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Why GenAI Investment will Double in 2024

In 2024, every business can be a technology-driven business. The quest for business technology leadership skills, and digital transformation, will gain new momentum as more organizations seek ways to drive net-new digital growth.

Large enterprises will invest more than $19.4 billion worldwide in Generative Artificial Intelligence (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 more than double in 2024 and reach $151.1 billion in 2027 -- that's with a compound annual growth rate (CAGR) of 86.1 percent over the 2023-2027 forecast period.

Artificial Intelligence Market Development

Despite the recent IT headwinds in 2023, business leaders accelerated their exploration of GenAI solutions to help boost their digital business transformation.

"In 2024, the shift to AI everywhere will enter a critical buildout phase as enterprises make major new investments with the goal of drastically reducing the time and costs associated with customer and employee productivity use cases," said Rick Villars, group vice president at IDC.

From there, the use case and applications focus will shift to GenAI investments that boost revenue and business outcomes.

IDC expects GenAI investments to follow a natural progression over the next several years as organizations transition from early experimentation to aggressive infrastructure and trained data model building to widespread adoption with extensions to the edge of all business activities.

While companies at all levels will experience a shift in their technology investments toward AI implementation and the adoption of AI-enhanced products or services, the IT industry will make a much greater and faster AI pivot during the same period.

This is because every company will race to introduce AI-enhanced products or services and assist their employees and customers with AI implementations. For most, AI will replace cloud computing as the lead motivator of IT-enabled innovation.

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 Platform and Application Software will gradually overtake infrastructure by the end of the forecast with a five-year CAGR of 99.6 percent.

Similarly, GenAI Services, including IT and business-related services, will nearly equal infrastructure spending by the end of the forecast with a five-year CAGR of 94.2 percent.

By the end of the forecast period, GenAI spending will account for 29 percent of overall AI spending, up significantly from 10.8 percent in 2023.

GenAI spending will remain strong well beyond the build-out phase as these solutions become a foundational element in enterprises' digital business control platforms.

Outlook for GenAI Apps Investment Growth

"GenAI has served as a catalyst for investments in traditional AI solutions. The synergy between traditional and generative AI opens up a world of possibilities across industries," said Ritu Jyoti, group vice president at IDC.

 As IDC analysts look ahead to the future, embracing a holistic approach that merges traditional AI technology with generative creativity will enable more versatile systems capable of adapting to evolving challenges while fostering disruptive innovation.

That said, I anticipate more CEOs and other senior business leaders will want to assign a champion to the important task of GenAI skills development across the organization.

Similar to how prescient enterprise leaders previously led the adoption of Intenet access and transition to eCommerce, GenAI apps will be a top priority to enable productivity and fuel new growth.