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The AI Surge: Why Enterprises Are Pouring Money into Artificial Intelligence

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The winds of change are sweeping through the enterprise landscape – powered by artificial intelligence. Despite being relatively new, AI has quickly become a priority for business leaders looking to improve operational efficiency and revenue opportunities.  They are no longer merely dipping their feet in the AI pool; rather, they are diving in head first in many cases.

A recent ISG report notes that enterprise investment in AI is set to nearly double from 2023 to 2027, which makes sense if enterprises go from using an average of 251 AI-enabled applications to nearly 500, as ISG predicts. What’s also telling is that AI investment isn’t limited to just a few areas – they span the entire enterprise.

“These AI-enabled applications are wide-ranging, covering analytics, customer experience, HR, supply chain, procurement and more,” said Alex Bakker, ISG Distinguished Analyst.

As is often the case with new technologies that have seen rapid adoption, cost reduction was an early driver. But, there are myriad other factors that are creating this thirst for AI that go far beyond cost reduction and basic automation and, in fact, ISG Principal Analyst Michael Dornan explains that currently, there is an expectation that AI adoption will come at a cost, at least initially.

“Though the highest proportion (30 percent) of respondents say efficiency is their organization’s primary motivation for enabling AI technologies, AI is currently driving up costs across the business more than it is saving through efficiencies,” Dornan says.

He adds that, while enterprises largely consider AI the driver of spending increases on cloud, security, CX, and other IT needs, they place “the most value on achieving AI’s promise of cost and labor efficiencies over the coming two years.”

So, what's driving this surge in investment at a time when purse strings are held more tightly than ever?

  • The Power of Data: Businesses are sitting on a goldmine of data, but often lack the tools to extract its value, missing out on much of that power. AI brings the ability to analyze vast amounts of data to identify patterns, predict trends, and generate actionable insights, enabling business leaders to make data-driven decisions that optimize operations, create leaner business models, personalize marketing campaigns, and drive growth.

  • The CX Revolution: CX has become the new enterprise battleground and AI has become the weapon of choice, transforming how businesses interact with their customers. AI-powered chatbots can provide 24/7 support, answer complex questions with a high degree of accuracy, and even personalize recommendations and interaction, driving higher customer satisfaction and loyalty – and, by extension increase revenue.

  • Innovation on Autopilot: AI is not just about optimizing existing processes; it's about identifying and unlocking entirely new opportunities. AI can be invaluable in developing new products and services, identify untapped markets, and discovering un- or underserved customer segments. The use of AI not only supports business growth, but fosters a culture of innovation across organizations, better equipping them for the AI generation.

  • Generative AI: Rather than relying solely on existing data, the latest and rapidly growing segment of the AI landscape, GenAI, adds a layer of creativity to data, leveraging existing datasets to create new content. Enterprises are rapidly expanding their use of GenAI in marketing, product development, and personalization, making GenAI a key – albeit new – piece of enterprise AI investment.

But, with this massive uptick in AI adoption, enterprises can face challenges along the way, including integration issues, monitoring and management, data validation and security, among others. There’s also concern on the employee side that increased AI adoption will result in job loss, reducing their willingness to maximize their use of AI tools – either because their roles will become redundant or they won’t have the requisite skillsets to function effectively in an AI environment (or both).

However, Bakker suggests that enterprises can strategically minimize – perhaps eliminate some of all of these and other risks. “A long-term strategy is critical for guiding this rapid growth and ensuring AI investments are in line with business, revenue and customer experience goals,” he says.

What might that strategy look like?

  • Focus on High-Impact Projects: There are so many AI applications and used cases and it’s easy to get caught up in the hype. Spreading resources too thin can dilute the overall impact of AI. Rather, businesses should evaluate their existing operations to identify areas where AI can deliver the most value, then invest in high-impact applications that align with that analysis and overall business goals and maximize ROI.
  • Prioritize Data Governance: Establish clear data governance policies to ensure data quality, security, and accessibility to reduce risk. Creating a culture of data sharing across departments will help prevent or break down silos, improve results, and ensure greater business-wide success for AI initiatives.
  • Embrace Human-AI Collaboration: View AI as a tool to empower the workforce, not replace it. Transparency about AI initiatives and how they will improve workforce capabilities can increase employee willingness to embrace AI.
  • Invest in Talent: Successful AI requires a skilled workforce. In addition to transparency, enterprises should invest in training existing employees on AI concepts, while also recruiting AI specialists. This ensures an AI-proficient talent pool that can effectively manage, optimize, and utilize AI resources.

The Future of Work is Intelligent

From chatbots and other AI-driven CX projects to product development to process automation, the role of AI in the workplace is undeniable. The use cases are already nearly limitless and are only expanding. Simultaneously, the rise in AI spending is a clear indicator that enterprises recognize AI as not just a sideshow, but a strategic imperative and, by harnessing the power of AI to unlock data insights, revolutionize customer experiences, and foster innovation, they are positioning themselves for success in the intelligent age. As AI continues to evolve, those businesses that embrace it are more likely to thrive.




Edited by Greg Tavarez
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