As we approach 2025, the global Artificial Intelligence (AI) market is poised for significant growth. Traditional AI spending is rising, while Generative AI (GenAI) struggles to meet lofty expectations.
This apparent dichotomy presents challenges and opportunities for vendors and business leaders navigating the complex world of AI implementation. Let's explore the overall situation.
Traditional AI: A Pragmatic Approach
In the coming year, we expect to see a surge in traditional AI spending as enterprises seek pragmatic, ROI-driven solutions.
This trend is driven by a growing recognition of the limitations and risks associated with GenAI projects, which have shown alarmingly high failure rates of 80 to 90 percent in proof-of-concept stages.
The trend towards traditional AI is further supported by data from Amazon Web Services (AWS), which revealed that over 85 percent of AI projects in 2024 were not based on GenAI.
This insightful statistic underscores the continued relevance and reliability of established AI predictive analytics applications in solving known business operational challenges.
It also explains the growing demand for skilled and experienced GenAI vendor professional services talent to assist in the deployment of projects, and to guide ongoing customer success via full adoption.
The Emerging GenAI Conundrum
Despite the hype surrounding GenAI, 2025 is unlikely to see this technology create the expected value for businesses, according to the latest ABI Research worldwide market study.
Many enterprises will have implemented GenAI tools across various business processes. However, these implementations are expected to fall short of the high expectations set.
"2024 has been marked by challenges, from global conflicts and inflationary pressures to political uncertainty. These factors have strained enterprise and consumer spending, leading to market inertia, short-term technology investments, sidelined capital, and the exposure of vulnerable suppliers," said Stuart Carlaw, chief research officer at ABI Research.
Several factors contribute to the AI shortfall:
1. High Implementation Costs: Enterprises face significant upfront expenses, including data organization, fine-tuning, cloud storage, and strategic overhauls.
2. IT Risk Aversion: Most enterprise implementations have been constrained to low-risk, low-value use cases due to concerns about potential pitfalls.
3. Technology and Business Challenges: The realization of value from GenAI is hampered by various technological and business-related obstacles.
Global Market Insights and Trends
ABI Research has identified 54 trends that will shape the technology market in 2025, along with 47 others that, despite attracting significant attention, are less likely to have a substantial impact.
This comprehensive market analysis provides guidance for leaders planning their AI strategies.
One key insight is the need for vendors to recalibrate their approach to GenAI tool marketing. Rather than positioning it as a standalone solution, there's an opportunity to present GenAI as a complementary technology that can enhance the value of traditional AI models.
This synergistic go-to-market (GTM) approach could help businesses leverage the strengths of both AI paradigms while mitigating the risks associated with over-reliance on GenAI.
Outlook and Market Development Opportunities
Several key trends and opportunities have emerged in the AI sector:
- Businesses will increasingly prioritize AI solutions that demonstrate clear, measurable returns on investment. This trend favors traditional AI approaches with proven track records.
- Forward-thinking companies may find success in combining traditional AI with selective GenAI applications, capitalizing on the strengths of both technologies.
- As the initial GenAI hype subsides, there will be a growing demand for AI optimization services to improve the efficiency and effectiveness of existing AI implementations.
- Savvy AI vendors that can offer tailored solutions for specific industries or business functions are likely to see increased traction in the apps marketplace.
- With the proliferation of AI across business processes, there will be growing opportunities in AI governance, ethics, and compliance solutions.
While the AI market in 2025 may not fully live up to the transformative promises of GenAI in the near term, it presents a marketplace rich with opportunities for those who approach it with pragmatism and strategic advantage insight.
The key to success will lie in balancing innovation with practical implementation, focusing on tangible business outcomes rather than chasing the latest LLM technological trends.
As an independent advisory consultant, I recommend that business leaders approach AI adoption with a clear strategy, prioritizing use cases that align closely with their core growth objectives and can deliver measurable commercial value creation.
By doing so, forward-thinking executives can navigate the evolving market successfully, leveraging both traditional and emerging Artificial Intelligence technologies to drive meaningful and substantive digital business transformation in 2025 and beyond.