Six Critical Business Challenges Every CTO Must Address
The technology landscape of 2026 presents both unprecedented opportunities and significant financial challenges for organizations worldwide. As James Watson-Hall, EMEA Field CTO at Zadara, recently highlighted in his comprehensive analysis, “No one knows a business challenge unless you are in that business and you are dealing with it.” Yet across industries, six critical challenges consistently dominate boardroom discussions, each carrying the potential to either drain millions from IT budgets or deliver substantial cost savings when properly addressed.
With the hybrid cloud market projected to reach $384.77 billion by 2031, expanding from $161.82 billion in 2025, organizations focusing on IT cost savings strategies for 2026 are discovering new approaches to infrastructure optimization. The question isn’t whether these challenges will impact your organization—it’s whether you’ll turn them into competitive advantages or costly mistakes.
The Reality of IT Cost Savings in 2026: What Every Organization Needs to Know
The path to IT cost savings in 2026 requires a fundamental shift in how we approach technology investments. According to the ‘State of Sustainability Readiness’ report, 88% of business leaders are planning to increase IT investments for sustainability initiatives, while simultaneously seeking ways to reduce overall technology spending. This apparent contradiction highlights the need for strategic thinking about where to invest and where to optimize.
Watson-Hall emphasizes a crucial principle from his experience with a particularly insightful CTO at a well-known UK retailer and Bank: “Put the right workload in the right place for the right reasons at the right cost that provides the right service level.” This seemingly simple statement encapsulates the entire approach to modern IT cost management.
Managing AI Infrastructure Costs Without Sacrificing Innovation
The artificial intelligence revolution has created what Watson-Hall describes as “AI panic/AI FOMO (fear of missing out).” Organizations are caught between the fear of missing competitive advantages and the reality of massive infrastructure investments. The challenge of AI infrastructure costs extends beyond initial hardware investments to include ongoing operational expenses, power consumption, and the risk of delivering solutions with poor ROI.
GPU lead times and costs have reached unprecedented levels, creating a perfect storm for budget overruns. However, smart organizations are finding ways to optimize these investments. Rather than rushing into expensive AI implementations, successful companies are taking a measured approach that balances innovation with financial responsibility.
The key lies in understanding that AI infrastructure costs can be managed through strategic planning. Organizations should focus on specific use cases with clear ROI projections rather than implementing AI for the sake of keeping up with trends. As Watson-Hall notes, “There’s nothing worse than being carried with the hype with a customer, delivering something that actually delivers no ROI within a period of time that people expect because the process has been rushed.”
Hybrid Cloud Cost Optimization: The New Imperative for Enterprise Success
One of the most significant developments in 2026 is the trend of cloud repatriation—organizations moving workloads back from public cloud to on-premise infrastructure. This shift is driven primarily by cost considerations and data sovereignty requirements. Effective hybrid cloud cost optimization starts with understanding workload placement strategies and recognizing that the “cloud-first” mentality of the past decade may not always be the most cost-effective approach.
Major retailers, once considered cloud-native organizations, are now pulling applications back to on-premise infrastructure for cost reasons, according to Broadcom’s “Private Cloud Outlook 2025” report. This trend represents a fundamental shift in how organizations think about infrastructure investments. Companies achieving hybrid cloud cost optimization report significant reductions in operational expenses by strategically placing workloads where they can operate most efficiently and cost-effectively.
The hybrid cloud market’s projected growth to $384.77 billion by 2031 reflects this strategic approach to infrastructure deployment. Organizations are no longer asking whether to use cloud or on-premise solutions—they’re asking which workloads belong where and how to optimize costs across their entire infrastructure portfolio.
Smart Cyber Resilience Investment Strategies for Maximum ROI
Cyber resilience has evolved from a technical concern to a business-critical investment with direct financial implications. The statistics are sobering: 48% of UK businesses and public sector organizations have been attacked by cyber criminals in the last 19 months. The financial impact can be devastating—Marks & Spencer’s recent cyber attack is estimated to cost them around 300 million pounds in revenue this year.
