Spending on AI to skyrocket

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03/20/2019

One of the biggest buzzwords in security today is AI, or artificial intelligence, as one of the challenges today is determining if the technology is being overpromised and under-delivered. Security Systems News’ News Poll this month addresses these very questions, as we try to figure out where the industry stands on this topic.

Although the technology is still in its early adoption phase within security, a new study finds that spending on AI systems will continue to skyrocket within the next five years.

Worldwide spending on artificial intelligence (AI) systems is forecast to reach $35.8 billion in 2019, an increase of 44.0 percent over the amount spent in 2018, according to the International Data Corporation (IDC). With industries investing aggressively in projects that utilize AI software capabilities, the IDC Worldwide Semiannual Artificial Intelligence Systems Spending Guide expects spending on AI systems will more than double to $79.2 billion in 2022 with a compound annual growth rate (CAGR) of 38.0 percent over the 2018-2022 forecast period.

Global spending on AI systems will be led by the retail industry where companies will invest $5.9 billion this year on solutions such as automated customer service agents and expert shopping advisors & product recommendations. Banking will be the second largest industry with $5.6 billion going toward AI-enabled solutions including automated threat intelligence & prevention systems and fraud analysis & investigation systems. Discrete manufacturing, healthcare providers, and process manufacturing will complete the top 5 industries for AI systems spending this year. The industries that will experience the fastest growth in AI systems spending over the 2018-2022 forecast are federal/central government (44.3 percent CAGR), personal and consumer services (43.3 percent CAGR), and education (42.9 percent CAGR).

"Significant worldwide artificial intelligence systems spend can now be seen within every industry as AI initiatives continue to optimize operations, transform the customer experience, and create new products and services," Marianne Daquila, research manager, Customer Insights & Analysis at IDC, said in the announcement. "This is evidenced by use cases, such as intelligent process automation, expert shopping advisors & product recommendations, and pharmaceutical research and discovery exceeding the average five-year compound annual growth of 38%. The continued advancement of AI-related technologies will drive double-digit year-over-year spend into the next decade."

The AI use cases that will see the most investment this year are automated customer service agents ($4.5 billion worldwide), sales process recommendation and automation ($2.7 billion), and automated threat intelligence and prevention systems ($2.7 billion). Five other use cases will see spending levels greater than $2 billion in 2019: automated preventative maintenance, diagnosis and treatment systems, fraud analysis and investigation, intelligent process automation, and program advisors and recommendation systems.

Software will be the largest area of AI systems spending in 2019 with nearly $13.5 billion going toward AI applications and AI software platforms. AI applications will be the fastest growing category of AI spending with a five-year CAGR of 47.3%. Hardware spending, dominated by servers, will be $12.7 billion this year as companies continue to build out the infrastructure necessary to support AI systems. Companies will also invest in IT services to help with the development and implementation of their AI systems and business services such as consulting and horizontal business process outsourcing related to these systems. By the end of the forecast, AI-related services spending will nearly equal hardware spending.

"IDC is seeing that spending on both AI software platforms and AI applications are continuing to trend upwards and the types and varieties of use cases are also expanding," David Schubmehl, research director, Cognitive/Artificial Intelligence Systems at IDC, added. "While organizations see continuing challenges with staffing, data, and other issues deploying AI solutions, they are finding that they can help to significantly improve the bottom line of their enterprises by reducing costs, improving revenue, and providing better, faster access to information thereby improving decision making."

On a geographic basis, the United States will deliver nearly two thirds of all spending on AI systems in 2019, led by the retail and banking industries. Western Europe will be the second largest region in 2018, led by banking, retail, and discrete manufacturing. The strongest spending growth over the five-year forecast will be in Japan (58.9% CAGR) and Asia/Pacific (excluding Japan and China) (51.4% CAGR). China will also experience strong spending growth throughout the forecast (49.6% CAGR).

"AI is a big topic in Europe, it's here and it's set to stay. Both AI adoption and spending are picking up fast. European businesses are hands-on AI and have moved from an explorative phase to the implementation stage,” said Andrea Minonne, senior research analyst, IDC Customer Insight & Analysis in Europe, said in the announcement. “AI is the game changer in a highly competitive environment, especially across customer-facing industries such as retail and finance, where AI has the power to push customer experience to the next level with virtual assistants, product recommendations, or visual searches. Many European retailers such as Sephora, ASOS, and Zara or banks such as NatWest and HSBC are already experiencing the benefits of AI, including increased store visits, higher revenues, reduced costs, and more pleasant and personalized customer journeys. Industry-specific use cases related to automation of processes are becoming mainstream and the focus is set to shift towards next-generation use of AI for personalization or predictive purposes,"

The Worldwide Semiannual Artificial Intelligence Systems Spending Guide sizes spending for technologies that analyze, organize, access, and provide advisory services based on a range of unstructured information. The spending guide quantifies the AI opportunity by providing data for 25 use cases across 19 industries in nine regions. Data is also available for the related hardware, software, and services categories. Unlike any other research in the industry, the detailed segmentation and timely, global data is designed to help suppliers targeting the market to identify market opportunities and execute an effective strategy.

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