IDC estimates that in 2023, enterprises will have spent US$19.4 billion on generative AI (GenAI) solutions. The analyst believes the frenzy will continue to escalate and forecasts GenAI spending to double in 2024 and reach US$151.1 billion in 2027, with a compound annual growth rate (CAGR) of 85.9% over the 2023-2027 forecast period. IDC says the spending includes GenAI software, related infrastructure hardware and IT/business services.
"Despite IT headwinds in 2023, businesses accelerated their exploration of GenAI to boost business transformation," said Rick Villars, group vice president of worldwide research at IDC. He goes on to predict that in 2024, the shift to AI everywhere will enter a critical buildout phase as enterprises make major new investments to drastically reduce the time and costs associated with customer and employee productivity use cases.
“From there, the focus will shift to investments that boost revenue and business outcomes,” he added.
Natural progression
IDC expects GenAI investments to follow a natural progression over the next several years as organizations transition from early experimentation to aggressive infrastructure and trained data model building to widespread adoption with extensions to the edge of all business activities.
While companies at all levels will experience a shift in their technology investments toward AI implementation and the adoption of AI-enhanced products/services, the IT industry will make much a greater and faster AI pivot during the same period.
This is because every company will race to introduce AI-enhanced products/services and assist their customers with AI implementations. For most, AI will replace the cloud as the lead motivator of innovation.
Where the money will go
GenAI Infrastructure, including hardware, Infrastructure as a Service (IaaS), and system infrastructure software (SIS), will represent the largest area of investment during the build-out phase. But GenAI Platform and Application Software will gradually overtake infrastructure by the end of the forecast with a five-year CAGR of 99.1%.
Similarly, GenAI Services, including IT and business services, will nearly equal infrastructure spending by the end of the forecast with a five-year CAGR of 94.6%.
By the end of the forecast, GenAI spending will account for 29.0% of overall AI spending, up significantly from 10.8% in 2023. GenAI spending will remain strong well beyond the build-out phase as these solutions become a foundational element in enterprises' digital business control platforms.
"Generative AI has catalyzed investments in traditional AI solutions. The synergy between traditional and generative AI opens up a world of possibilities across industries," said Ritu Jyoti, group vice president of worldwide artificial intelligence and automation market research and advisory services at IDC.
"As we look ahead to the future of AI, embracing a holistic approach that merges traditional AI with generative creativity will enable more versatile AI systems capable of adapting to evolving challenges while fostering disruptive innovation."
Ritu Joyti