However, cyber resilience investment shouldn’t be viewed solely as a cost center. Smart organizations are discovering that proper cyber resilience strategies can actually reduce overall IT costs by preventing expensive incidents and improving operational efficiency. The key is moving beyond reactive security measures to proactive resilience frameworks that integrate with broader business operations.
Watson-Hall points out a critical gap in many organizations: “When you get hit, no one quite knows what to do. There’s not one person or a group of people that are empowered to press THE BIG RED BUTTON.” This lack of preparedness often multiplies the cost of cyber incidents. Organizations that invest in comprehensive response planning and clear decision-making frameworks see significantly better outcomes when incidents occur.
Data Sovereignty Compliance: Balancing Security and Cost Control
Data sovereignty has emerged as a major driver of infrastructure decisions, particularly as organizations implement AI solutions. The concern about placing intellectual property and private company data in public cloud environments is pushing many organizations to reconsider their data strategies. Data sovereignty compliance requirements are creating new cost pressures while simultaneously opening opportunities for more efficient data management.
The intersection of AI, hybrid cloud, and data sovereignty creates a complex web of requirements that smart organizations are turning into competitive advantages. By keeping sensitive data on-premise while leveraging cloud resources for appropriate workloads, companies can maintain compliance while optimizing costs.
This trend is particularly evident in organizations implementing AI solutions. Rather than sending proprietary data to external AI services, many companies are bringing AI models in-house and augmenting them with their own data. This approach addresses data sovereignty concerns while potentially reducing long-term AI service costs.
Lifecycle Management: The Hidden Source of IT Savings
IT lifecycle management represents one of the most overlooked opportunities for cost savings in 2026. Watson-Hall describes a common scene: “You walk through an open-plan office going to a meeting with the IT team, you look across the office floor and there’s a meeting room with a window, through the window you can see the room is piled high with equipment.” This image represents millions of dollars in wasted resources across organizations worldwide.
Proper lifecycle management can deliver substantial cost savings through several mechanisms. First, extending the useful life of existing equipment through strategic refresh cycles can delay major capital expenditures. Second, proper disposal and recycling programs can generate revenue from equipment that would otherwise represent sunk costs.
The statistics on equipment recycling are encouraging: approximately 75% to 80% of retired IT equipment gets resold, 15% to 20% gets recycled, and only about 5% ends up in landfill. Companies like Dell, HPE, and others actually purchase retired equipment, turning what many organizations consider waste into revenue streams.
Technology Sustainability Costs: Investment or Expense?
Sustainability initiatives in IT are increasingly driven by regulatory requirements rather than voluntary corporate responsibility programs. European organizations face compliance requirements for carbon neutrality reporting that extend beyond their direct operations to include all technology infrastructure, including cloud services.
However, technology sustainability costs should be viewed as investments rather than expenses. Organizations that proactively address sustainability requirements often discover operational efficiencies that reduce overall IT costs. Energy-efficient infrastructure, optimized cooling systems, and strategic equipment lifecycle management can deliver both environmental and financial benefits.
The trend toward sustainable IT is supported by significant investment: 88% of business leaders are planning to increase IT investments for sustainability initiatives. This investment is creating new opportunities for cost optimization through more efficient operations and reduced energy consumption.
Observability: The Foundation for Cost Control
Watson-Hall identifies observability as the seventh critical challenge, noting that “you can’t do any of the stuff above unless you really know what you’ve got, unless you can see where it is, unless you can understand how it’s behaving and unless you can monitor and manage it.” Observability platforms are becoming essential tools for cost management across all IT operations.
Modern observability solutions provide the visibility needed to optimize costs across hybrid cloud environments, AI infrastructure, and traditional IT operations. Without proper observability, organizations are essentially flying blind when making cost optimization decisions.
