As Mike Anderson plans tech spending for next year, the technology leader is asking all of Netskope's vendors for fresh updates about their generative artificial intelligence product roadmap and pricing plans.
“We’re not making any long-term commitments to any software providers,” says Anderson, who serves as chief digital and information officer at the cloud-based security company. “The change is happening so rapidly.”
Surveys have consistently shown that chief information officers and other technology C-suite leaders will spend more on generative AI next year. But now two years into the generative AI journey, they are also thinking more about getting a return on those investments, while also expressing increased skepticism about how AI is priced. The per-user cost for AI copilots, often $30 for each employee, is a frequent pain point. There is also wariness about “AI washing,” which is the notion that vendors are adding fees for flimsy new AI features with little to no business value.
“A lot of people are scratching their heads,” says Anderson. “I don’t really know if I can afford $30 per user.” McKinsey senior partner Aamer Baig agrees, sharing “It’s safe to say the CIOs are very irritated by these enterprise vendors pricing strategies for generative AI.”
CIOs say they are intrigued and even welcome some recent industry pricing pivots, most notably by Salesforce, to consumption-based pricing. “If I get to a point where I have good predictability around what my usage is, I’m sure that the vendors will negotiate some type of a contract that helps me control my costs,” says Anderson.
Baig says McKinsey’s clients are paying attention to the one-time costs of AI investments, but also discovering that for every $1 spent on developing an AI model, they are spending $3 on change management, meaning training staff and actively tracking their performance and the value of their investments in the technology. “There have been some surprises,” says Baig.
Principal Financial CIO Kathy Kay says the financial investment management and insurance company has evolved budget planning from an annual cycle to a quarterly cadence, allowing for more fluidity to move dollars depending on new priorities or changes to the business.
Kay says she will spend more on generative AI in 2025, but that the core function of IT is to also find ways to do work cheaper and faster. “I’m not a proponent of just asking to increase my spending without good business rationale,” says Kay.
Dave Williams, chief information and digital officer at Merck, anticipates the pharmaceuticals company will also increase spending on generative AI, as well as cybersecurity, edge computing, drug development, and to make manufacturing more efficient.
“We see a huge opportunity to leverage cloud, gen AI, and the combination [of those technologies], to accelerate the core of what we do, which is get new vaccines and medicines to patients faster,” says Williams.
Rajeev Rajan, chief technology officer for Atlassian, says the software provider is “very prudent about how much we spend on R&D. We look at our overall revenue, our overall budget, and we keep it in good proportion.” He’s also spending more on AI, but a yearslong project to get customers to migrate data from on-premise to the cloud is wrapping up, requiring less funding.
Atticus Tysen, Intuit’s chief information security officer, says the financial software company starts annual budget planning by first allocating dollars toward security, and then everything else. “As the CISO and the CIO, I have to be careful about that and not take up all the money,” says Tysen.
One big priority for 2025 is Intuit’s continued embrace of a multi-cloud strategy. While Intuit primarily leans on Amazon Web Services, it has acquired brands, like Credit Karma, which have built their data processing on rival offerings. By working with more than one cloud provider, Intuit can select the best service from AWS or Microsoft or Google that will match a specific need.
“There’s no reason to really move or change that,” says Tysen, regarding keeping Credit Karma on Google Cloud Platform. “They wouldn’t get any customer benefit out of it. There wouldn’t be any particular cost savings.”
John Kell
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