Despite the expanding COVID-19 pandemic, or maybe even because of it, global demand for artificial intelligence (AI) solutions is forecast to show strong growth in 2020, 12.3% over 2019. While this year's growth is somewhat slower than previous years due to the economic impact of COVID-19, IDC believes investment in AI will recover quickly. By 2024, AI-related revenue will reach US$300 billion, with a five-year compound annual growth rate (CAGR) of 17.1%, according to the IDC Worldwide Semiannual Artificial Intelligence Tracker.
Software is the largest AI technology group delivering roughly 80% of all AI revenue. Most of the software revenue comes from AI Applications ($120.4 billion in 2020) with AI Software Platforms ($4.3 billion) delivering the remainder.
CRM AI Applications and ERM AI Applications are the two largest segments with 20% and 17% share of the AI Applications market. Other key segments include AI for Content Workflow and Management Applications, Production Applications, and Collaborative Applications. While software will remain the largest category throughout the forecast, it will also see the slowest growth with a five-year CAGR of 16.7%.
"The role of AI Applications in enterprises is rapidly evolving. It is transforming how your customers buy, your suppliers deliver, and your competitors compete. AI applications continue to be at the forefront of digital transformation (DX) initiatives, driving both innovation and improvement to business operations," said Ritu Jyoti, program vice president, Artificial Intelligence Research at IDC.
CRM AI Applications are expected to take centre stage within the AI Applications market, both in terms of its sheer size and growth opportunities, in the coming years.
"Customer Experience (CX) is the new brand. Leading CRM vendors are driving the intersection of CRM and CX, that help build strategies that improve both your customers' and your employees' experience with your business," added Ritu.
In terms of vendor share, Adobe had the top spot for AI-centric CRM Applications while Microsoft was #1 in AI non-centric CRM Applications. Meanwhile, in ERM AI Applications, Ceridian and Intuit take the top spots in AI-centric and AI non-centric types, respectively. As for the rest of the AI Applications market, IBM is in first position under AI-centric type while Microsoft occupies the top spot under AI non-centric type.
The second largest AI category is services, which IDC forecasts will reach $18.4 billion in 2020, an increase of 13% year over year. Within the AI services market, AI IT Services accounts for nearly 80% of the category's revenue with AI Business Services delivering the rest.
"The pandemic has interrupted the momentum of AI services market growth in nearly all regions," said Jennifer Hamel, research manager, Analytics and Intelligent Automation Services. "However, enterprise demand for AI capabilities to support business resiliency and augment human productivity will sustain double-digit expansion in 2020 even as other discretionary projects experience delays."
Rising demand for expertise in embedding AI-enabling technologies into business analytics and intelligent automation programs has led to a highly competitive and fragmented AI services vendor landscape.
IDC expects AI hardware (server and storage combined) revenues to reach $13.4 billion in 2020, representing 10.3% year-over-year growth, which is a significant drop from the prior year when it grew 33.4%. Within the hardware market, AI Storage is forecast to grow 11.4% this year, slightly ahead of AI Server, which is expected to grow 10.1%.
However, from a size perspective, AI Server is responsible for more than 80% of total AI hardware revenues. The overall hardware market is forecast to have a strong recovery with 35.5% year-on-year growth next year, led by AI Storage, which is expected to grow 43.1% year over year.
Amita Potnis, research director in IDC's Enterprise Infrastructure Practice explains further, "While the overall market has seen a slowdown due to the COVID-19 pandemic, investments for AI and analytics infrastructure will continue, and perhaps increase, in specific industries such as life sciences, healthcare and Media & Entertainment.”
Storage will see stronger growth than servers owing to new data generation along with existing datasets that will be curated to support AI models with increased adoption of high-performance parallel file systems and all-flash object stores.
"The AI server market is expected to return to its previous growth trajectory in 2021, but with the US not having the pandemic under control, 2021 growth in the US will be lower than in China and Western Europe," said Peter Rutten, research director in IDC's Enterprise Infrastructure Practice.
In terms of vendor share, the top 3 companies in AI Server are Dell, Hewlett Packard Enterprise, and Inspur. They are the only 3 competitors with a double-digit market share in that market space. In the AI Storage market, Dell Technologies, NetApp, and Hewlett Packard Enterprise hold the top 3 positions.