The investment in observability platforms pays dividends across all other technology initiatives. Organizations with comprehensive observability report better cost control, faster problem resolution, and more efficient resource utilization across their entire technology portfolio.
Turning Challenges into Competitive Advantages
The six challenges outlined by Watson-Hall—AI infrastructure, hybrid cloud optimization, data sovereignty, cyber resilience, lifecycle management, and sustainability—represent the defining technology issues of 2026. However, organizations that approach these challenges strategically can turn them into sources of competitive advantage and significant cost savings.
The key is recognizing that these challenges are interconnected. Decisions about AI infrastructure affect hybrid cloud strategies. Data sovereignty requirements influence cyber resilience investments. Lifecycle management impacts sustainability initiatives. Organizations that take a holistic approach to these challenges are finding ways to address multiple issues with single solutions, maximizing their return on technology investments.
As Watson-Hall concludes, “If you go in and say ‘We can fix everything,’ they won’t believe you because they’ve heard it all before, but if we can do some of it and we’re open about it and we can pick out some of those really high-level ones, that’s what customers are looking for today.”
The organizations that will thrive in 2026 are those that view these challenges not as obstacles to overcome, but as opportunities to build more efficient, secure, and sustainable technology operations. The potential for cost savings is measured in millions of dollars—but only for organizations willing to think strategically about their technology investments and take action on the insights available to them today.
Transcription
Introduction Welcome everybody! My name is James Watson-Hall. I am the EMEA Field CTO here at Zadara. I’m going to shorten my name for the rest of these podcastish series to JWH just because it’s easier and I’ve got ADHD and sometimes it’s hard to keep saying my own name. So, we’ve got a little bit of a mixed bag, so I call these things podcasts which technically they’re not because most podcasts are one person or two people or a group of people in a room with microphones, sometimes with a camera, sometimes without, chatting about certain topics. So, I’m going to be chatting about certain topics, but for this podcast series-ish, I’m kind of going to do it on my own and unusually, I’m going to use slides. And the reason for that is these kind of podcasts are designed for all types of technical sales, non-technical sales, anyone that works in IT in general and they’re designed to basically give an overview in business speak, not technical speak. There might be some technical slides in here, but business speak, around what Zadara is all about, what we do, how we meet some of these business challenges and stuff like that. I try to keep them short, I fail miserably sometimes, but I try to kind of do 8 to 10-minute bite-sized chunks. There are some slides because I think for me visually is much easier when you’ve got someone talking they kind of go hand-in-hand.
Context and Strategy And I would say, and I’ll probably say this all the way through, is from my perspective, the idea is not to verbatim learn everything I’m going to say or try and consume everything I say and regurgitate it. You know your customers, you know the market you’re in, you know the size of organizations that you’re going after, and you know your customers better than I do. The aim is hopefully you’ll pick up certain bits and you’ll think “Oh, my customer mentioned something like that and maybe I can go and have a conversation.” That’s really what this is designed for. I am English, I do have ADHD, and I do talk very fast, and I am deliberately now trying to slow myself down. So we’re going to get cracking. I think we’ve got 11 or 12 podcasts-ish in here. So we’re going to start, I’m going to go a little bit back to the beginning so to speak, and I think it’s important because a lot has changed and I’ve been in this business a long-long time. You know, I’ve done technical pre-sales to technical account management, European pre-sales, European CTO, global CTO. The way in which we sell technology today has changed so dramatically after the last 15 years. But I think it’s important to kind of start with how I see the market and how the market appears to me and I think hopefully to other people.
