AI Software Market Poised for Remarkable Growth, Surpassing $250 bn: IDC

The artificial intelligence (AI) software market is on an upward trajectory, set to skyrocket from $64 billion in 2022 to an astonishing $251 billion by 2027, reflecting a remarkable compound annual growth rate (CAGR) of 31.4 percent.
artificial-intelligenceThis forecast encompasses AI-centric software, which comprises Artificial Intelligence Platforms, AI Applications, AI System Infrastructure Software (SIS), and AI Application Development and Deployment (AD&D) software, excluding Generative AI platforms and applications.

Notably, the forecast omits Generative AI platforms and applications, for which IDC predicts revenues of $28.3 billion in 2027. These impressive figures underscore the growing influence of AI technologies across industries worldwide.

A survey conducted by IDC further reveals that approximately one-third of respondents anticipate that organizations will opt to purchase AI software from vendors or combine in-house support with vendor-supplied AI software for specific use cases and application areas over the next 12 months. This trend underlines the increasing demand for AI solutions and emphasizes the necessity for customized approaches that align with individual business needs.

“The momentum behind investments in AI and automation technologies remains unwavering despite economic uncertainty and shifting market dynamics. Businesses are realizing that utilizing cutting-edge technology is not only a strategic necessity but also a crucial factor in achieving long-term success,” Raghunandhan Kuppuswamy, Research Manager for Artificial Intelligence and Automation Research at IDC, said.

As of 2023, AI Applications claim the largest share of the AI software market, accounting for approximately one-third of its overall revenue. This category encompasses various applications, such as collaborative, content workflow and management, enterprise resource management (ERM), supply chain management, production and operations, engineering, and customer relationship management (CRM). However, AI Applications are projected to exhibit revenue growth that lags slightly behind the overall market, with a five-year CAGR of 21.1 percent.

The second-largest category in terms of 2023 revenue is Artificial Intelligence Platforms, with a 35.8 percent CAGR over the 2023-2027 forecast period. These platforms play a pivotal role in developing AI models and applications, including intelligent assistants capable of mimicking human cognitive abilities.

AI System Infrastructure Software (AI SIS) and AI Application Development and Deployment (AI AD&D) software, the two smallest categories, are expected to witness revenue growth outpacing the overall market. AI SIS boasts a five-year CAGR of 32.6 percent thanks to its integration with existing software systems, enabling organizations to extract valuable insights from extensive data for informed decision-making and optimized operations. The AI AD&D category anticipates an impressive five-year CAGR of 38.7 percent.

Ritu Jyoti, Group Vice President of Worldwide Artificial Intelligence and Automation Market Research and Advisory Services at IDC, emphasized the evolving AI landscape, stating, “Convergence of traditional AI with Generative AI will lead to cutting-edge solutions that combine decision efficacy with creative ingenuity. As businesses continue to invest in AI, they should be prepared to address challenges and prioritize ethical considerations to maximize the long-term ROI.”