand stricter proof of IT spending value before approving further capital expenditures?

Yes, absolutely. Boards and executive teams are moving from digital growth at all costs to commercial discipline and value realisation. We are already seeing much clearer demands for line of sight between technology spend and tangible outcomes, whether that is EBITDA margin, operational efficiency or revenue growth.

But focusing only on capital approval misses much of the problem. Most technology spend is now operating expenditure: subscriptions, cloud consumption and managed services. Much of it never passes through a capital approval process, and renewals often roll forward on last year's baseline with little scrutiny.

The more useful discipline for boards is to look backwards as well as forwards. What was approved last year, what benefit was promised, and is that benefit visible in the P&L today? Going into 2027, IT leaders who cannot answer that question will face significant friction in budget cycles.

iTNews Asia: In their IT investment, what can enterprise IT teams do to counter vendor pricing, for instance, during cloud and software renewals?

IT teams need to move from being takers of vendor pricing to active negotiators, and that starts well before the contract expires.

Countering aggressive vendor pricing strategies, especially around cloud and software renewals, requires preparation well in advance of contract expiration dates.

Six to nine months ahead is the minimum; 12 months for the largest agreements. A negotiation that begins 30 days out is already lost.

iTNews Asia: What do you recommend as a commercial strategy before they enter into enterprise contract renewals?

Before entering a renewal, teams should have:

1. Better usage data than the vendor - know actual consumption against contracted capacity, and what can be removed.
2. A price benchmark - know what comparable organisations pay, rather than negotiating from the vendor's list price.
3. A credible alternative - reduce single-vendor dependency where possible, even partially. Without an alternative, there is no leverage.
4. Terms beyond unit price - caps on annual uplifts, the right to scale volumes down, flexibility to move commitments across products or markets, and clear exit and data terms often matter more than the headline discount.
5. One voice - vendors are skilled at going around IT to business sponsors. IT and procurement should agree on a single position before talks begin.

iTNews Asia: What practical steps can they take to audit hidden spend and optimise expenditure commitments across APAC operations without stalling digital innovation?

Auditing hidden spend across decentralised APAC operations is what helps companies free up capital to reinvest in innovation. Some practical steps include:

• Build regional spend visibility:
  Combine cloud, SaaS and vendor spend across all APAC business units into a single view, drawing on accounts payable, corporate cards, cloud billing and contract records. This surfaces duplicate tools and underused licences without slowing down local teams.
• Rationalise tools and consolidate vendors:
  Audit category by category to find overlapping capabilities and fragmented contracts. A common finding in APAC is that entities in each market contract separately with the same global vendor, paying local prices in several markets when they could negotiate once for the region.
• Right-size cloud and software commitments:
  Review commitments and licence tiers against actual consumption. Commit where usage is predictable, since that is what secures the discount, and keep flexibility where it is not, so new initiatives are not constrained by over-committed contracts.

To protect innovation, you must separate the two conversations: tighten control over the established estate, and use the savings to fund a ring-fenced innovation budget with light governance for experiments and proper scrutiny only when something is ready to scale.

iTNews Asia: Are there guardrails that can be determined around generative and agentic AI deployments, preventing duplicate solution licenses from eroding IT budgets?

Yes, license proliferation is a real issue, with individual business units independently buying AI tools that overlap in capability. Establishing robust commercial governance guardrails is critical to preventing budget erosion, including:

• A single front door for AI purchasing. A cross-functional group from technology, procurement and risk should assess every AI request against the enterprise technology roadmap, supported by a central register of AI tools and use cases.
• Check what you already own. Require vendors to disclose AI features embedded in existing platforms before any standalone purchase. Paying twice for the same capability is one of the most common sources of duplication.
• Pilot milestones before scale. Keep pilot licences small and time-limited, and expand only on measured adoption.
• Hard spending limits for agentic AI. Where costs scale with activity, set consumption caps and monitor usage in near real time. The monthly invoice is too late.

iTNews Asia: Going into 2027 budget planning, how can regional tech leaders balance multi-jurisdictional regulations, cloud sovereignty requirements, and local vendor risk compliance across Asia Pacific?

How important is governance, risk, and compliance as organisations scale AI and cloud initiatives?

Managing technology investments across Asia Pacific requires navigating a complex and highly fragmented regulatory environment. For instance, research indicates that 51 percent of APAC organisations prioritising digital sovereignty want to retain control over sensitive and strategic data, broadly in line with 53 percent globally.

However, APAC businesses are placing an even greater emphasis on digital sovereignty than their global peers, with 43 percent ranking it among the leading drivers of technology investment (compared to 30 percent globally). This highlights how governance, risk, and compliance considerations are becoming increasingly central as organisations scale AI and cloud initiatives.