The Big Six and a Little Seventh We’re going to talk about kind of the big six and maybe a little seventh topic. And the reason I’m doing this is I work for a very-very well-known large manufacturer and for the last five years as a global CTO covering data services, so that’s AI, storage, backup recovery, cyber resilience, kind of all that sort of stuff. And I saw it in that organization and I hear other people talking about it “Let me tell you about your business challenges.” It slightly irks me when I hear that phrase because I think a lot of people ask the question but don’t really know what they’re asking and if they get an answer they potentially don’t understand it or at least can’t translate it into something that we can do that can help. And I think sometimes it really irritates customers because you ask the question, you see the eyes roll because “Oh my god, everyone’s asking me the same thing!” No one knows a business challenge unless you are in that business and you are dealing with it, frankly, in my personal opinion. It’s not an opinion of Zadara, it’s my personal opinion. But what I do hear and what I do see, and this is really across the last at least three years, is the same topics at the board or at the CIO or the CTO or the IT director or infrastructure manager, the same six topics have been around for a very long time.
And so what we’re going to do is we’re going to focus on those, and that’s podcast one-ish, and then we’re going to go on to a little bit of history and then we’re going to kind of go into how Zadara and what we do addresses some of these big challenges. Excuse the non-pretty slides, right? I’m not a slide designer but it’s as good as it gets. We will hear lots and lots of the same thing over and over again. And the big one at the moment, honestly if you’ve been on LinkedIn, Facebook, Instagram (I’m too old for things like TikTok and Snapchat and stuff), but you can’t ignore Artificial Intelligence. I mean the hype is insane, and I mean really is insane! Everyone’s talking now about a bubble. You see these 5 billion dollar deals being struck with the UK and you see the Kingdom of Saudi Arabia committing billions of dollars towards Artificial Intelligence. We’re going to cover that in one of the sections. It’s huge. I’m going to talk about AI panic/AI FOMO (fear of missing out). It’s big but there is so much noise, there’s a lot of smoke and mirrors, but it is probably today, outside of cyber resilience, number one on every organization’s list. And that is because simply for a lot of organizations, if we’re not doing it, we’re going to miss out. And if we’re not doing it and our competition is, we’re going to lose ground, maybe. So we’re going to talk about Artificial Intelligence.
There’s an awful lot of stuff going on. Everyone’s talking about GPUs, GPU lead times are insane, GPU costs are insane. You know, I’ve got a slide that’s going to kind of bring us a little bit back to basics in terms of having a reasonable conversation with a customer. And what I mean by that is it’s very easy (and I’m all about selling stuff, right?), we go into a customer, they want to buy our solution with some GPUs in it, boom let’s go and sell it. But there’s nothing worse than sometimes being carried with the hype with a customer, delivering something that actually delivers no ROI within a period of time that people expect because the process has been rushed. So we’re going to talk about that.
Hybrid Cloud has been around for a long time. I think the really interesting thing that we’re seeing now is organizations (and this is small-medium businesses and also now we’re seeing like enterprise). If anyone’s from the UK and Ireland and actually Europe, we all know about Tesco’s as a giant retailer, one of the biggest food retailers and clothes retailers across Europe. With the hybrid cloud situation now what we’re seeing is customers that were born in the cloud are now moving out of the cloud for cost reasons and for data sovereignty reasons. We’re going to talk about data sovereignty, it’s another big topic at the moment. And organizations, large organizations that, honestly 10 years ago, if I had a euro or a dollar or a pound for every customer that I went to see that said “Thanks for coming but we’re 100% cloud and we’re never going to buy infrastructure again,” I would be retired! But we’re seeing organizations pull applications or repatriate applications back to on-premise. Sometimes that’s driven by cost, a lot of the time it’s driven by data sovereignty. Data sovereignty is driven by artificial intelligence because people don’t want to put their intellectual property and their private company data into the public cloud for all those reasons that you can go and read about. So it’s a big topic.
