GenAI Investment to Surge 30% Despite Limited IT Budget Growth

With modest GDP growth and stagnant budgets, organizations globally are reevaluating their financial priorities. The shift involves reallocating funds from mature areas to support IT investments. While cloud and security remain top priorities, generative AI (GenAI) is capturing attention for its promise of significant productivity improvements.

Boston Consulting Group (BCG) anticipates GenAI investment to grow by 30%. Companies with high GenAI maturity expect triple returns over the next three years compared to those with minimal adoption.

IT Spending Trends and Priorities

IT budgets are growing modestly, rising by 3.2% in 2023 and 3.3% in 2024. Leaders prioritize both cost control and growth, with equal importance placed on both.

Security and digital transformation are among the top concerns. These are rated as top-three priorities by 61% and 60% of respondents, respectively.

High-Impact Investment Areas

Organizations focus on high-impact areas like AI and ML, security infrastructure, cloud services, and analytics. IT budgets see a 30% increase for AI, 27% for security, and 30% for cloud.

Conversely, companies are cutting spending on server infrastructure (24%) and devices (16%), reallocating those funds to areas with higher potential returns.

GenAI Maturity Insights

Companies are at varied stages of GenAI maturity. About 20% have minimal adoption, down from 24% in Q3 2023. Midsize and large enterprises are ahead, particularly in tech, banking, and retail sectors.

Geography is a less significant factor in adoption. North America and Europe show consistent maturity levels, while Asia leads with a slightly higher adoption rate.

Investments Beyond Budgets

Although companies initially estimated 4% of their IT budgets for GenAI, actual spending in 2023 reached 4.5%. The allocation is set to grow to 7.6% by 2027.

Growth-focused companies plan to invest 15% more in GenAI compared to cost-focused companies. This indicates a strategic shift to prioritize long-term returns over immediate cost control.

Barriers to GenAI Adoption

Immaturity of GenAI technology remains a significant barrier. Other challenges include data risks, legal issues, and inadequate training. These have become more prevalent over the past year.

Organizations must present a clear strategic plan to gain CIO support. Effective planning and vendor support are critical for successful GenAI implementation.

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