The digital transformation was only the first step, in order to create real value, companies must continue on the path they have started, IDC pointed out. With generative artificial intelligence, the time has come to build innovative capabilities and culture if they want to stay competitive in the new era of digital business.
In an effort to increase their competitive advantage and modernize their technological environment and processes, organizations have focused on digital transformation for years. They had only one goal – to become a digital company that creates value and user experiences for its customers and employees with the technology used in its processes, products and services. And now they really have the opportunity to enter the era of digital companies, International Data Corporation pointed out in its 2024 trend forecast for digital business strategies (IDC FutureScape: The Digital Business Era Has Arrived, Augmented by GenAI).
Companies are now looking for new sources of income while further digitizing their operations in order to reduce costs and increase efficiency. They are increasing their spending on digital technologies, while their traditional, non-digital investments are stagnating or decreasing – and their customers, employees, partners and suppliers already directly expect digital experiences from them.
– Their digital transformation was only the first step, in order to really gain value from the change, companies must continue to move towards an innovative state – said Craig Powers, research director of IDC. – According to our expectation, during 2024, more and more companies will further develop their innovative capabilities, as digital innovation, ideation and testing with digital technologies are given an increasing priority. Now is the time for organizations to build innovative capabilities and culture if they want to remain competitive in the age of digital business.
AI and innovation
In the FutureScape 2024 research, IDC examined external drivers that will change the global business ecosystem in the next 12-24 months, and also mapped the problems that IT teams defining, building and managing the digital technologies used by companies must find solutions for. The analyst also gave ten predictions for digital company strategies.
Innovation supported by generative artificial intelligence – Companies will use generative AI to develop digital products and services, which also helps innovation in recognizing business opportunities and allocating resources. Organizations that leverage the technology’s capabilities in this way will be more efficient and effective in their new revenue generation efforts and will grow faster than their competitors that do not use generative AI.
The momentum of investments in digital technologies continues – Organizations’ spending on digital technologies will grow seven times faster than the economy as a whole in 2024, as market demands push companies to develop their digital business models and digital capabilities.
Artificial intelligence in senior management – In the latest IDC survey, slightly more than half of IT managers said that their company has a separate manager responsible for artificial intelligence, or plans to create such a position. According to the same proportion of respondents, the place of the AI director is in the top management.
Generative AI for digitally native companies – These businesses rely on technology to support their disruptive business models and increase their competitive advantage. Early adopters of generative artificial intelligence will also be excluded.
Digital business platforms for success – Digital business platforms provide greater insight into the operation of companies, thereby making the impact of their investments more understandable. As organizations become more digitally mature, it’s easier for organizations to measure return on investment (ROI), making them more likely to build cutting-edge capabilities that drive revenue growth.
Ubiquitous AI is permeating new business models – According to the analyst, the combination of predictive artificial intelligence, machine vision and generative AI, as well as the on-demand services of digital ecosystems, opens up a new dimension. Companies can use these capabilities to create attractive products and services that will be valued by their target audiences.
New KPIs are needed to measure success – For strategic decision-making, it is critically important to follow which developments and measures are actually relevant for the business. Companies will therefore use new performance indicators to measure the success of digital products, services and experiences.
A digital-first approach becomes an investment priority – CEOs increasingly expect technology leaders to focus on achieving better business results, increasing business agility, and driving new revenue through digital products, services and experiences.
Work processes and the workforce are also affected by AI – The widespread introduction of artificial intelligence presents challenges to employees, as the technology affects both the work and the learning process. To avoid negative consequences, companies must retrain their employees to work with generative artificial intelligence.
Digital technologies help to achieve sustainability goals – If they want to achieve results in their efforts in this direction, business and technology leaders must implement IT investments that simultaneously bring companies closer to their digital business and sustainability goals.
Cost generating intelligence
IDC’s forecast (GenAI Implementation Market Outlook: Worldwide Core IT Spending for GenAI Forecast, 2023-2027) worldwide, companies will spend nearly 16 billion dollars this year on investments related to generative artificial intelligence. Including software, hardware infrastructure, and IT and business services, their spending for this purpose is expected to reach $143 billion by 2027, which promises a compound annual growth rate of 73.3 percent over the forecast period. This is more than twice the growth rate of total AI spending, and nearly 13 times the expected growth of total IT spending over the same period.
The analyst pointed out that generative artificial intelligence is much more than a passing trend or mere hype, a transformative technology that has a far-reaching business impact and can transform industries, work and many areas of life if organizations use it ethically and responsibly.
According to his expectation, generative AI investments will follow a natural development direction in the years ahead, as organizations move from the experimentation phase to the aggressive introduction of the technology, to support targeted use cases, and it will appear in all areas of the company’s activities, reaching the edge networks as well. However, supply chain disruptions, skill shortages and the underdevelopment of AI skills, as well as security concerns and other factors will undoubtedly affect how organizations spend.
By the end of the forecast period, spending on generative artificial intelligence will reach 28.1 percent of total AI spending, which is a significantly larger share than the 9 percent measured this year. Companies will continue to spend heavily on generative artificial intelligence after the first wave of deployment, as it will become a core element of their digital business platform.
In the initial phase of the rollout, the infrastructure of generative AI will be the most significant area of investment, including hardware devices as well as infrastructure services (IaaS) and system infrastructure software (SIS). Towards the end of the five-year forecast period, however, the area of software will attract the most spending, with IDC forecasting a compound annual growth rate of 76.8 percent here. Within this, the segment of platform and model delivery, as well as application development and implementation, will grow at an even faster pace.