And I went to meet an organization in the UK called The Co-op, and they’re a retailer, they’re a bank and they’re also funeral directors (or they were funeral directors, I’m not sure if they are now), and I met one of the smartest CTOs I think I’ve ever met. He is exceptionally blunt, he tore my sales team to pieces, and he was part of a video series that was sponsored actually at the time by VMware, HPE and someone else called Clouded. It was done by a company called Dark Matter. Ignore the fact it’s VMware and HPE, it’s a really good watch. It’s an hour long, I’ve watched it 10 times. But he said to me “Put the right workload in the right place for the right reasons at the right cost that provides the right service level.” And actually absolutely common sense! And if you look today at Azure outages (and I’m not one to try and capitalize on this, “Oh you’re in AWS, come and move your 15,000 applications to us!”), things like that don’t happen, but it is making people think. Put it in the right place. It’s making people think because also people want to do Artificial Intelligence. It’s really good if you want to go and take an off-the-shelf model like Chat or Meta or Anthropic or Claude as it’s known now and bring that in-house and then augment that model against your own data because that’s where your intelligence comes from, right? That’s where your insight comes from. And that links Artificial Intelligence, Hybrid Cloud, and Data Sovereignty. You see how all these kind of all link? So those three are interlinked.
And then of course we’ve got some other ones that sit on the side of it. Cyber Resilience is huge. I mean in the UK we’ve had some massive public ones. Marks and Spencer’s had a cyber attack, they were very public about it which I think is absolutely, well firstly, good on them, and secondly, they wanted to share their experience to stop other people having the same problem. That’s rare. They were sharing with competition of theirs and they’re estimating their revenue drop this year will be around 300 million pounds. That’s what the cyber resiliency cost them. And they’ve cancelled a contract with a very well-known Indian outsourcer because (and this is the problem with cyber resilience), quite often the weakness is between the chair and the keyboard, aka you-I workers. But cyber resilience is a much bigger topic than that. People are like “Yeah, we can detect encryption.” Yeah, the minute any vendor releases a solution, the hackers are one or ten steps ahead. They’re already getting around it. “Oh, we look for 4 kilobytes of encrypted data!” They’re doing 4 bytes of data. There’s never going to be a fix and it’s only going to get worse with artificial intelligence because they’re using it against people. But cyber resilience is the right infrastructure, it’s training your people in the right way to spot these problems, remove the issue between the chair and the keyboard. Malicious, they’re now bribing people. There’s a really interesting BBC report of a reporter who was approached by a hacking group and they were offering him a cut of the proceeds to give up his credentials. It’s very interesting. One of the big challenges is not an infrastructure challenge, is when cyber resilience, when you get hit, when a company gets hit, no one quite knows what to do. There’s not one person or a group of people that are empowered to press the big red button that says “This process is going to kick in and this is what we do.” That, even in the largest of organizations, it doesn’t really exist today. Jaguar Land Rover, the UK government has bailed out… this is interesting because everyone’s getting annoyed about this. Everyone thinks that they’ve bailed out Jaguar Land Rover by 1.5 billion dollars even though Tata is a billions and billions of dollars company. Actually what the UK government has done is committed 1.5 billion dollars to ensure that the just-in-time manufacturers that supply Jaguar Land Rover’s production line do not go out of business. So if JLR goes and they’re backed by a big organization they’ve got lots of money, the impact upstream or downstream depending on how you look at it to their just-in-time suppliers in the UK is enormous and across Europe. That’s what they’ve rescued. And I read a really interesting stat that said that 48% of UK businesses and public sector in the last 19 months have been attacked by cyber criminals. 48% of companies in the UK! It’s insane!
So it’s a real issue so we’re going to talk about some of that stuff. And then the last two are kind of a little bit and my little seventh one down bottom right-hand side. Lifecycle Management, I’m going to talk about horizontal scaling. Which you think about those two things, they just sound completely different. Bear with me, we’re going to get to that when it comes to one of the podcasts towards the end. But lifecycle management is an issue, right? Dealing with legacy hardware or firstly getting off of legacy hardware onto new hardware is a challenge because it’s legacy for a reason, because no one wants to touch it normally. But dealing with legacy hardware and lifecycle management of that hardware and patching stuff like that comes into this, is a real challenge. And one of the biggest routes in for cyber attackers is through legacy hardware and unpatched software and firmware on equipment. Again, they all kind of interlink. So we’re going to touch on it but I’m going to touch on it from a horizontal scaling point of view which I’ll link back into that in one of the podcasts.
