Investment in GenAI Pressures Other IT Projects

Generative AI (GenAI) investment is projected to grow by 30% in 2024, with companies expecting ROI three times higher over the next three years compared to those with minimal GenAI investment. Despite overall IT budget increases, spending is uneven, focusing heavily on security and driving digital transformation. Companies plan to consolidate vendors across most products, with GenAI being the notable exception. GenAI budgets are expected to grow 60% over the next three years, accounting for an average of 7.6% of IT budgets by 2027.

According to Boston Consulting Group’s latest IT Spending Pulse, conducted with GLG, the survey captured insights from 330 IT buyers, primarily from North America and Europe, with some data from the Asia-Pacific region. Respondents indicated a dual focus on cost control and growth, with IT budgets increasing modestly by 3.3% going into 2024. Top priorities include security infrastructure, cloud services, and AI/ML, while spending on analytics and enterprise resource planning for finance is declining.

The trend towards vendor consolidation is strong, especially in storage and server infrastructure, but GenAI bucks this trend. About 42% of respondents plan to expand their roster of GenAI vendors to explore the emerging market. This diversity is necessary as companies seek the best tools and technologies to drive productivity gains.

GenAI adoption varies by industry, with tech companies leading, followed by banking, retail, industrial goods, and healthcare. Large companies are more likely to have mid or high maturity in GenAI adoption, while midsize companies lag behind. Geographically, adoption rates are similar across North America, Europe, and Asia, although Asia shows slightly higher maturity levels.

Companies with high GenAI maturity expect substantial returns, with 38% forecasting ROI of 20%-30%. High maturity firms are also willing to spend more on GenAI capabilities, demonstrating confidence in the technology’s potential. However, barriers to GenAI adoption remain, including the technology’s immaturity, data risks, legal risks, and inadequate training.

IT leaders must strategize effectively to win support from CIOs, balancing the need for GenAI investment with maintaining essential day-to-day operations. Clear business cases, appropriate resourcing, and vendor support are crucial for success. Companies that manage this balancing act will be better positioned to leverage GenAI’s transformative potential while sustaining critical infrastructure.