Cost and budget limitations are the biggest business transformation challenges facing organizations in the coming year. That’s according to the PEX Report 2025/26.
The report is based on the results of a recent survey of more than 200 professionals and paints a comprehensive picture of the modern business transformation landscape.
More than half of respondents (58 percent) cited cost/budget limitations as the leading business transformation challenge they will encounter in the next 12 months. This is followed by change management (39 percent), adopting and deploying new technologies (37 percent) and linking process improvement with top-level business strategy (33 percent).
Other challenges include overcoming resistance (33 percent), access to required skills and talent (31 percent) and leadership buy-in (29 percent).
Emphasis on budget is unsurprising
The emphasis on budget is entirely expected, driven by several key factors, commented Debashis Sarkar, managing partner at Proliferator Advisory and Consulting and PEX Network Advisory Board member.
“Businesses are hesitant to invest due to uncertainty surrounding President Trump’s tariffs, including a 10 percent universal tariff on US imports and higher rates on 57 countries. These tariffs significantly increase the cost of imported goods, prompting companies to reduce spending on non-essential activities like capital expenditures, marketing and hiring.”
Furthermore, economic volatility, characterized by high inflation and recession fears, is compelling businesses to conserve cash, Sarkar added. “Geopolitical uncertainties also amplify this cautious approach, leading companies to hoard funds.”
Nearly two thirds of respondents (62 percent) say they need more artificial intelligence (AI) skills and capabilities to stay competitive, followed closely by operational excellence (OPEX)/process excellence (61 percent) and digital transformation (49 percent).
Strategy execution (46 percent), change management (45 percent) and leadership (44 percent) are the next most in-demand skills/capabilities, followed by Agile and/or Lean (32 percent).
Overcoming business transformation challenges
So how can businesses overcome challenges such as cost pressure, change resistance, skill gaps and lack of leadership buy-in? They need to stop treating transformation like an isolated initiative and start embedding it into how the business runs, according to Jeff Winter, internationally renowned digital transformation thought leader and Top LinkedIn Voice.
“Connect it to outcomes people care about. Make it visible. Over-communicate the ‘why,’ not just the ‘what.’ Invest in people; not just hiring new talent but upskilling the ones you already have. The companies that succeed aren’t the ones with the biggest budgets. They’re the ones with the clearest intent, the strongest internal alignment and the patience to build the muscle.”
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Business transformation investment plans
Businesses have diverse transformation investment plans for the coming year. A substantial 40 percent of respondents expect their transformation budget to remain flat over the next 12 months (the same figure as last year), while a quarter (25 percent) expect it to increase (again on par with our previous report). A similar number (24 percent) are unsure, with only 11 percent predicting their budget to decrease, up from 9 percent last year.
As for how and where businesses are looking to spend next year, AI is, unsurprisingly, top of mind. Just under half of businesses (48 percent) are prioritizing AI adoption, with the same number planning to invest in traditional AI. Meanwhile, 41 percent and 39 percent are looking to spend on generative AI and agentic AI, respectively.
When investing in new and emerging AI technology, organizations should look for platforms and tools where most of their applications and workloads are, according to Andreas Welsch, AI expert and author of the AI Leadership Handbook.
“While agentic AI is still an emerging area, emphasize interoperability to set yourself up for future growth and workflows that span multiple departments and business applications.”