And then Sustainability is, two years ago, in fact I mean most, depends where you are around the world, but for most European organizations there is a set of compliance and regulations that says “We want everyone to be carbon neutral by X,” and you have to kind of disclose what you’re doing, how you’re doing it, when you think you might be carbon neutral. And it goes way beyond just your business, right? So just because you put something in AWS or Azure, Google or Alibaba or somewhere like that, you still have to report on that. You still have to tell what’s out there and put it into your report. You have to say what you’re doing, everything from a wireless device all the way through to the data center. And it’s called Scope 1, Scope 2, Scope 3, I think there’s a Scope 4. I don’t profess to understand it, I don’t think anyone else does. But it’s a big challenge. But some of that starts with the lifecycle management which links into what I’m going to talk about around horizontal scaling. And some of it is around having a solution that kind of just churns away in the background and when you put a generation 4 hardware device in and the generation 1 comes out (we’re going to talk about this with horizontal scaling), and the generation 1 comes out, then it’s about recycling that. Taking that product, typically what happens is somewhere in someone’s building there’s a room or a cupboard or a corner of the warehouse that’s just piled high with old printers, laptops, desktops, servers, you name it. They can be sustainably taken away, wiped to any directive, any regulatory directive, and they can either be resold whole, resold as parts, they can be recycled and very little has to go to landfill. In fact if you look at the statistics from Dell, HPE, Votel I think that’s what they’re called, there’s a load of companies that do it, by and large about 75% to 80% of stuff gets resold, about 15% to 20% gets recycled and only about 5% ends up in landfill. So imagine if everyone was doing it? And by the way they buy this stuff back! So rather than having a whole meeting room full of laptops (and I’ve seen in so many places!), you walk through as you’re going to a meeting with the IT team and you look across and there’s a window on a meeting room and it’s just piled high with equipment. So that kind of for us links in with the lifecycle management horizontal so we’re going to touch on that.
And down in my seventh-ish, which is right down on the right bottom, is Observability. It’s big because you can’t do any of the stuff above unless you really know what you’ve got, unless you can see where it is, unless you can understand how it’s behaving and unless you can monitor and manage it. And what we’re seeing now is there are observability platforms (Datadog’s a good example, Dynatrace, Darktrace sorry, there’s a whole bunch of them out there), and there was always this kind of one tool to rule them all. That doesn’t really exist so we’re starting to see observability appear into these other areas and we’re going to talk a little bit about how we help customers with that when it comes to technology from Zadara.
Closing That was probably way over 10 minutes, that’s probably one of the longest ones. The first three I’ve got here are probably the longest and then we’ll get a little bit shorter, a little bit more succinct. But you know, business challenges, these topics here in my opinion, under all of these there are business challenges. And we are going to, or I am going to, try to relay how Zadara (we’re not a magic button to fix all these!), but I’m going to talk about how we address some, maybe in their entirety like sovereignty we can do, and how they interlink with other ones. And that’s the important thing for customers is if you go in and say “We can fix everything,” they won’t believe you because they’ve heard it all before, but if we can do some of it and we’re open about it and we can pick out some of those really high-level ones, that’s what customers are looking for today. So, that’s the end of this podcast. As I say, you don’t have to learn all of it. I’ve probably spoken too quickly because that’s what I do. But think about the customers that you have, the markets that you’re in, some of these will be really pertinent, some of them will be less pertinent. Artificial Intelligence will be everywhere. And hopefully I’ve given you some that enable you to go “Okay, I’ve heard about that, I think I know a little bit about it and I know how Zadara can help me or help my customer address some of that.” That’s all from JWH, I will see you in the next podcast. Thank you very much for listening!
