IDC Sees AI Investment Accelerating
September 1, 2021
and organizations across all industries are increasing their investment in
artificial intelligence (AI) to create competitive advantage through improved
customer insight, greater employee efficiency, and accelerated innovation. The
new Worldwide Artificial Intelligence Spending Guide from International Data
Corporation (IDC) forecasts global spending on AI systems will jump from $85.3
billion in 2021 to more than $204 billion in 2025. The compound annual growth
rate (CAGR) for the 2021-2025 period will be 24.5%.
"The disruption through the global pandemic has been unsettling, but it is also
serving as a catalyst for innovation, growth, and business transformations,"
Ritu Jyoti, group vice president, Artificial Intelligence
and Automation Research with IDC's software market research and advisory
practice. "Today, AI expertise is focused more on developing
commercial applications that optimize efficiencies in existing industries.
Acceleration of AI adoption and proliferation of smart, intuitive ML/DL
algorithms will spawn the creation of new industries and business segments and
overall will trigger new opportunities for business monetization."
Retail and Banking are the two industries that will spend the most on AI
solutions over the five-year forecast period with Retail spending growing at a
slightly faster rate. Retail AI spending will largely focus on solutions that
improve the customer experience through automated customer service and
recommendation engines. The Banking industry will allocate much of its AI
investment to risk reduction through automated threat intelligence and fraud
analysis applications. The third largest industry for AI spending, Discrete
Manufacturing, will invest primarily in quality management and automated
preventative maintenance solutions. In terms of spending growth, all 19
industries in the Spending Guide are expected to have compound annual growth
rates (CAGRs) greater than 20% over the 2021-2025 forecast period.
The two largest use cases in terms of total spending across all industries are
Automated Customer Service Agents and Sales Process Recommendation and
Automation. Together, these two use cases will account for $15.9 billion or more
than 18% of all AI spending this year. While this shows an orientation toward
better customer experience across industries, how the solutions are used will
vary from industry to industry. For example, Federal and Central Government will
use AI solutions to help constituents find the most suitable government service
while Retail will focus on helping shoppers to identify additional items to
The next five use cases were closely bunched at just over $5 billion in spending
this year – IT Optimization; Automated Threat Intelligence and Prevention
Systems; Program Advisors and Recommendation Systems; Fraud Analysis and
Investigation; and Automated Preventative Maintenance. Similar to AI spending by
industry, all 27 AI use cases in the Spending Guide are expected to have CAGRs
greater than 20% over the five-year forecast period.
"In addition to the customer experience, a lot of AI investment is geared
towards improving efficiency. IDC believes these implementations will migrate
towards developing and enhancing new business models," said
Mike Glennon, senior research manager with IDC's Customer
Insights & Analysis team. "New ways of conducting business will
fundamentally change how companies interact with their customers and will
encourage new players across many industries. We have already seen dramatic
changes in retail with companies such as Alibaba and Amazon, and other
industries will follow as they discover how they can benefit from changes in how
business is done using AI. AI will have an impact in all stages of business,
from customer interactions, through supply chain improvements, to new and yet to
be thought of services."
“The digitization of business operations has
accelerated over the past 18 months leading to an expanded digital footprint
exposed to cyber threats. The deluge of digital data is a gold mine for many
lines of insurance. Cyber insurance, for example, benefits from insights into
the configuration of cloud services or into the deployment of security best
Rajeev Gupta, CPO and co-founder at Cowbell Cyber.
“All aspects of AI - making sense of large amounts of data, machine learning,
and advanced algorithms – are helping us redefine how cyber insurance can
operate at speed and with precision.”
To put a finer point on the cybersecurity
angle, machine learning can be used to enhance the accuracy of sensitive data
discovery through named entity recognition (NER) in tools like IRI DarkShield.
"You can teach the computer to find patient names within the context of
sentences, for example,"
explained IRI SVP David Friedland. IRI has also
demonstrated the use of machine learning to improve diagnostic accuracy based on
tissue sample data run through the IRI Voracity provider for the KNIME AI and
analytics platform, and intends to leverage AI in the development, orchestration
and scaling of Voracity data integration jobs in partnership with DataSwitch.
"Opportunities are wide open to use AI software to improve the efficiency of
software-related processes themselves," he concluded.
will be the leading technology group accounting for more than half of all
spending on AI solutions throughout the forecast. The largest areas of
investment will be AI Applications and AI Development & Deployment software
while AI Lifecycle Software will experience the fastest spending growth with a
five-year CAGR of 40.7%. A quarter of all AI spending will go toward Services
with IT Services seeing spending totals similar to those for AI Applications.
Hardware spending will be dominated by server purchases.
On a geographic basis, the United States will deliver more than half of all AI
spending throughout the forecast, led by the Retail and Banking industries.
Western Europe will be the second largest geographic region, led by Banking,
Retail, and Discrete Manufacturing. China will be the third largest region for
AI spending with State/Local Government, Banking, and Process Manufacturing as
the leading industries. The strongest spending growth over the five-year
forecast will be in Western Europe (26.9% CAGR) and Asia/Pacific (excluding
Japan and China) (25.1% CAGR).