Whalesbook
IT Spending Surges, But Value Creation Faces Hurdles
Indian businesses are investing heavily in technology, with IT spending expected to grow 6% to 8% in 2026. This rate outpaces the 4% to 6% forecast for global competitors, indicating a strong investment trend likely to last two to three years. However, this spending boom is overshadowed by a persistent challenge: the gap between the amount invested and the actual business value delivered. This disconnect suggests that while technology commitment is high, strategic execution and measuring results need improvement. Companies are moving beyond just updating their tech or fixing past issues, aiming to reimagine operations and build future-proof technology systems.
Shift to CapEx Fuels AI and Data Investments
A key feature of India's current tech investment is the strong shift to capital spending (CapEx). Indian firms are dedicating 50% to 60% of their tech budgets to CapEx, far exceeding the global average of 20% to 30%. Most of this investment goes to AI platforms and data modernization, taking up 30% of the CapEx. Other allocations include modernizing core applications (25%), cloud and IT infrastructure (25%), and cybersecurity (20%). This spending strategy focuses on building core strengths, making AI and data central to future company growth. Yet, many companies struggle to turn these large investments into clear business results. This is often due to a mismatch between business goals and IT execution, weak AI and data infrastructure, and old operating models.
Leaders See IT as Adequate, Not Strategic
Despite the large increase in tech spending, a key paradox remains: only about 15% of business leaders see IT as truly strategic. A large majority, 70%, rate it as "good, but not great." This shows a fundamental challenge in getting the most value from significant IT spending. Experts point to several systemic problems preventing the best results. These include shortages of advanced AI and data skills, challenges integrating new tech with older systems, and a lack of strong ways to measure ROI beyond just finishing projects. While AI investment is common globally, the maturity of data management, operational flexibility, and strategic alignment varies. This can put Indian companies at a disadvantage in fully using their tech investments. Companies that focus on results rather than just completing projects will likely lead.
Risks in High IT Spending
The fast growth in India's enterprise tech spending comes with risks. A main concern is the potential misallocation of large capital spending, especially if AI and data modernization don't lead to clear gains in efficiency or revenue. The ongoing gap in value delivery suggests deeper problems, like shortages of specialized AI talent and challenges integrating new tech with old systems, could continue to slow progress. Additionally, the view of IT as "good, but not great" suggests a disconnect at the executive level about IT's strategic role. This could mean less support for key transformation projects. Uncertainty around data privacy and AI rules in India could also create unexpected issues. Unlike some global rivals with more mature digital rules, Indian companies face the dual challenge of adopting quickly while doing the necessary groundwork for effective, compliant use. This poses a risk that spending might outpace readiness.
Focus on Outcomes Needed for Tech Success
Looking ahead, about 40% of 2026 tech budgets are set aside for change projects, with a large part aimed at AI and data-driven transformations. CIOs are expected to focus on key AI plans, simplifying applications, and upgrading data systems in the next year. This shows a continued commitment to building strong tech foundations. However, the success of these projects depends on solving the value realization challenges discussed. Companies need to shift their focus from deploying tech to achieving measurable business results. This involves redesigning operating models and ensuring IT and business functions work together smoothly. The next two to three years will be vital for Indian companies to bridge the gap between their ambitious tech investments and the strategic value they deliver.