Enterprises Expected to Invest $16 bn in Generative AI Solutions in 2023: IDC

Enterprises across the globe are set to invest nearly $16 billion in Generative Artificial Intelligence (GenAI) solutions in the year 2023, International Data Corporation (IDC) revealed in its forecast.
Dollar spending on technologyThis comprehensive spending encompasses Generative AI software, alongside the necessary infrastructure hardware and IT/business services. The forecast indicates a remarkable trajectory, with an estimated spending of $143 billion by 2027, boasting a compound annual growth rate (CAGR) of 73.3 percent over the period from 2023 to 2027.

This expected growth in GenAI spending significantly outpaces the overall AI spending rate, more than doubling it and being nearly 13 times greater than the compound annual growth rate for worldwide IT spending over the same forecast period, IDC said in its report.

Ritu Jyoti, the Group Vice President of Worldwide Artificial Intelligence and Automation Market Research and Advisory Services at IDC, emphasized the transformative nature of GenAI, describing it as a technology with profound implications and far-reaching business impact.

The IDC foresees a natural progression in GenAI investments in the coming years, transitioning from early experimentation to aggressive build-out with targeted use cases, ultimately leading to widespread adoption across various business activities, extending GenAI use to the edge.

Rick Villars, Group Vice President of Worldwide Research at IDC, pointed out that the rate of GenAI spending may face some constraints up to 2025 due to workload shifts, resource allocation turbulence, and other factors including networking, facilities, model confidence, and AI skills. He also mentioned potential limiting factors such as pricing, privacy and security concerns, and public sentiment or government interventions.

By the end of the forecast period, GenAI spending is expected to account for a substantial 28.1 percent of overall AI spending, significantly increasing from 9.0 percent in 2023. GenAI spending is projected to remain robust well beyond the build-out phase, becoming a foundational element in enterprises’ digital business control platforms.

During the build-out phase, GenAI infrastructure, encompassing hardware, Infrastructure as a Service (IaaS), and system infrastructure software (SIS), will represent the largest area of investment. However, GenAI services are predicted to gradually overtake infrastructure spending by the end of the forecast, with a five-year CAGR of 76.8 percent.

GenAI software segments, especially GenAI platforms/models, are expected to experience the fastest growth, delivering a CAGR of 96.4 percent over the 2023-2027 forecast. This will be followed by GenAI application development & deployment (AD&D) and applications software, both with an 82.7 percent CAGR.