Dive Brief:
- Most businesses gained ground on their AI goals last year, but returns on AI investments were harder to come by, according to IBM-commissioned research published last month.
- Less than half — 47% — of IT leaders said their AI projects were profitable in 2024, the survey of more than 2,400 IT decision-makers found. One-third said they broke even, and 14% recorded losses.
- Most businesses that have yet to reach ROI expect cost savings to occur within three years. Around 44% anticipate turning the corner sooner, within the next two years.
Dive Insight:
Generative AI got a bad reputation in 2024 for its elusive returns, which ultimately clouded the technology’s initial hype and spurred enterprise disillusionment. Most organizations pivoted from a wide-eyed adoption sprint to a more deliberate pace, eyeing costs and prioritizing high-value use cases.
Along the way, organizations have also changed the way they gauge return on investment.
Quicker software development, faster innovation and time saved were the most important metrics IT leaders used to calculate AI investments ROI, according to IBM’s report. Far fewer leaders are focused on quantifiable savings.
While technology leaders expect AI projects to bring cost savings in the long term, the price tag associated with the tech stack is already rising. Nearly 4 in 5 U.S. organizations experienced software price hikes last year, according to a July Forrester report. Most technology leaders blame AI and expect the technology to raise software costs again this year.
Countless analysts rang the alarm on the risk of ballooning AI costs last year. Gartner said enterprises could be miscalculating AI costs by as much as 1,000% as they scale deployments.
Tech executives are working to manage the cost creep by increasing audits, leveraging their purchasing power and turning to open-source alternatives when appropriate, Forrester said, though contract complexities and predicting future needs present additional challenges.
Governing generative AI initiatives was overwhelming for organizations in 2024. Enthusiasm has waned and skepticism has increased as enterprises forge on. The most common place for Fortune 500 companies to mention AI in SEC filings is in the risk factor section, according to an Arize AI report published in August.
CIOs enter the new year facing even more pressure to achieve positive ROI on AI initiatives. In response, vendors are marketing applicable use cases tied to new updates and innovations to accelerate adoption.
