Artificial intelligence (AI) brings a new set of technologies that are exciting businesses across all industries with the possibilities they bring. The pace of innovation and the board/C-suite expectations are met with the collective angst with the chief information officers (CIOs) who are challenged to meet the evolving demands of implementing new technologies while balancing the need to continually reduce costs within the information technology (IT) function.
So What Is Changing to Drive IT Costs Higher?
The Mix of Skills That IT Is Now Expected to Provide
AI skills may cost 30%-50% more than “traditional” IT skills. New roles such as AI platform engineer, AI agent architect, prompt/agent engineer are not simply old roles with “AI” put in front of them, they require new skillsets that must co-exist with the traditional IT roles.
Innovation Is Now Moving at an Accelerated Pace
Whereas innovation cycles used to be three to five years to deploy and benefit from new technologies, the pace of change wrought by AI is bringing this down to months or sometimes weeks. This is evidenced by the speed with which companies are releasing new large language models (LLMs) and AI solutions with increasing power and opportunity on an almost quarterly basis.
Technical Debt and Data Readiness
Rapid innovation and the rise of new AI technologies are accelerating cost pressures that have steadily increased for CIOs. AI is also exposing data frailties across the organization faster than ever.
Increasing Productivity Outside in the Business, Driven By AI
This wave of AI has truly democratized insights across the firm, with demand for AI initiatives will come from the business directly — front office and back office. IT will need to provide the infrastructure and tools to support everything that can be justified with a return on investment (ROI).
Compute Replacing Labor
As agentic solutions improve and the number of “digital workers” increases with it, the costs of AI compute will increase as well — but preferably at lower unit cost than the human counterparts. Costs will shift from human labor to compute, and the CIO’s budget will be the one that is hit the hardest.
AI Regulation
While the impact is not yet fully felt, the CIO of the near future needs to plan for higher compliance, AI governance, and associated costs that will come from the economic shift to AI technologies and the regulation that will follow soon. We are already seeing countries and industries setting up strict AI regulations to protect against the unforeseen and often unintended consequences of AI.
‘Everyone Gets a License’
For many companies “AI strategy” is almost synonymous with “everyone gets a Copilot/Gemini/Perplexity (or similar) license.” Expect more platforms and productivity tools to be demanded by the business.
Where Can a CIO Find Cost Savings in the Age of AI?
While there may be an appetite for deploying AI technologies, the CIO can take advantage of new AI technologies themselves to reduce costs with certain role types that are fulfilled by humans.
Examples of roles that will reduce over the next two years
- Helpdesks and service desks
- Technology delivery lifecycle
- Report development and information consumption
- Infrastructure and application management
- Adaptive cybersecurity and threat intelligence
Agentic AI Solutions Should Be Part of the Solution
Both within the IT function itself and in the business, agentic solutions can automate processes and improve productivity. However, successful implementation needs to be coupled with a strong financial business case and governance. The chief financial officer (CFO) who sponsors an agentic initiative, will want to see the direct impact on the profit and loss (P&L).
The Great Balancing Act Revisited
Self-Funded Journeys
While AI technologies may drive more funding from corporate, the CIO will be expected to self-fund as much as possible. This means releasing the funds from existing IT spend to fund new operating expenditure (Opex) and capital expenditure (Capex) spend.
The Challenge… Accepted?
Here is perhaps the greatest challenge of all for the CIO. The new, increased costs that will increase the IT budget must be balanced against the efficiencies that AI technologies will bring to the AI function itself.
Can these two opposing forces move in lockstep, or will the cost increases come in far quicker than the cost decreases can handle?
What Is the CIO to Do?
- Run an explicit cost assessment and cost reduction program (again).
Worst case: Better ability to justify why foundational AI costs are leading to unavoidable increases in the IT budget.
Best case: Fresh eyes to identify new opportunities to reduce the cost of IT, perhaps even using AI technologies. - Be more rigorous about identifying changes outside the IT function, attributed to changes driven from within the IT function. If not already, make even better friends with the finance department and the human resources (HR) department to understand what is happening to costs outside of IT.
- Practical AI solutions. Your CEO is tired of the “TED talk” or consulting companies trying to sell them an “AI strategy” or an “AI roadmap” or doing an “AI assessment.” Focus on those practical AI solutions that can drive change in the business with a measurable and real outcome. Something your CFO can support.
- Measurable benefits and outcomes. To realize outcomes and measurable impacts from AI automation and an agentic workforce, start by defining clear key performance indicators (KPIs) aligned with your strategic goals. Implement baseline measurements of current processes before automation. Then, deploy AI solutions incrementally, tracking performance changes at each stage.
How Ankura Can Help
Ankura’s IT Cost Optimization is our marquee offering under our Margin Expansion and Cost Transformation services. Consisting of deeply experienced IT consultants working closely with our analytics team, our AI solutions team and our performance improvement team, we deliver tangible value unlock for our clients and help them move from sizing opportunities through to implementation.
The AI transformation is inevitable; Ankura makes it intentional.
© Copyright 2026. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC, its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
