Introduction
The global business landscape is witnessing a notable shift in IT investments, driven by the growing importance of generative AI (GenAI) and other high-impact technologies. Despite modest GDP growth and stagnant overall budgets, organizations are reallocating funds from mature areas to support crucial IT investments. This report examines the projected growth in GenAI investment, its impact on return on investment (ROI), and the trends in IT spending based on a recent survey.
Generative AI Investment Growth
Investment in GenAI is expected to grow by 28%, with companies demonstrating high GenAI maturity anticipating their ROI to be three times higher over the next three years compared to peers with minimal GenAI adoption. This finding highlights the significant productivity improvements and competitive advantages that GenAI can offer to organizations that effectively implement it.
The average allocation of IT budgets to GenAI increased from 4.5% in 2023 to around 5% in 2024. Projections indicate a substantial 58% growth in the next three years, raising GenAI’s share of IT budgets to approximately 7.8% by 2027. This growth underscores the strategic importance that companies place on GenAI to drive innovation and efficiency.
IT Spending Trends
The survey reveals steady, modest growth in IT budgets, with an increase from 3% in 2023 to 3.5% in 2024. Leaders are prioritizing spending in high-growth areas such as AI and machine learning (28% net spend increase), security infrastructure (25%), cloud services (28%), and analytics (20%). These areas are considered high-impact and high-necessity, essential for maintaining competitive edge and operational resilience.
Conversely, the largest net spend decreases are expected in server infrastructure (22%) and devices (14%), reflecting a shift towards more flexible and scalable IT solutions.
GenAI Maturity by Industry and Geography
The report categorizes companies into four levels of GenAI maturity: little to no adoption, low maturity, mid maturity, and high maturity. Approximately 18% of companies have little to no GenAI adoption, down from 22% in the third quarter of 2023. The percentage of high maturity companies remains steady at around 14%, while mid maturity companies have increased from 16% to 25%.
Tech companies lead in GenAI maturity, with 60% qualifying as mid or high maturity. The banking, retail, industrial goods, and healthcare sectors also show significant maturity, with 30% to 37% of companies reaching mid to high levels. Industries lagging behind include energy, travel and tourism, and insurance, each with at least 38% of companies showing minimal GenAI adoption.
Geographically, adoption rates are consistent across North America and Europe, with about 42% of companies achieving mid to high maturity. In Asia, adoption is slightly higher at 43%, with only 15% of companies having minimal or no GenAI adoption.
Future ROI and Investment Willingness
High maturity companies expect a significantly higher ROI from GenAI investments, with 36% anticipating returns of 22% to 28% and 2% expecting even higher returns. By contrast, fewer companies with low to mid-level GenAI maturity foresee similar returns, yet twice as many of these expect returns exceeding 32%.
This positive outlook is reflected in the willingness of companies to exceed their allocated budgets for GenAI. In 2023, actual spending on GenAI was approximately 5% higher than initially projected, highlighting the growing recognition of its value.
Challenges to GenAI Adoption
Despite the potential benefits, the primary barrier to GenAI adoption is the technology’s immaturity, cited by 41% of high maturity, 34% of mid maturity, and 38% of low maturity companies. About 28% of companies with little or no maturity have no plans to implement GenAI within the next three years.
Other challenges include data risks, legal risks, and inadequate training, which have seen increases of 6%, 8%, and 19% respectively since the previous survey. Addressing these issues will be crucial for companies aiming to leverage GenAI effectively.
Conclusion
The IT investment landscape is rapidly evolving, with generative AI emerging as a key driver of future growth and innovation. Companies with high GenAI maturity are poised to achieve significantly higher returns, underscoring the importance of strategic investment in this technology. As organizations navigate the complexities of digital transformation, they must balance their budgets to support GenAI while ensuring adequate funding for essential operations. The insights from this report provide a roadmap for businesses to capitalize on the opportunities presented by generative AI and other high-impact IT investments.
