Worldwide revenues for the artificial intelligence (AI) market, including software, hardware, and services, are forecast to grow 16.4% year over year in 2021 to $327.5 billion.
According to the IDC Worldwide Semiannual Artificial Intelligence Tracker, the market will reach US$554.3 billion by 2024, growing at a five-year CAGR of 17.5%.
Software prognostication
The AI software market accounted for 88% of the total market in 2020 with applications taking the largest share at 50%. The AI Software Platforms is the forecast to have the strongest growth with a CAGR of 32.7% compared to AI applications (17.3%) and AI System Infrastructure Software (13.7%). Within the AI Applications market, AI ERM is expected to grow slightly stronger than AI CRM over the next five years.
"The global pandemic has pushed AI to the top of the corporate agenda, empowering business resilience and relevance."
Ritu Jyoti
"AI is becoming ubiquitous across all the functional areas of a business. Advancements in Machine Learning, Conversational AI, and Computer Vision AI are at the forefront of AI software innovations, architecting converged business and IT process optimizations, predictions and recommendations, and enabling transformative customer and employee experiences," said Ritu Jyoti, program vice president for AI Research at IDC.
Top 3 vendors, 1H 2020 (ranking based on worldwide revenues)
| AI Software Market | AI Type | #1 | #2 | #3 |
| AI Software Platforms | AI Centric | IBM | Microsoft | SAS Institute |
| AI Applications | AI Centric | IBM | OpenText | Slack |
| AI non-Centric | Microsoft | Intuit | ||
| AI System Infrastructure Software | AI Centric | IBM | Microsoft | Dynatrace |
| AI non-Centric | Microsoft | VMware | McAfee | |
| AI Application Development & Deployment | AI Centric | Microsoft | Palantir | |
| AI non-Centric | Microsoft | ESRI | Teradata |
Services outlook
The AI Services category grew slower than the overall AI market with 13% annual revenue growth in 2020. However, it is forecast to grow 17.4% year over year in 2021, outperforming the overall AI market by approximately 1%. Its five-year CAGR is expected to be 18.4% with revenues reaching $37.9 billion by 2024.
This technology category breaks down into two market 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, IT Services for AI tends to grow faster than Business Services for AI except for 2024, where Business Services for AI is forecast to perform slightly higher than both IT Services for AI and the overall AI Services market.
Jennifer Hamel, research manager, Analytics and Intelligent Automation Services noted that although the pandemic interrupted the momentum of worldwide AI services market growth, enterprise demand for AI capabilities to support business resiliency and augment human productivity sustained double-digit expansion in 2020, even as other discretionary projects experienced delays
"Client demand for technical expertise to develop, implement, and manage AI applications drives IT services expansion while increasing adoption of AI-enabled automation within business processes boosts spending on business services," she added.
Under IT Services for AI, the Top 3 companies in 1H 2020 were IBM, Accenture, and Infosys. These were the only companies to bring in more than $500 million in IT Services for AI revenues and their combined share of the market was 28%.
Beyond the Top 3, 13 other companies generated more than $100 million each during the same period. In the Business Services for AI market, there were only four companies – Ernst & Young, PwC, Deloitte, and Booz Allen Hamilton – that generated revenues of more than $100 million in 1H 2020.
Overall, the competitive landscape in both services markets for AI is a highly fragmented one where players from across the services value chain continue to invest in technology assets, innovation resources, and expertise in applying AI to solve industry- and domain-specific problems for clients.
Hardware landscape
The AI hardware market is the smallest category with approximately 5% share of overall AI revenues in 2020. The share is forecast to increase slightly in 2021 at the expense of AI Software.
The AI Server market grew faster than the AI Storage market in 2020, but these results are expected to the reverse in 2021 when AI Storage is forecast to grow 31.8% year over year compared to 26.4% for the AI Server market. By 2024, AI Hardware is forecast to be a $30.5 billion market with AI Servers representing an 82% revenue share.
"The AI server and storage markets continue to see rapid growth, providing an increasingly specialized and innovative infrastructure foundation under the entire AI landscape," said Peter Rutten, research director, Infrastructure Systems, Platforms and Technologies at IDC.
In terms of 1H 2020 vendor share, the top companies in the AI Server market were (in alphabetical order) Dell, HPE, Huawei, IBM, Inspur, and Lenovo. Each of these companies brought in more than $250 million in 1H 2020 and collectively these 6 companies accounted for 58% of the market, while 30% went to ODMs.
While the number of vendor companies tracked in each market is the same, the competitive landscape of AI Server market is more fragmented than the AI Storage market, where the Top 3 companies accounted for 49% market share in 1H 2020.
