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Gartner – AI generates spending

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Gartner – AI generates spending

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This year, we will spend more on information technology services than on telecommunications services, which is the first time, Gartner pointed out in its global forecast. According to the analyst, nine out of ten corporate CFOs are planning larger AI budgets by 2024 – and these trends will affect vendor strategies as well.

The world’s IT spending is expected to reach 5 trillion dollars this year, which promises a 6.8 percent increase compared to last year, according to Gartner’s latest forecast. The analyst revised his expectations downwards, as in the third quarter of last year he predicted an 8 percent expansion for 2024. Although generative artificial intelligence (AI) was accompanied by a lot of hype last year, this technology will not significantly increase IT spending in such a short term – at least when it comes to product procurement.

“This year, organizations will actually spend more to plan how they will use generative AI,” said John-David Lovelock, vice president of Gartner, when the report was released. – Traditional factors such as profitability and workforce will have a much greater impact on the IT spending of companies, which are starting to get tired of managing continuous changes.

Driver tiring endless change

Spending on IT services is expected to grow by 8.7 percent on an annual basis this year, reaching a value of $1.5 trillion and becoming the largest segment of the market for the first time in the history of forecasts. Its performance is primarily due to the fact that in the uncertain economic environment, companies invest in vital projects aimed at increasing organizational efficiency and optimizing operations. Not far behind is the segment of communication services, which has been the leader so far, with an expected size of 1.47 trillion dollars this year, but here the annual growth will be at a much slower pace, 2.3 percent.

Spending on software may grow the fastest this year as well, with the 12.7 percent growth of the segment, which slightly strengthened last year’s 12.4 percent expansion, this year it may exceed the $1 trillion mark. The segment of data center systems is also performing reliably, after last year’s 7.1 percent expansion, it may grow by another 7.5 percent this year, so its size exceeds 261 billion dollars. And the segment of end-user devices may turn around the negative trend of last year’s 8.7 percent decrease in 2024 – because the analyst here expects a 4.5 percent increase, which could increase spending to over 732 billion dollars.

Total IT spending grew by 3.3 percent in 2023, just 0.3 percent faster than the year before. Although the expected 6.8 percent expansion for this year shows a greater momentum, companies tired of the never-ending changes will somewhat restrain their technology spending, Gartner added. Fatigue can even lead to resistance to change, when IT managers are already reluctant to sign new contracts and start longer-term programs. If they do start new initiatives, then IT managers avoid risks even more than before and expect more certain results from their projects.

Enterprise AI ambitions and frameworks

When it comes to artificial intelligence, 90 percent of corporate CFOs are preparing a larger budget for this year, and none of them plan to cut the AI ​​budget, Gartner found in its report (2024 Budget Priorities for CFOs) published in February. According to the underlying survey – in which the analyst asked more than three hundred financial managers about the use of the framework – 71 percent of companies will increase their AI spending by at least 10 percent or more this year compared to last year’s level. The role of generative AI is very large in this, as 81 percent of respondents are preparing to spend more in this area.

– As organizations advance in the use of artificial intelligence, their leaders must also reach an agreement on what goals the technology will ultimately be used to achieve – said Alexander Bant, Gartner’s research leader. – In addition to increasing the AI ​​budget, the CFO must therefore also participate in key senior management meetings where the organization’s AI aspirations are formulated.

In order to use the framework that can be applied to artificial intelligence as smartly as possible, senior management must develop the company’s AI vision. In other words, you need to determine whether you will use the technology to enhance your existing business and operating model, or to go further and develop entirely new models. You also need to decide whether AI will be a tool for internal operations, or whether the company will incorporate it into solutions that directly address its customers.

It seems that some of the CFOs have already taken the analyst’s advice. According to Gartner’s survey last November – in which more than eight hundred managers from different functional areas participated – 34 percent of CFOs take a role in developing a corporate strategy around generative artificial intelligence. It is noteworthy that only 55 percent of the surveyed CTOs and 48 percent of the CIOs can say the same about themselves. In comparison, 45 percent of CEOs are at the table when the company’s generative AI strategy is on the agenda.

– The vast majority of financial directors are still dissatisfied with the performance of their company’s digital investments – said Alexander Bant. – As companies can spend five to eight times more on generative artificial intelligence this year than last year, CFOs want to take on the role of co-pilot to ensure that these expenditures bring measurable results, without undue risks.

Industrial clouds and vertical marketplaces

Generative artificial intelligence – together with several other technological trends – determines the strategy of market players not only on the user side, but also on the supplier side, Gartner pointed out in its report published in February (2024 Tech Provider Top Trends). Technology is reshaping suppliers both internally and externally, at the level of product development and organizational operations, forcing them to balance short-term business opportunities with long-term benefits in a volatile economic environment. For example, they must develop an effective growth strategy that takes into account future revenue opportunities in addition to the currently available margin. They also need to renew their relationship with the company’s IT department, and update their approach to sales and marketing to detect and respond to changes in customer habits or said pessimism.

In the short term, within 12 months, technology suppliers must respond to trends related to artificial intelligence security and models, as well as industry clouds, the analyst emphasized.

The responsible and reliable, safe use of artificial intelligence is by no means a new concept. However, the unprecedented rapid development of generative AI raises questions about risk management, or, for example, the origin of content and hallucinating technology, which we are still looking for answers to. Suppliers must therefore build their AI models and solutions based on security principles that facilitate visibility, tracking and explanation of operations. To maintain their competitiveness, it will be critical to build trust in anticipation of the regulatory and compliance requirements that are now taking shape.

While general-purpose generative AI models perform well in a wide range of applications, they are underperforming in enterprise use cases that require domain-specific data. It is therefore advisable for suppliers to develop industry AI models that users can effectively customize according to their own requirements with their existing devices.

In a similar way, cloud providers – including hyperscale providers and local players, independent software vendors and SaaS providers – should also turn to vertical solutions that can help their customers achieve faster results. According to Gartner, by 2027, more than 50 percent of technology vendors will use industry cloud platforms, which is a very rapid increase, considering that this percentage was only 3 percent last year.

According to the analyst, in the longer term, in 36 months’ time, suppliers must also respond to the trend of specialized digital marketplaces focused on niche markets. Special marketplaces not only customize the purchasing experience, but also simplify the introduction and integration of solutions. It can therefore be expected that in the future it will be increasingly difficult for customers to find the services of players who do not customize their digital marketplace. According to Gartner’s forecast, no less than 80 percent of supplier and customer interactions will be directed to digital channels in 2025. However, 100 percent self-service will still not be a feasible path for most companies, so technology suppliers must strengthen the hybrid model when entering the market, in terms of marketing and sales.

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