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AI Software Market will Reach $251 Billion

The growth in Artificial Intelligence (AI) software could lead to many benefits. As more organizations adopt AI, they may become more efficient, productive, and able to offer improved products and services.

The global job market could also expand, with demand growing for roles like AI engineers and technicians. Plus, AI apps could enable breakthroughs in fields like healthcare, transportation, and energy.

The worldwide AI software market will grow from $64 billion in 2022 to nearly $251 billion in 2027 at a compound annual growth rate (CAGR) of 31.4 percent, according to the latest market study by International Data Corporation (IDC).

AI Software Market Development

The forecast for AI-centric software includes Artificial Intelligence Platforms, AI Applications, AI System Infrastructure Software (SIS), and AI Application Development and Deployment (AD&D) software (excluding AI platforms).

However, it does not include Generative AI (GenAI) platforms and applications, which IDC recently forecast will generate revenues of $28.3 billion in 2027.

A recent IDC survey found that, in the next 12 months, roughly a third of respondents believe that organizations will prefer to buy AI software from a vendor or use in-house support alongside vendor-supplied AI software for specific use cases or application areas.

This indicates a growing demand for AI solutions and highlights the need for customized approaches based on individual business requirements.

The momentum behind investments in AI and automation remains unwavering despite economic uncertainty and shifting market dynamics. Leaders realize that business technology is a strategic necessity and also a crucial factor in achieving long-term success.

"Despite potential challenges and risks, organizations are confident that adopting AI will continue to be crucial for future-proofing their business operations and remaining ahead of the competition," said Raghunandhan Kuppuswamy, research manager at IDC.

AI Applications is currently the largest category of AI software, accounting for roughly one-third of the market's overall revenue in 2023.

The category includes collaborative, content workflow and management, enterprise resource management (ERM), supply chain management, production and operations, engineering, and customer relationship management (CRM) applications.

Revenue growth in the AI Applications category will trail the overall market with a five-year CAGR of 21.1 percent.

The second largest category in terms of 2023 revenue is Artificial Intelligence Platforms. With the second fastest growth rate over the 2023-2027 forecast period (a 35.8 percent CAGR), AI Platforms will be the largest revenue category for most of the forecast.

AI Platforms facilitate the development of artificial intelligence models and applications, such as intelligent assistants that can mimic human cognitive abilities.

The two smallest categories – AI Systems Infrastructure Software (AI SIS) and AI Application Development and Deployment (AI AD&D) software – will both grow revenues faster than the overall market with five-year CAGRs of 32.6 percent and 38.7 percent, respectively.

The AI SIS category benefits from its integration with existing software systems, allowing organizations to derive valuable insights from vast amounts of data to make informed decisions and optimize operations.

The category includes analytics, business intelligence software, data management, integration, orchestration, application development, software quality, life-cycle software, and application platforms. 

The AI AD&D category includes analytics and business intelligence software, data management, integration and orchestration, application development, software quality and life-cycle software, and application platforms.

Outlook for AI Software Applications Growth

"The AI landscape is changing rapidly. Convergence of traditional AI with Generative AI will lead to cutting-edge solutions that combine decision efficacy with creative ingenuity," said Ritu Jyoti, group vice president at IDC.

According to the IDC assessment, as businesses continue to invest in AI, they should be prepared to address challenges and prioritize ethical considerations to maximize the long-term ROI.

That said, I believe AI initiatives could transform major industries and economies over the next decade. The increased revenues reflect growing investment in developing innovative AI applications.

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