Tech Explained: Here’s a simplified explanation of the latest technology update around Tech Explained: AI drives surge in data, cloud, cyber spends despite tight tech budgets in Simple Termsand what it means for users..
‘AI is opening new areas of addressable work, including cybersecurity, core operations, custom systems integration, and even mainframe modernisation’
AI-led transformation is emerging as a key growth driver for IT services, with companies seeing a surge in adjacent spending on data modernisation, cloud, and cybersecurity, even as overall technology budgets remain constrained.
Julie Sweet, Chair and CEO of Accenture, highlighted this pattern during the company’s Q2 FY26 earnings call, adding that AI is emerging as a key tailwind for the company’s growth.
“Clients are implementing foundational programs with our ecosystem partners to capture the full opportunity of AI. These typically involve cloud, security, and data modernisation, often combined with operating model and talent transformation. We continue to see that at least one out of every two advanced AI projects leads to a data project,” she observed.
Similarly, a report by Emkay Global Financial Services explained that Advanced AI is opening new areas of addressable work, including cybersecurity, core operations, custom systems integration, and even mainframe modernisation. AI is making some previously uneconomic or technically difficult modernisation work feasible, while also enabling more complex use cases in areas such as KYC in banking, claims in insurance, prior authorisation in healthcare, and manufacturing.
Bundled deals
“AI is causing a significant spike in spending in the data modernisation area. The increased attack surface due to AI is also causing a spike in cybersecurity spending. Cloud is a function of consumption and scales linearly with workloads in the cloud. We continue to see bundled deals where clients are signing larger data modernisation deals, even as they create larger and more integrated deals in cyber/cloud,” said Yugal Joshi, Partner, Everest Group.
A similar pattern is being observed across Indian IT firms. Breakthrough AI transformation creates additional significant work in terms of process re-design, data modernisation, skills upgrades, and tech of the future – all of which require a robust consulting layer. This is also compounded by ongoing revenue compression in the traditional segments, which creates a drag on growth.
However, this momentum doesn’t mean a notable increase in technology budgets just yet. Given the current environment, technology budgets are increasingly modest at low to mid-single digits, even as AI budgets are almost doubling on-year, he said.
Joshi noted that clients are forcing an aggressive posture on run and Business as Usual (BAU) spending, and seeking significant productivity and savings in these areas. They are seeking to reuse these savings for funding their AI transformation budgets, and the expected big budget increases there.
“In several situations, we are finding ‘new’ capital/budgets being released for AI, and that discretionary budget is usually coming from ‘business budgets’ outside of IT. AI is getting funding not just from IT, but also from other sources of discretionary money with the C-Suite and the business,” he shared.
Published on March 24, 2026