Why Observability Budgets Keep Growing Even When IT Is Asked to Cut Costs
IT leaders are not protecting observability by accident. See how consolidation, unified data, and AI turn cost pressure into resilience and smarter operations.
Observability is the surprising budget line that isn’t shrinking.
96% of IT leaders expect observability budgets to hold steady or grow through 2026
62% anticipate increases, even as broader IT budget cuts
Observability is becoming a major part of operational infrastructure rather than just a monitoring tool
IT Leaders aren’t cutting observability spending but consolidating tools and reinvesting in unified, AI-ready platforms
96% of IT leaders expect observability budgets to hold steady or grow over the next 12 months. And 62% expect those budgets to increase regardless of broader IT budget cuts.
Why?
Because as infrastructure becomes more distributed and harder to manage, observability has shifted from a “nice to have” to a control point for cost, performance, and risk. Even as leaders scrutinize spending elsewhere, observability is where they draw the line.
Observability Has Become Essential Infrastructure
Outages at companies like CrowdStrike and Cloudflare showed how quickly a single blind spot can disrupt entire industries and cause widespread financial impact. That moment marked the end of treating observability as an optimization project.
This makes it clear that in highly interconnected environments, a single visibility gap can cascade far beyond one system, taking down entire industries.
When a critical service goes dark, the disruption doesn’t stay inside the firewall. It affects customers, partners, and entire supply chains within minutes.
That’s why uptime, digital experience, trust, and revenue are now inseparable from an organization’s ability to see what’s happening across its systems. As downtime risk increases, observability budgets follow. Leaders invest here for a simple reason: you protect the parts of the business you can’t afford to lose.
The Scope of Observability Has Expanded Dramatically
Teams now operate in a hybrid observability model, where internal systems are only one part of the delivery chain. However, that chain stretches across hybrid infrastructure, multiple clouds, the public Internet, third-party providers, and AI workloads.
Hybrid infrastructure, Internet performance, and digital experience monitoring have converged. The Internet is now part of your architecture, so observability has to treat it that way.
Responsibility hasn’t shrunk as a result—IT teams are still accountable for the full digital experience end to end.
This represents a fundamental shift from monitoring what you own to monitoring what you’re accountable for. To support that shift, observability now has to extend far beyond traditional infrastructure boundaries.
The expanded scope looks like:
Hybrid infrastructure across on-prem and cloud: Gives teams a unified view across data centers, virtual machines, containers, and cloud-native services to trace issues end-to-end without blind spots.
Multi-cloud environments:Connects telemetry across multiple service providers, so teams can compare performance, prevent cost surprises, and avoid siloed monitoring.
Internet performance monitoring: Tracks how the public Internet, including routing, latency, and regional degradation, affects application availability and reliability.
Digital experience monitoring: Measures what users actually experience, tying backend performance directly to customer satisfaction and business outcomes.
External dependencies: Surfaces issues in identity providers, payment gateways, DNS, and APIs that frequently cause outages even when internal systems appear healthy.
AI and data-intensive workloads: Maintains consistent visibility across dynamic, high-volume pipelines so teams can support model health, data freshness, and inference performance.
A single slow DNS lookup or a degraded ISP route can break an SLA even when your infrastructure is performing exactly as expected. So, partial visibility, in those cases, leads directly to partial accountability.
When observability has to follow every hop of the delivery chain, including the parts you don’t own, the scope naturally grows. And with it, the data requirements, tooling needs, and investment grow proportionally.
Observability Is the Foundation for AI Initiatives
Only 4% of organizations have been able to fully operationalize AI, while 62% are still piloting or implementing it. That gap isn’t because AI models don’t work. It’s because the infrastructure required to feed, monitor, and operationalize those models isn’t ready.
But AI doesn’t work on its own—it depends entirely on data. To move from experimentation to real operational value, organizations need:
Consistent telemetry
Unified visibility across hybrid and multi-cloud environments
Context that spans infrastructure, applications, the Internet, and the end-user experience
Without that foundation, AI systems can’t reliably explain what’s happening or why—and can’t be trusted to act. That’s why fragmented data, spread across tools, clouds, and teams, is the real blocker. The AI technology itself is mature enough. The observability layer beneath it often isn’t.
This is also why AI has become a major force protecting observability budgets. It’s now the top strategic priority for 63% of IT leaders. In fact, organizations are under pressure to turn AI from isolated experiments into systems that deliver measurable business outcomes. So, as long as AI maturity depends on observability maturity, investment in observability continues to rise.
Today, observability and AI aren’t separate investments. Observability provides the data AI needs, and AI amplifies the value teams get from observability. The two reinforce each other, so you should fund accordingly.
Digital Business Resilience Depends on Observability
As digital services become more distributed and customer-facing, even small failures can have an outsized business impact. A 30-second DNS hiccup can break a checkout flow, interrupt transactions, and cost millions in lost revenue.
