Tomás O’Leary is CEO and Founder of Origina, helping enterprises extend the life of mission-critical IT systems.
Paying tax is one of the few certainties in adult life, and most of us settle up without much thought, ticking it off once a year and trusting that the system is roughly fair. But anyone who has worked with a good tax adviser knows the real lesson: the difference between what you must pay and what you happen to pay is often substantial. The adviser’s job isn’t to evade. It’s to help you understand the difference between the two.
I want to argue that enterprise software now works the same way. There is a tax on every IT budget, a tax most chief information officers (CIOs) are paying without ever having sat down to read the bill.
Call it the “software tax.” It is the portion of your annual technology spend that goes not to running the business or to growing it (and certainly not to transforming it), but to absorbing changes you did not request, did not need and would not have chosen had anyone given you the choice.
For instance, these are price uplifts on tools you already own, forced migrations to versions containing new features your teams will never use, re-platforming exercises driven by vendor end-of-support deadlines rather than business demand and compliance recertifications triggered by a release cycle on someone else’s calendar.
Until recently, the scale of it was hard to see, but it is becoming harder to ignore.
The Cost Of Staying Current
According to Gartner, worldwide software spending will grow in 2026 to more than $1.4 trillion, contributing to over $6 trillion in total IT spending worldwide. At that pace, software spending is expanding at more than four times the rate of projected global GDP growth.
Much of this is being driven not primarily by what enterprises are choosing to do, but by what they are being told they have to do: price uplifts on incumbent products, mandatory version transitions and bundled functionality the buyer never asked for.
Then there is the AT&T example, which offered a public glimpse into how these dynamics can surface. Following Broadcom’s acquisition of VMware, AT&T claimed that proposed renewal terms would increase annual costs by more than 1,000% for infrastructure supporting approximately 75,000 virtual machines.
The headline figure is unusual, but the broader pattern is familiar to many enterprise buyers. Most enterprises absorb this kind of repricing quietly through a renewal letter no one outside the procurement team will ever read.
McKinsey’s technology spending analysis, published in March 2026 in collaboration with Serviceware, found that the best-performing companies—what the researchers call “deliberate modernizers”—manage to direct only about a third of their technology budgets toward “change” activities such as modernization, AI and new application development, with the remaining two-thirds going to “run” expenditures that simply keep existing systems alive. And those are the leaders.
Most enterprises do worse, with AI investment now consuming up to a third of whatever change budget remains, often layered on top of legacy platforms rather than replacing them. Flexera’s 2026 State of the Cloud Report finds that 29% of cloud spend on IaaS and PaaS is wasted outright on idle, over-provisioned or forgotten resources. What is changing is that boards have started to notice that “IT spend goes up every year and innovation capacity does not” is a pattern, not a coincidence.
Sorting What You Owe From What You Pay
A good adviser does not tell you to stop paying taxes. They help you sort what you owe from what you have been paying out of habit, ignorance or the mistaken belief that the rules leave you no room to maneuver. CIOs need to do the same exercise with their software estate. Three questions are enough to start:
1. Is this spending necessary?
Some of it genuinely is. Core systems require maintenance. Regulatory environments require updates. Real innovation requires investment. Mark these with a pen and move on.
2. Is this spending negotiable?
An enormous amount of enterprise software cost sits in this category and is treated as if it does not. Renewal terms can be challenged. Bundled features you do not use can be unbundled. End-of-support deadlines are vendor commercial decisions, not laws of physics, and well-supported systems have been kept running productively for years past the official sunset date.
Negotiation requires preparation, and preparation requires the analysis most IT departments have never been resourced to do.
3. Is this spending avoidable?
This is the uncomfortable category. Every line item that exists because a vendor’s roadmap demanded it rather than because the business asked for it belongs here.
That includes migrations justified primarily because an existing system has been declared end-of-life by the same party that benefits from replacing it. It also includes every “upgrade” that delivers no measurable improvement to the operation it affects.
Avoidable does not always mean immediately avoidable. But it does mean these costs should be identified, quantified and elevated to the board agenda.
Beyond The Bill
This piece is about cost, where the software tax first and most visibly shows up. It is the entry point, not the whole story. The same dynamic creates a waste problem, where perfectly functional systems and hardware retire years before their useful life ends. It produces a control problem—strategic decisions about your own infrastructure being made in someone else’s product roadmap meeting. And it produces a capacity problem when the best people in your IT organization are spending their time managing change they did not initiate, instead of building the things only they can build. I will come back to each of those in future columns.
But it begins with the bill. Read it line by line. You are paying for a lot of things you would never have agreed to if anyone had asked. The good news is that you are the one signing it, and can take action to reduce the software tax.
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