Enterprise leaders will have invested nearly $16 billion worldwide in Generative AI (GenAI) solutions in 2023, according to the latest market study by International Data Corporation (IDC).
This spending, which includes GenAI software as well as related infrastructure hardware and IT or business services, is expected to reach $143 billion in 2027 with a compound annual growth rate (CAGR) of 73.3 percent over the 2023-2027 forecast period.
Note that this is more than twice the rate of growth in overall current AI investment, and almost 13 times greater than the CAGR for worldwide IT spending over the same period.
Generative AI Market Development
"Generative AI is more than a fleeting trend or mere hype. It is a transformative technology with far-reaching implications and business impact," said Ritu Jyoti, group vice president at IDC.
With ethical and responsible implementation, GenAI solutions are poised to reshape industries -- changing the way we work, play, and interact with the world at large.
IDC expects GenAI investments to follow a natural progression over several years as organizations transition from early experimentation to aggressive build-out, with targeted use cases to widespread adoption across business activities, and with an extension of GenAI use to the edge.
The rate of GenAI spending will be somewhat constrained through 2025 due to turbulence in workload shifts and resource allocation, not just in silicon but also in networking, facilities, model confidence, and AI skills.
Other factors that might constrain the expected rate of investment include pricing, concerns about privacy and security, and the possibility of an existential crisis that triggers major consumer antipathy or government interventions.
By the end of the forecast, GenAI spending will account for 28.1 percent of overall AI spending, up significantly from 9 percent in 2023.
According to the IDC assessment, GenAI spending will remain strong well beyond the build-out phase as these solutions become a foundational element in enterprises' digital business platforms.
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 services will gradually overtake infrastructure by the end of the forecast with a five-year CAGR of 76.8 percent.
GenAI Business Applications Growth Forecast
The GenAI software segments will see the fastest growth over the 2023-2027 forecast with GenAI platforms or models delivering a CAGR of 96.4 percent, followed by GenAI Application Development & Deployment (AD&D), and applications software with an 82.7 percent CAGR.
That said, I believe it's crucial to incorporate GenAI into your strategic business activities. Start with targeted experimental use cases, then gradually extend GenAI use to the frontline of your organization.
As Generative AI becomes essential to achieving desired business outcomes, investing in the related infrastructure and associated services will be vital to many forward-looking digital growth strategies.