UPDATED 15:08 EDT / AUGUST 04 2021

AI

IDC predicts enterprise AI spending will surpass $341B in 2020

Companies worldwide will spend $341.8 billion on artificial intelligence software, hardware and related services in 2021, International Data Corp. projected in a new report published today.

According to the research firm, the forecast indicates that AI spending is on track to increase by 15.2% compared with 2020. Growth is expected to remain robust in the subsequent years. IDC’s analysts see organizations upping their AI budgets by another 18.8% next year and, by 2024, a total of more than $500 billion will be spent annually on machine learning software and related solutions.

That’s good news for Nvidia Corp. and other makers of chips for running AI software. Nvidia, whose graphics processing units are the go-to choice for machine learning projects, has already seen its market capitalization increase more than fourfold since 2019 thanks to enterprises’ growing adoption of AI. In the same time frame, several competing AI chip startups have been acquired or raised funding at multibillion dollar valuations.

It’s software makers, however, that are poised to benefit the most from the growth in enterprises’ AI budgets. IDC estimates that AI software accounts for 88% of all corporate spending related to machine learning. Within the software segment, AI applications command 50% of the market, while the remainder is split between AI platforms and AI system infrastructure software.

The AI applications market is led by tech giants such as Microsoft Corp., IBM Corp. and Google LLC, according to IDC. There are also a few smaller companies among the AI software leaders listed by the research firm in its report today. Among them is Canada-based OpenText Corp., which makes applications for managing business documents and other files. OpenText recorded revenues of $3.15 billion in its last fiscal year.

Spending on AI applications is set to increase significantly over the coming years. IDC believes that two categories of applications in particular, machine learning-powered customer relationship management services and risk management tools, will see especially strong growth. The firm’s analysis indicates that both segments will see adoption increase at a compound annual growth rate of more than 30% through 2025.

“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,” said Ritu Jyoti, the group vice president for AI and automation research at IDC. “We have now entered the domain of AI-augmented work and decision 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.”

As enterprises accelerate AI software initiatives, they’ll spend more on consulting and other professional services to help them with the implementation phase of their projects. From 2023 onwards, IDC sees services outpacing both software and hardware to become the fastest growing segment of the AI market.

The research firm splits the solutions in this segment into two major categories. The first category, IT services, covers services that focus on assisting enterprises with the technical aspects of building and deploying machine learning software. Business Services, the other category identified by IDC, encompasses services that focus on helping companies set up the organizational processes necessary to support AI projects.

IDC assessed about 190 companies in the AI services market for the report. It found that the leaders in the IT Services category last year were IBM Corp., Accenture plc, and Tata Consultancy Services Ltd., which each generated revenues of more than $1 billion. Ernst & Young Global Ltd., Accenture, and Deloitte Ltd. led the Business Services category. The two groups of companies commanded 26% and 46% of all spending in their respective segments of the AI services market, IDC estimates.

Both services and software account for a larger portion of companies’ AI spending than AI hardware, which represents just 5% of the overall market. But hardware is expected to be the fastest growing segment this year thanks to an expected 29.6% spending jump.

The growing adoption of AI is the result of, among factors, the fact that the number of ways companies can apply machine learning to streamline operations is growing continuously. Scientists at research organizations such as OpenAI are developing new AI algorithms capable of partly automating complex tasks such as graphic design. Meanwhile, the tech industry’s leading players are also working on novel ways of applying machine learning. This effort has produced products such as the recently introduced Copilot programming assistant from Microsoft Corp.’s GitHub unit. 

Image: Pixabay

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