New Forrester research outlines key actions for business and technology leaders to navigate uncertainty and mitigate the effects of global disruptions.
According to Forrester’s report How To Thrive Through Volatility, business and technology leaders need to quickly adapt to current economic uncertainty.
2025 has so far been marked by unpredictability and volatility – new tariffs, trade wars, outages, cyberthreats, supply chain disruptions and geopolitical tensions are all contributing to global market instability.
As a result, business leaders may have an impulse to pause planned initiatives and spending and wait to see how things play out. Yet with no end in sight to this volatility, leaders should double down on investing in areas that position them for future growth while proactively optimizing costs, pivoting resources and scaling back on non-essential projects.
As competitors retreat, market opportunities will emerge for those poised to take control. For business and technology leaders to thrive through volatility and come out ahead, the report recommends focussing on four critical areas. These include:
- Fiercely optimizing tech investments and simplifying technology. This is not the same as ruthless cost cutting, which, when done reactively, often undermines long-term value. Instead, it’s about identifying opportunities to streamline – such as eliminating redundant software and renegotiating to drive greater efficiency and savings.It’s also about reprioritizing – not pausing – modernization plans to be more nimble, secure, and prepared to make the best use of AI and other game-changing technologies.
- Reaffirming brand value and prioritizing customers. Understanding and prioritizing which customer segments to serve will help leaders adjust their brand’s value proposition to reflect volatility shifts.
- Excelling at leading change. To successfully adapt to volatility, leaders must provide confidence and clarity to their organizations. Along with building bidirectional listening strategies and communicating transparently to employees, leaders should cultivate a culture of continuous learning and upskilling.
- Proactively managing risk. More than 40% of business and technology leaders cite economic uncertainty as the systemic risk that they are the most concerned about. While leaders can’t stop volatility from happening, they can manage it by taking a continuous, holistic approach to risk. Forrester recommends managing three sources of risk – enterprise risks tied to their strategy and factors fully within their control; ecosystem risks they can partially control arising from third-party relationships; and external risks they can’t control, including tariffs – and creating scenario plans for addressing each risk type.
“The ongoing tariff negotiations on imports from all APAC countries has introduced significant uncertainty into the market, with the full ramifications yet to unfold, said Frederic Giron, VP, Senior Research Director, Forrester.
“In this volatile environment, it is imperative for business and tech leaders to engage in comprehensive scenario planning to anticipate various outcomes and develop adaptive strategies that ensure organizational resilience. By proactively preparing for multiple contingencies, APAC organizations can navigate the complexities of the evolving trade landscape effectively.”
“Although we rightly predicted in 2024 (see: Forrester’s Predictions For Public Sector And Government) that rising digital sovereignty policies and geopolitical tensions would see the world fragment into at least 3 distinct technology trading blocks, we did not expect to be facing a full-scale global trade war,” said Sam Higgins, principal analyst at Forrester and based in Sydney.
“For many countries in the region, and particularly Australia, the impact of the evolving tariff policies are not only direct but indirect. As an example, the currency fluctuations have real implications for imported cloud-based computing for organisations, as global tech providers have pegged their product pricing to the US dollar in major global markets. As a result, we can expect tech leaders finally biting the bullet to pay down tech debt by refactoring cloud-hosted legacy applications to reduce consumption charges.”
More analyst insights
Forrester VP, Principal Analyst George Lawrie – On Tariffs and Supply Chain
“In the ever-evolving landscape of global trade, the recent imposition of new tariffs and sanctions is leaving many business leaders concerned about the future of their supply chain strategies. Navigating through the complexities of today’s global trade environment presents a multifaceted challenge for businesses. While, in the short term, consumers will bear the brunt as importers include tariffs in their prices, this moment also presents an opportunity for supply chain leaders to diversify and digitize their supply chains for greater resilience.”
Forrester Senior Analyst Alvin Nguyen – On tariffs and semiconductors/ chips/ data centers
Near-term
“The fluidity of the tariff situation means there will be confusion about the impact to the supply chain due to the complexity of tracking where materials and manufactured goods are produced and assembled. For semiconductors, we may see certain goods no longer making sense to produce due to the cost (see Nintendo Switch 2) and the value seen from IT purchases diminishing. For data centers, this will increase the costs of building data centers in the US – but investments here are long-term so I do not expect changes right away.”
Medium-term
“For semiconductors, we will see more foundries being built around the world as the push for geographic diversity and the supporting supply chains are deployed. This will be beneficial as there is less dependence on Taiwan for the majority of chip production. For data centers, this may cause some changes to data center investments depending on the state of tariffs and the cost impacts by location. Enterprises may be incentivized to time buildouts to where they see better returns, but this is where sovereignty laws (AI and data) will also have an impact and can completely change the basis for where to build data centers.”
