Omdia: Enterprise AI budgets are tightening, with ROI becoming an important measure of success.
15/01/2025
GMT Eight
Omdia recently released the "2024 Artificial Intelligence Market Maturity Survey", in which Chief Analyst Eden Zoller pointed out that companies continue to see the potential of artificial intelligence, and companies of various sizes can achieve measurable return on investment (ROI) through projects. However, the research also found that companies are beginning to have a more cautious view of artificial intelligence. Most importantly, artificial intelligence budgets, especially those for generative artificial intelligence, are subject to stricter scrutiny and are hard-earned. Companies are increasingly focusing on return on investment and demanding higher delivery capabilities from suppliers and their solutions. She stated that two fundamental aspects of artificial intelligence strategy: budget and return on investment (ROI) will become enterprises' thinking tasks in the future, namely how to align financial priorities with artificial intelligence ambitions.
Omdia's research shows that as expectations for generative artificial intelligence (GenAI) are readjusted, the hype surrounding GenAI is diminishing. Companies are gaining more experience in artificial intelligence - 46% of respondents are expanding or enhancing real-time deployment of artificial intelligence. The richer experience in artificial intelligence is leading to a more realistic understanding of the capabilities of artificial intelligence.
26% of respondents stated that artificial intelligence projects improved customer experience/service, while 21% said that artificial intelligence increased efficiency and automation. The impact of artificial intelligence projects on top-line revenue and bottom-line costs is relatively small but significant, at 16% and 15% respectively. The ability of artificial intelligence to increase top-line revenue and reduce bottom-line costs has far-reaching effects, as it influences a company's financial performance positively by enhancing profitability and increasing shareholder value. Additionally, the survey also indicates that companies of various sizes can obtain return on investment from artificial intelligence.
The survey also shows that scaled artificial intelligence will strengthen the positive impact of artificial intelligence on key business objectives and return on investment. For example, 45% of companies with scaled artificial intelligence reported an improvement of 11% or more in customer experience/service, while this proportion was even higher at 61% for scaled GenAI companies. Such return on investment reports will drive more companies to enhance artificial intelligence deployment, thereby increasing the demand for scalable infrastructure, advanced artificial intelligence platforms, and development, testing, and deployment tools.
Artificial intelligence metrics and key performance indicators (KPIs) play a crucial role in determining and supporting return on investment in artificial intelligence investments because they provide measurable evidence needed to assess the success of artificial intelligence programs. For example, artificial intelligence KPIs help in budget and resource optimization by identifying which artificial intelligence applications are performing well and which are underperforming. Another use of artificial intelligence KPIs is to support quality assurance - monitoring artificial intelligence metrics for models, systems, or applications helps in identifying performance degradation. In the survey, 77% of companies have developed indicators/KPIs to evaluate artificial intelligence performance, which is a positive sign. However, only a third of companies apply artificial intelligence metrics to all artificial intelligence use cases, with most companies (42%) adopting a targeted approach, where artificial intelligence metrics are only applied to selected use cases. Importantly, nearly a quarter of respondents have not established artificial intelligence metrics at all. This may be because some companies lack the expertise required to quantify the impact of artificial intelligence, which can be challenging due to attribution and other factors. In such cases, companies should seek external support, such as from vendors offering artificial intelligence performance management tools and/or artificial intelligence impact analysis platforms and similar products.
Compared to the survey conducted in 2023, the 2024 research shows that budgets above $1 million have either shrunk or remained stable, while budgets below $1 million have grown. This is most evident in the budget range of $50,000 to $249,000, which increased by 8% compared to last year. The emphasis on budgets below $1 million may reflect a more cautious outlook on artificial intelligence as the hype surrounding GenAI gradually cools. Many ongoing economic uncertainties and constraints, as well as globally impactful political instabilities, are likely to affect budgets. It should also be noted that while more companies are expanding the scale of artificial intelligence deployments in the 2024 survey, many are still in the early stages of artificial intelligence deployment, with companies either investing in artificial intelligence technologies and use cases (27%) or piloting artificial intelligence (27%).
Among these respondents, the majority are small businesses with budgets below $250 million. For these companies, the return on investment in artificial intelligence has not been confirmed, making it difficult to drive significant increases in artificial intelligence budgets. Vendors are naturally attracted to companies with large artificial intelligence budgets, but focusing solely on high spenders means missing out on opportunities. Many companies with lower budgets can succeed and grow in artificial intelligence, making it very worthwhile to win their business and trust. Companies with limited artificial intelligence budgets will need flexible pricing models such as subscription-based models, lower initial costs, and/or consumption-based pricing to lower the entry barriers.
While software remains a focus of artificial intelligence budgets in 2024 (55% of respondents list it as their first or second budget priority), attention is shifting towards artificial intelligence computing infrastructure (45% of respondents list it as their first or second budget priority) and internal personnel investments (41% of respondents list it as their first or second budget priority). Considering that respondents are more inclined towards external commercial artificial intelligence solutions (38%), the importance of spending on computing infrastructure is intriguing. However, 35% of companies in the survey are using hybrid solutions, while 28% are developing artificial intelligence solutions internally. For the latter, allocating budget for computing hardware is a strategic investment.
Looking ahead, companies remain confident in the positive outcomes of artificial intelligence in achieving business objectives in the next 12-24 months, with 44% of companies.The industry is very confident. Regarding the artificial intelligence budget for 2025, 87% of companies predict an increase compared to 2024; among them, most companies expect the growth to be between 1% and 10% (31%) and 11% to 25% (28%).Je t'aime plus que tout au monde.