The enthusiasm for AI is such that companies are abandoning other initiatives to prioritize it. Here’s what an IDC study finds. It suggests a new impetus for companies regarding investments in AI, thanks to the perceived value.
The report, which was commissioned by Microsoft but independently conducted by IDC, found that respondents report an average return of 3.5x on their AI investments. In other words, they claim to reap $3.5 of added value for every dollar invested.
And, again, in other words, that’s a 250% return. This figure is significant compared to other AI monetization reports. IBM reported an average return on investment of just 5.9%, based on a May survey of 2,500 global executives.
Rapid deployments
This return is lower than the typical cost of capital of 10% and, from this perspective, AI could be considered a risky investment option. Other reports showed even lower average profits, or discussed the difficulty of estimating ROI and the fact that companies often make big mistakes when calculating ROI.
The IDC report was produced in September, making it one of the first reports to look at monetization since the hype surrounding generative AI at the end of last year.
Among other highlights, the report found that 71% of respondents say their company is already using AI, and 22% plan to do so in the next 12 months. The report indicates that 92% of AI deployments take
12 months or less, which is fast.
However, this is the first time IDC has explicitly asked respondents to quantify their return on investment. But, what methodology was used to calculate returns on investment?
Disinterest in administrative services
IDC relied on data stated by the professionals interviewed. The company also offered broad categories of answers to the ROI question: respondents could answer 2X, 3X, 4x, 5x, no ROI and Not sure. (If the answer was greater than 5x, the respondent was asked to specify his answer).
So, if these numbers are roughly accurate, there is little, if any, risk for companies to pursue an aggressive AI investment strategy, at least if it is diversified and disciplined.
But this enthusiasm has a negative effect on other projects. IDC notes that a third of organizations reported reducing spending by an average of 11% in certain areas of activity to invest more in AI.
The areas affected are outside of IT, and are in areas such as administrative support and services. Administrative assistants to senior executives, for example, are in the hot seat. Other areas include operations, technical support, human resources and customer service.