That’s why IT leaders protect observability budget even in cost pressure because it protects revenue.
The protected observability budget. It also shapes four core dimensions of business resilience:
Customer experience: Gives teams early warning when performance starts to change, so issues can be resolved before users feel them.
Employee productivity: Cuts alert noise and manual troubleshooting, so IT teams spend more time improving the environment instead of reacting to it.
Security and compliance posture: Improves visibility into system behavior and anomalies, enabling faster detection, cleaner audits, and stronger policy enforcement.
Brand trust during incidents: Reduces the blast radius of failures, shortens recovery time, and prevents public disruption.
Tool Sprawl and Rising Telemetry Costs Are Forcing Smarter Investment (Not Less)
IT leaders are under real cost pressure, and they’re taking a hard look at where observability dollars actually deliver value. The issue isn’t that observability costs too much. It’s those years of tool sprawl and rising telemetry volumes that have made many environments inefficient.
51% of IT leaders cite siloed tools and fragmented visibility as their top observability challenge. Despite that, 66% still operate two to three observability tools, and only 10% have consolidated to a single unified platform.
Running multiple observability tools increases cost without improving outcomes. It fragments visibility, slows investigations, and makes it harder to understand what’s really happening across complex environments.
Over time, that fragmentation becomes a serious operational risk as teams try to support AI-driven use cases.
Consolidation addresses the root problem. It reduces overlap, improves data consistency, and frees budget to strengthen the observability foundation AI depends on. That’s why 84% of IT leaders are consolidating or actively evaluating consolidation
This means they aren’t cutting observability spend. Instead, they’re refining their observability platform strategy and reallocating investment toward fewer, more capable platforms.
Protected Budgets Don’t Mean Passive Spending
Observability budgets are growing because organizations are actively modernizing. IT teams are moving away from tool accumulation and toward unified platforms, not to cut costs, but to get cleaner, more consistent data they can trust.
Since cost pressure is pushing them to invest more intelligently, instead of trimming observability, leaders are:
Reducing overlapping capabilities
Improving MTTR through stronger correlation and automation
Laying the groundwork for predictive and autonomous IT
These improvements prevent issues before they escalate—catching a memory leak in pre-production costs hours of engineering time, not millions in downtime. That’s where the real savings come from. Next, the budget freed through consolidation is reinvested in modernization rather than removed.
Cost pressure drives consolidation. Consolidation creates unified data. Unified data enables AI that actually works. And AI powers automated and predictive operations.
This cycle—consolidation → unified data → AI that actually works → autonomous operations—justifies continued investment in observability even as cost pressure rises.
Observability Is the New Foundation for Autonomous Operations
Observability budgets aren’t growing despite cost pressure. They’re growing because of it.
As complexity increases and the cost of downtime rises, IT leaders are modernizing their observability strategies to reduce risk and operate more efficiently. They’re consolidating fragmented tools, unifying telemetry across hybrid environments, and building the data foundation AI needs to move from experimentation to operational value.
This is a strategic investment in capabilities that strengthen resilience, improve efficiency, and reduce the blast radius of disruption in an Internet-dependent world where a single blind spot can take down entire industries.
The payoff extends beyond faster MTTR and better uptime. Unified observability data enables the next generation of IT operations: systems that don’t just alert on problems but predict them, correlate root causes instantly, and in some cases, resolve issues without human intervention.
That future isn’t theoretical. It’s already happening in pockets across leading IT organizations. And it depends entirely on the observability foundation being built today.
Observability has become the backbone of modern IT. Not as an optimization project, but as essential infrastructure that makes everything else possible.
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How should IT leaders think about observability budgets during annual planning cycles?
Instead of treating observability as a discretionary line item, plan for it as core operational infrastructure. Align observability spend to service reliability goals, customer experience targets, and AI initiatives rather than viewing it as a tool category that can be trimmed independently.
Can I delay observability investments until after modernization projects?
Observability enables modernization rather than following it. Teams that postpone observability tend to struggle with migrations, cloud expansion, and AI adoption because they lack the visibility needed to manage change safely.
Is observability equally important for small and large organizations?
Yes, but for different reasons. Smaller teams rely on observability to avoid manual overhead and context switching. Larger organizations depend on it to coordinate across teams, platforms, and services. In both cases, observability scales operational effectiveness without scaling headcount.
By Sofia Burton
Sr. Content Marketing Manager
Sofia leads content strategy and production at the intersection of complex tech and real people. With 10+ years of experience across observability, AI, digital operations, and intelligent infrastructure, she's all about turning dense topics into content that's clear, useful, and actually fun to read. She's proudly known as AI's hype woman with a healthy dose of skepticism and a sharp eye for what's real, what's useful, and what's just noise.
Disclaimer: The views expressed on this blog are those of the author and do not necessarily reflect the views of LogicMonitor or its affiliates.
