Etude

Tariffs Are Reshaping Tech Functions as Deglobalization Accelerates

Localization, reshoring, and fragmentation add pressure to technology budgets, increase operating model complexity, and raise new risks.

Par Stephen Phillips, Ramesh Razdan, et Matthew Leybold

First published on juillet 02, 2025
min


New tariffs in 2025 have exposed vulnerabilities and increased uncertainty across regions and industries. The effects on information technology are real and immediate: tighter regulations, rising costs, and more complexity, particularly in China and other geofenced markets. While the pace of decoupling varies, the direction is clear: Tech environments are becoming more regionalized and risk sensitive. For technology leaders, this means rethinking core decisions—vendor strategy, architecture, and the operating model. Tech executives will need to deliver results in a more fragmented, more expensive landscape. Understanding five key trends can help leadership teams build smarter, more resilient strategies. Hardware: Shifting away from China comes at a premium. As companies move production out of China, hardware costs are rising—by up to 20% in some categories. The added effort to qualify new suppliers, build buffer stock, and manage a broader vendor base is straining budgets and creating near-term supply risks. Data: Localization redefines architecture needs. Tougher data privacy and AI regulations increasingly require companies to store and manage data locally. That means duplicative cloud setups, region-specific security tools, and in some cases, split AI and data platforms—all of which drive up cost and complexity. Cloud: Fragmentation erodes scale advantages. Hyperscalers are investing in sovereign cloud, in-country AI, and multiregion infrastructure to meet local demands. While necessary, these investments are pushing up cloud computing costs and reducing the savings of a centralized model, requiring greater architectural planning and financial discipline. Cybersecurity: Rising geopolitical risk increases threats. As global tensions rise, so do cyberthreats—from state-sponsored attacks to vendor breaches and phishing campaigns themed around tariffs. Companies will need sharper monitoring, stronger vendor oversight, and continuous employee upskilling to stay ahead. Talent: Mobility constraints reshape delivery models. Limits on cross-border talent movement are pushing companies to shift toward more onshore, nearshore, or insourced teams. That means new cost structures, capability trade-offs, and a rethink of how and where tech work gets done. Act now, plan ahead To navigate this new terrain, tech leaders must balance near-term moves with longer-term bets. In the short run, that means managing exposure, triaging IT budgets, reassessing vendor footprints, and exploring workforce levers. Longer-term, the focus should shift to reimagining sourcing, architecture, and the operating model to thrive in a more fragmented future.

New tariffs in 2025 have exposed vulnerabilities and increased uncertainty across regions and industries. The effects on information technology are real and immediate: tighter regulations, rising costs, and more complexity, particularly in China and other geofenced markets. While the pace of decoupling varies, the direction is clear: Tech environments are becoming more regionalized and risk sensitive.

For technology leaders, this means rethinking core decisions—vendor strategy, architecture, and the operating model. Tech executives will need to deliver results in a more fragmented, more expensive landscape. Understanding five key trends can help leadership teams build smarter, more resilient strategies.

Hardware: Shifting away from China comes at a premium. As companies move production out of China, hardware costs are rising—by up to 20% in some categories. The added effort to qualify new suppliers, build buffer stock, and manage a broader vendor base is straining budgets and creating near-term supply risks.
Data: Localization redefines architecture needs. Tougher data privacy and AI regulations increasingly require companies to store and manage data locally. That means duplicative cloud setups, region-specific security tools, and in some cases, split AI and data platforms—all of which drive up cost and complexity.
Cloud: Fragmentation erodes scale advantages. Hyperscalers are investing in sovereign cloud, in-country AI, and multiregion infrastructure to meet local demands. While necessary, these investments are pushing up cloud computing costs and reducing the savings of a centralized model, requiring greater architectural planning and financial discipline.
Cybersecurity: Rising geopolitical risk increases threats. As global tensions rise, so do cyberthreats—from state-sponsored attacks to vendor breaches and phishing campaigns themed around tariffs. Companies will need sharper monitoring, stronger vendor oversight, and continuous employee upskilling to stay ahead.
Talent: Mobility constraints reshape delivery models. Limits on cross-border talent movement are pushing companies to shift toward more onshore, nearshore, or insourced teams. That means new cost structures, capability trade-offs, and a rethink of how and where tech work gets done.

Act now, plan ahead

To navigate this new terrain, tech leaders must balance near-term moves with longer-term bets. In the short run, that means managing exposure, triaging IT budgets, reassessing vendor footprints, and exploring workforce levers. Longer-term, the focus should shift to reimagining sourcing, architecture, and the operating model to thrive in a more fragmented future.