According to the IDC Worldwide Semiannual Artificial Intelligence Tracker companies will be forking out $341.8 billion to buy artificial intelligence solutions in 2021, up 15.2% from 2020.
It will further accelerate in the coming years breaking the $500 billion mark by 2024.
IDC group vice president for AI and automation research, Ritu Jyoti, acknowledged that the disruption is unsettling, but it can also serve as a catalyst for innovation and transformation.
“2020 was the year that accelerated digital transformation and strengthened the value of enterprise AI. We have now entered the domain of AI-augmented work and decisions across all the functional areas of a business. Responsible creation and use of AI solutions that can sense, predict, respond, and adapt at speed is an important business imperative." Ritu Jyoti.
What enterprises are buying
Spending on AI software will account for 88% of the overall AI market although AI hardware will grow the fastest in the short term. From 2023 onwards, AI Services is forecast to become the fastest-growing category.
AI Applications account for nearly 50% of revenues. Within the AI Applications market, AI ERM is expected to grow slightly stronger than AI CRM over the next five years.
In terms of growth, AI Platforms is the strongest with a five-year compound annual growth rate (CAGR) of 33.2%. AI Lifecycle Software is forecast to grow the fastest among the markets within AI Platforms.
The slowest will be AI System Infrastructure Software with a five-year CAGR of 14.4% while accounting for roughly 35% of all AI Software revenues.
The AI services market was estimated at $19.4 billion in 2020, representing the fastest growth relative to hardware and software. By 2021, it is forecast to grow by 19.3%.
Over the next five years, it is expected to enjoy the best CAGR at 21%. This technology category breaks down into two segments: IT Services and Business Services. IT Services is the larger of the two, accounting for nearly 80% of all AI Services revenues. From a growth perspective, the two markets are similar with five-year CAGRs of 21%. Overall, AI Services is expected to be a $50 billion market by 2025.
"AI has emerged as an essential component of the future enterprise, fueling demand for services partners to help organizations clear the many hurdles standing between pilot projects and enterprise AI," said Jennifer Hamel, research manager, analytics and intelligent automation services.
She noted that client demand for expertise in developing production-grade AI solutions and establishing the right organization, platform, governance, business process, and talent strategies to ensure sustainable AI adoption at scale drives expansion across both IT services and business services segments.