Long-term
“For semiconductors, we should see a healthier global ecosystem for semiconductor manufacturing and more supply chain options in where chips are produced and can be procured. For data centers, this has little effect in terms of if data centers will be built, but where they get built – due to effectiveness of spend and any associated regulatory activity – may be impacted.”
Forrester Principal Analyst Lee Sustar – On Tariffs and Cloud
“The trade wars will impact the public cloud platform in multiple ways. In the near term, cloud providers face price shocks in their supply lines. As bulk buyers of chips, cables and other materials, they have some near-term flexibility. But the ambitious plans like Microsoft’s proposed $80 billion buildout of AI-oriented data centers will become significantly more expensive to execute due to price increases for building materials. At the same time, the demand for cloud services — especially pricey AI offerings — will drop at least in the near term due to uncertainty over the wider economy. Cloud providers will face pressure to pull back on big investments and pass costs to customers with price increases.”
Forrester VP, Research Director Mark Moccia – On Tariffs and CIOs/ IT Costs
“The new US tariffs have set the stage for increasing IT costs. The impacts will evolve over the next two to three quarters as vendors consider, develop, and roll out new pricing strategies. To navigate these challenges, identify worst-case, best-case and likely scenarios, along with the specific actions needed to mitigate the heightened cost pressures entailed in each.
“Tariffs will make mass capital expenditures for PCs more expensive, prompting many to delay their Windows 11 refresh and pay for extended support for Windows 10; seek alternative approaches to a hardware refresh; and investigate opex-based purchasing to avoid a massive capex purchase – though prices will rise for both traditional purchasing and leasing.
“IT infrastructure will likely see significant price increases as major manufacturing nations face high tariff rates, especially in the US. The rising costs could balloon budgets and force CIOs to delay or prioritize the most important projects. CIOs and other tech leaders will need to proactively analyze costs, diversify sourcing, optimize inventory and prioritize the projects that don’t sacrifice critical AI ambitions.
“While not currently subject to tariffs, the cost of cloud, software as a service and other services could go up as their underlying costs increase and exchange rates fluctuate. More concerning would be if other countries retaliate by directly targeting US services where there is a surplus to many countries.
“Service providers and even software vendors will find ways to recoup cost, even for contracts seemingly unavailable for renegotiation. This occurred previously during the US-China trade war in 2018–2019, when many tech hardware vendors were hit with 25% import tariffs on components. These vendors added a ‘tariff surcharge’ to fixed price agreements, which many customers reluctantly paid.
“The disruption caused by changing the funding and tax incentives of the US Chips Act will also have long-term cost implications. While chip manufacturing in the US is announced, those plants will not start delivering before 2027. A threat in Europe’s trade-negotiation arsenal is restricting export of ASML machinery. If implemented, this could negatively impact chip supply in the medium term. The result: more price increases. US CIOs should plan to boost AI project budgets, as previously allocated budgets will likely not suffice to continue these projects at their current pace.
“Maintaining an IT staff that has a healthy mix of employee to contractor will afford CIOs the option to reduce contract staff in response to sharp cost increases that drive IT demand lower, without sacrificing years of subject-matter expertise in employee layoffs.
“We urge CIOs to lean more heavily into other methods of spend optimization before drastically reducing labor expense. Minimizing cuts to IT staff will allow for existing personnel to buy down more technical debt, improve data management capabilities to set up AI deployments for success, and so on.”
Forrester VP, Research Director Lauren Nelson – On tech leaders/ volatility
“As much as we want to regain control, lead people through difficult times and navigate the ongoing chaos gracefully, it can feel like an insurmountable goal in the current reality. To lead through this change, the best approach is to keep it simple and tangible. Focus on clarifying the unclear, celebrating successes, managing risk, and giving employees the space to innovate and take ownership to drive a better path forward.
“At the same time, tech leaders won’t have a choice – they will need to do more with even less. This will mean dusting off the cost-cutting playbook from prior years to seek out additional optimization opportunities but without sacrificing their AI ambitions.
“Do not abandon long-term, North Star strategies already in place or in development. This will not only hurt your organization but your long-term ability to lead, as your best talent wants to be part of progressing toward a better end state. When that vision is put aside in times of strife, you risk losing their presence and sliding backwards from any cultural gains when it comes to embedding continuous improvement and curiosity. Your employees will not be quick to forget this and will be less ready to follow you in sunnier times or into the next battle. Without your best talent playing a key part in taking major cultural strides, it will be near impossible to drive the long-term success and transformation needed for your organization.”
