A New Era of AI Investments: The Value and Momentum

A survey conducted by research firm IDC reveals that there is a new level of momentum around AI investments by global businesses. The survey, which included 2,100 business leaders and decision makers, was commissioned by Microsoft and found that there is a growing excitement and perceived value around generative AI. According to the report, respondents reported an average return on investment of 3.5 times for their AI investments, meaning they are reaping $3.5 in value for every $1 invested. This translates to a significant 250% return, compared to other reports that have shown much lower average returns.

IBM, for example, reported an average ROI of only 5.9% based on a survey of 2,500 global executives. This return falls below the typical 10% cost of capital, making AI a potentially risky investment choice. Many reports have also discussed the difficulties in estimating ROI and the mistakes companies often make when calculating it.

The Rise of AI in Businesses

The IDC report, conducted in September, highlights the widespread adoption of AI in businesses. 71% of respondents reported that their companies are already using AI, with an additional 22% planning to implement AI within the next 12 months. Furthermore, the report found that 92% of AI deployments take 12 months or less, demonstrating the faster deployment rates compared to previous technologies.

Ritu Jyoti, GVP AI and Automation for IDC, explained that this was the first time their research explicitly sought to quantify the returns on investments. Respondents provided self-reported data, with options ranging from 2X to 5X for ROI estimates. Jyoti noted that tracking ROI claims in future reports will be important to assess the accuracy of these estimates.

“If these numbers are anywhere close to accurate, there’s essentially very little to no risk for organizations to push ahead on an aggressive AI investment strategy, at least if it’s diversified and disciplined.” – Ritu Jyoti

However, caution should still be exercised when making AI investments. Jyoti warned that there is a possibility that these estimates reflect a generally bullish attitude towards AI among respondents, fueled by the hype surrounding generative AI. It’s important for companies to carefully evaluate their investments and not overlook projects that may yield poor ROIs.

Despite the caution, Jyoti revealed that there is a significant level of excitement and interest around AI. Companies are even deprioritizing other initiatives to prioritize AI, which is a new trend. In fact, 32% of organizations stated that they have reduced spending on certain areas in order to invest more in AI. This includes administrative support and services, with roles like administrative assistants for C-suite executives being affected.

The Impact of Generative AI

The rise of generative AI has played a key role in driving interest and investment in AI. Traditionally, AI was mainly used by highly technical workers within IT or at lower levels in business units. However, generative AI has brought AI to the forefront and attracted attention from top management and board of directors.

Generative AI is considered transformative because it allows organizations to leapfrog in terms of innovation without having to modernize underlying technologies. It also enables more people to access and utilize AI, making it more accessible across industries. The potential use cases for generative AI are vast, from healthcare and software development to retail.

The IDC report also noted that while organizations experienced positive results when using AI, there were concerns around data or IP loss, risk management, and lack of AI governance. These concerns have been further emphasized with the arrival of generative AI.

“Generative AI is sort of bending the innovation curve. It’s allowing organizations not to have to modernize underlying technologies, but really kind of leapfrog in a faster way to time to market, time to value.” – Alysa Taylor, Corporate Vice President at Microsoft

Alysa Taylor, Corporate Vice President at Microsoft, highlighted the company’s efforts to address the skills barrier by engaging millions of people globally through their Learn program and training partners.

Overall, the survey by IDC showcases the growing momentum and value of AI investments in businesses. With generative AI on the rise, organizations are exploring new opportunities and prioritizing AI initiatives, while also being cautious and mindful of potential risks.

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