As software vendors integrate generative and agentic AI capabilities into their products and enterprise adoption progresses, companies are facing mounting pressure from continuously rising software spending. According to West Monroe analysis, this technology is driving up costs across infrastructure, data management, and applications.

The consulting firm's report released Monday shows that more than 90% of executives expect AI adoption to increase technology budgets over the next year, with software spending being the primary driver. West Monroe surveyed 310 executives in procurement, IT, and finance roles at companies with annual revenue of at least $100 million.

The survey found that nearly half of companies experienced license and subscription cost increases exceeding 10% for renewals and new contracts, above the industry average.

As costs rise, CIOs face greater pressure to demonstrate that software investments deliver returns. Dhaval Moogimane, head of West Monroe's high-tech and software practice, told CIO Dive, a sister publication of CFO Dive: "The real challenge lies in linking spending to value creation. Executives often cannot see what other departments are spending on, so they make decisions based on limited information."

Global AI spending is snowballing, driven primarily by hyperscaler infrastructure investments and the proliferation of AI-driven software tools. As costs flow downstream to end users, enterprise customers are bearing the brunt.

Jonathan Selby, head of the technology practice at risk management firm Founder Shield, said in an email: "AI software is expensive to develop and maintain due to high computing demands, specialized talent, and ongoing operations, prompting some tech companies to raise prices to offset costs and ease margin pressure. But this trend has variables—competition and open-source models could ultimately make some AI services more accessible."

The wave of massive vendor investment has not yet peaked.

Last week, Microsoft committed$30 billionto expand its Azure cloud infrastructure in the UK, and added$4 billionfor data center facilities in Wisconsin, following a previous $3.3 billion investment in the state. In July,Google Cloud added $10 billion, bringing its total capacity expansion plans this year to $75 billion. Meanwhile, cloud giant AWS committed in June$10 billion to AI data center construction in North Carolina, and the largest hyperscaler plans to invest$100 billion。

in infrastructure-related capital expenditures this year. Cloud providers are absorbing the vast majority of AI investment, which Gartner forecasts will drive the global AI market to grow nearly 50% year-over-year in 2025, reaching nearly $1.5 trillion. Butthe spending structure is shifting toward enterprisesand the software they consume.

AI is everywhere

Erik Peterson, founder and CTO of IT cost management platform CloudZero, noted that because AI permeates every corner of the IT ecosystem, enterprise spending is difficult to track precisely.

Peterson told CIO Dive: "AI spending comes from multiple directions, including internal software engineering teams using AI to accelerate work, as well as AI replacing functions of existing systems."

Lack of cost visibility can distort perceptions and affect critical investment decisions. West Monroe's survey shows that nearly two-thirds of executives believe their software asset spending is higher than peers, while only 3% believe their bills are lower.

West Monroe noted that companies that perceive themselves as overspending tend to adopt defensive rather than strategic procurement strategies, prioritizing cost reduction over other business objectives.

Some excess spending is linked to poor vendor contract negotiations. According to research from analysis firm Green Cabbage cited by West Monroe, although rate increases for Oracle on-premises, SAP support, and Salesforce renewals were below 10%, many companies still absorbed double-digit software renewal price hikes.

Two major enterprise software vendors have signaled AI-related cost adjustments. Salesforce, since last month, hasraised prices on multiple enterprise products by an average of 6%. Earlier this year, the company increased Slack's commercial monthly per-user cost by 20% and set new pricing for its Agentforce platform.

Microsoft in Augusteliminated volume licensing discounts onmultiple cloud software suites, including Microsoft 365 and Dynamics 365, under Enterprise Agreements and Microsoft Products and Services Agreements.

Moogimane also pointed out that over-provisioning andshadow ITare alsodriving up software budgets。

Moogimane said: "Over the past few years, many companies made substantial software investments, especially in cloud agreements, based on expectations of business growth or agility. Some also purchased higher-tier elasticity or support services than current needs require."

Moogimane added that as long as AI adoption remains in its early stages, IT executives will need to balance multiple priorities.

Moogimane said: "Business units often experiment with AI tools on their own outside central oversight. We shouldn't stifle that experimentation, because much innovation and bottom-up adoption stems from it, but it inevitably leads to a proliferation of software."