Almost a month ago, a report by the International Data Corporation (IDC) revealed quite a telling figure about our dependence on artificial intelligence (AI) technologies. IDC estimated that by 2027, India will see a 2.2x growth in spending on AI tech, as compared to the spending on digital tech as a whole. And thanks to this spending, the country will also generate an economic impact of over $115 billion in the next three years.
Here’s what the report also found:
- Gen AI will be expected to have at least a 70% success rate by 2027.
- As many as 40% IT leaders will rise up the business corporate ladder due to AI becoming an integral part of business strategies.
- More than half or 55% of companies in the country will have a workforce-skill problem in the digital space (with employees finding it difficult to keep up with tech that’s advancing at a rapid rate) which will cause a delay in project timelines across industries.
One more interesting data point that the report put forth was that this year itself, in 2025, as many as 80% companies will face the repercussions of not making a data-centric and data-disciplined business that adds value to their stakeholders’ trade. This won’t just mean a loss in business, but a delay to actually putting in place AI models as well, the report said. On the other hand, over 75% of businesses that have AI strategies already in place will ‘achieve enhanced value from their investments’, suggested IDC.
But how much are we spending on AI tech at the moment, and why is this growth important?
Well, according to a November 2024 report by Gartner, a management consulting company, “India’s IT spending is projected to total $160 billion in 2025, an increase of 11.2% from the last year.”
Naveen Mishra, VP analyst at the company, had said, “In 2025, chief information officers (CIOs) will start allocating budgets for generative AI beyond initial proof-of-concept projects. While spending on GenAI will increase, CIOs’ expectations for its capabilities will diminish. Additionally, Indian CIOs are expected to significantly boost spending on technologies such as cybersecurity, business intelligence, and data analytics in 2025 compared to 2024.”
Neha Gupta, the senior research manager for digital businesses and AI strategies at IDC India, had told the media after the report’s launch, “Planned investment in all types of AI is rising at levels much faster than overall digital technology investment. Strategies at leading digital business organisations are focusing heavily on AI so much so that AI transformation and digital business are locked at the hip. Although digital transformation remains foundational to India’s digital journey, AI is clearly leading the charge as a high-growth priority.”
And for what products exactly would the spending on AI tech increase? Are there any exciting developments happening?
In the past few years, big tech companies have spent huge amounts on capital expenditure (capex) for developing and building up AI infrastructure. For instance, in the first three quarters of 2023, big tech spent close to $109 billion on capex. In the same time period in 2024, the four giants that form big tech – Alphabet, Amazon, Meta and Microsoft – spent over $170 billion, a year-on-year increase of 56%.
Going ahead though, the Garner report says, the spending will mainly be towards premium offerings on Gen AI-enabled “customer relationship management (CRM), email, authoring, and analytics platforms,” other than for increasing labour productivity, especially for companies outside the realm of big tech.
The IDC report also stated, “Software will be the largest category of technology spending, representing more than half the overall AI market for most of the forecast. Two thirds of all software spending will go to AI-enabled applications and AI platforms while the remainder will go toward AI application development and deployment and AI system infrastructure software. Spending on AI hardware, including servers, storage, and Infrastructure as a Service (IaaS), will be the next largest category of technology spending.”
Specific developments aside, as estimated by the IDC report, AI’s economic impact globally would be on the lines of $20 trillion, which is sure to garner interest from emerging tech companies who want to capitalise on any advancing opportunities in the space. Additionally, a lot more organisations are expected to develop their own large language models (LLMs) and AI tools and bots that cater to the needs of their company and are in line with their vision. This, again, would require a lot of capital investment. Even in the ‘high priority growth race’, there’s a long way to go!
