Volatility tests C-suite resolve – a return to customer value

Geopolitical conflict has ceased to be a peripheral risk; it is now the defining stress test for enterprise technology leadership. With the US and Israel’s strike on Iran pushing crude oil past US$100 a barrel and the subsequent closure of the Strait of Hormuz disrupting critical maritime trade routes, organisations are navigating a perfect storm of macroeconomic and operational disruption.

Compounding this are the protracted war in Ukraine, emerging conflicts between Pakistan and Afghanistan, persistent tariff turbulence, and unrelenting pressure to harness artificial intelligence.

As Stephanie Balaouras, VP group director at Forrester, warns, “Geopolitical volatility is not something technology leaders can wait out. It demands sharper trade‑offs, faster decisions, and more visible leadership — across budgets, platforms, risk, and people.”

In this environment, CIOs, CTOs, and CFOs must restructure operating models, defend strategic investments, and fortify resilience across every layer of the enterprise technology stack.

From line items to capability-led planning

Rising energy costs and persistent inflation have transformed IT budgeting from a forecasting exercise into a structural restructuring imperative. Forrester projects APAC technology spending will grow by 9.3% in 2026, yet much of this expansion is merely inflationary.

Software vendors are aggressively monetising AI by embedding capabilities into renewal pricing at rates that frequently outpace general inflation.

In Australia, software price growth is running at nearly five times the consumer price index, while private equity-owned firms are applying additional margin pressure through licensing restructurings and consolidation.

Hardware costs have simultaneously climbed 10–20 per cent due to component shortages. Consequently, nominal budget growth no longer equates to purchasing power.

Frederic Giron, VP and senior research director at Forrester, emphasises that executives must pivot away from traditional line-item tracking.

“The right response is to treat this as a structural budget restructuring problem, not just a cost control exercise,” he states. He concludes that organising spend around a short list of business capabilities and having an honest conversation with business capability owners and value stream owners about what stops, what slows, and where investment increases.

“That conversation is only possible with a capability-based budget model. CIOs still running line-item budgets will find it very difficult to have it at all,” he further elaborates.

This capability-led approach is particularly crucial in Southeast Asia, where data infrastructure, legacy migration, and core platform modernisation remain the dominant investment priorities, fundamentally shaping how trade-offs are evaluated compared to mature markets focused on defending AI pilots.

Defending spend through customer value, not pilots

As budget scrutiny intensifies, artificial intelligence programmes face rigorous justification. Organisations can no longer rely on isolated productivity experiments to defend AI expenditure. Leaders must transition to enterprise-wide strategies that solve explicit customer pain points and deliver measurable business outcomes.

Giron notes that across Southeast Asia, AI experiments are active, yet enterprise-wide strategies competing for substantial technology budgets remain a minority. Most organisations are still addressing foundational prerequisites: ordering data infrastructure, managing legacy migrations, and consolidating platforms.

For those successfully scaling AI, the focus shifts decisively towards impact.

“For those organisations where AI is scaling, they tend to focus on a small number of priority use cases tied to customer or employee outcomes, with serious investment in the data, integration, and operating model required to run them reliably.” Fred Giron

This targeted approach necessitates ruthless prioritisation of application sprawl and technical debt. Leaders are compelled to approve only upgrades and features that yield clear, quantifiable business value, while systematically deprioritising legacy initiatives that dilute resources.

The mandate is clear: move beyond chasing employee productivity gains to formalising AI strategies that scale agentic workflows, embed responsible governance, and directly enhance customer value.

FinOps as an operating discipline and infrastructure reality checks

With public cloud consumption accounting for an average of 17 per cent of IT expenditure, FinOps has evolved from a reactive cost-tracking function into a core operating discipline. Leading organisations are embedding financial accountability directly into engineering workflows, ensuring teams own consumption and finance tracks unit economics such as cost per transaction, customer, or model run.

Giron highlights that mature FinOps programmes “embed guardrails early via tagging standards, policy-as-code, and budget alerts.”

Optimisation extends specifically to AI and machine learning operations, where teams right-size training and inference workloads, reuse shared pipelines, and strategically select cost-effective models, including open-source alternatives.

Workloads are deliberately distributed across cloud and on-premises environments to balance expenditure with performance, preserving scalability without inflating costs. Simultaneously, infrastructure procurement strategies are shifting from price-driven to capacity-driven models.

Facing memory shortages and 10–20 per cent higher refresh costs, CIOs are locking in long-term agreements for critical workloads, selectively extending legacy assets, and triggering refreshes based on utilisation thresholds rather than calendar cycles.

The prevailing mindset, as Giron notes, is to “assure capacity for what matters,” maintaining flexibility as demand fluctuates and supply chains remain constrained.

Energy, sovereignty and the cyber resilience imperative

Data centre energy constraints have emerged as a structural planning variable. Facilities reliant on grid electricity and diesel backups—consuming roughly 7,000 gallons per megawatt daily during outages—must treat energy availability as a core design constraint.

Giron advises that CIOs are responding practically: improving efficiency through consolidation and advanced cooling, deploying telemetry to track energy alongside cost, modernising infrastructure in deliberate waves, and utilising colocation or cloud where flexibility and efficiency improve.

“Treat energy as a design constraint early to avoid capacity surprises and scale more sustainably,” he urges.

This resilience imperative extends to cybersecurity and digital sovereignty. State-aligned hacker groups, including Iranian actors targeting firms like medical technology leader Stryker, are escalating attacks on critical infrastructure.

Yet, full-stack technological sovereignty is neither feasible nor practical. Instead, organisations must pursue “minimum viable sovereignty,” a pragmatic, risk-based approach that mitigates jurisdictional exposure without overengineering solutions.

Giron warns that many APAC CIOs mistakenly equate sovereignty with data residency. “Data residency is something hyperscalers cannot guarantee, and regulatory compliance does not resolve it. The real exposure is jurisdictional,” he states, citing US FISA Article 702 as a mechanism that can grant access to data regardless of physical location.

Giron says the correct response requires triage across data, infrastructure, networks, software, AI, and personnel. Tabletop exercises must yield funded action lists, such as portability plans for critical systems, tested identity recovery sequences, and explicit supplier diversification for hardware exposed to export restrictions.

“If the exercise produces no funded commitments, it was planning theatre,” Giron asserts.

Advanced organisations are implementing lightweight abstraction layers to convert vendor lock-in into switchable configurations, preserving optionality against ownership changes, margin optimisation, or sudden geopolitical shifts. Boards must routinely audit the question of what would be lost if primary AI vendors changed overnight.

Continuity, upskilling and leadership under fire

Geopolitical crises strain the people who maintain critical systems just as much as they disrupt infrastructure. Workforce continuity can no longer be improvised; safety risks and regional instability force rapid operational shifts while cloud capacity remains under pressure.

Leaders must address burnout as a tangible business risk that compounds execution errors during high-stakes trade-offs. Transparent communication and accelerated AI upskilling are essential, framing transformation as workforce augmentation and value creation rather than implicit reduction.

As technology leaders navigate unprecedented volatility, the ability to balance fiscal discipline, architectural pragmatism, and human resilience will separate enduring enterprises from those left exposed.