Post-Gen AI Hype: Enterprises Scrutinize Budgets and Raise the Bar

Recent findings from Omdia’s 2024 AI Market Maturity Survey reveal that enterprises remain optimistic about AI’s potential, with projects delivering measurable return on investment (ROI) for companies of all sizes.

However, Omdia’s survey points to enterprises taking a more measured view of AI. This is partly a reaction to the hype around generative AI (Gen AI), which is now abating with expectations being recalibrated. Enterprises are also becoming more experienced with AI – 46% of survey respondents are scaling AI or ramping up live deployments.

Greater experience with AI leads to a realistic view of AI capabilities. The bottom line is that AI budgets, particularly those for generative AI, are under even more scrutiny and hard-won. Enterprises are taking a laser focus on ROI and will demand more of vendors and what their solutions can deliver. 

Twenty-six percent of survey respondents report that AI projects have improved customer experience/services, while 21% report improvements in efficiency/automation. The impact of AI projects on top-line revenue and bottom-line costs is less intense but still significant at 16% and 15%, respectively.

The ability of AI to improve top-line revenue and reduce bottom-line costs is consequential, as it affects a company’s financial performance, with positive impacts on financial results via stronger profitability and improved shareholder value. Moreover, the survey suggests that enterprises of all sizes are experiencing ROI from AI. 

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The survey also reveals that AI at scale intensifies the positive effects AI has on key business objectives as well as ROI. For example, 45% of enterprises scaling AI report improvements to customer experience/services of more than 11%, rising to 61% for those enterprises scaling Gen AI. ROI reports of this kind will prompt more enterprises to ramp up AI deployments, increasing the need for scalable infrastructure, sophisticated AI platforms, and tools for development, testing, and deployment. 

Compared to the 2023 survey, the 2024 iteration shows that budgets of more than $1m have contracted or remain stable, while budgets of less than $1m have grown. This is most pronounced in the $50,000-$249,000 budget band, with a year-on-year increase of 8%.

The emphasis on budgets of below $1m could reflect more measured expectations regarding AI now that the hype surrounding Gen AI is cooling. Budgets are likely to be tempered by ongoing economic uncertainty and constrictions in many markets, compounded by political instability that has global ramifications.

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It should also be kept in mind that while more enterprises in the 2024 survey are scaling AI than ever before, many are still at much earlier phases of AI deployment, split between those enterprises still investing AI technology and use cases (27%), and those piloting AI (27%). Of these respondents, the majority are smaller enterprises with budgets below $250 million.

For companies in this position, ROI from AI is still unproven and pushing for punchy AI budgets is difficult. Vendors are understandably drawn to enterprises with substantial AI budgets, but an exclusive focus on the big spenders means missed opportunities. Many enterprises with modest budgets will find success with AI and grow, which makes winning their business and trust a worthwhile pursuit.

Enterprises with more constrained AI budgets will need flexible pricing models, such as subscription-based models, lower initial costs, and/or consumption-based pricing, to reduce barriers to entry.

Looking ahead, enterprises remain confident that AI will deliver positive results towards business goals in the next 12-24 months, with 44% saying they are very confident AI can do this.

When it comes to AI budgets for 2025, 87% of enterprises predict they will grow relative to 2024; and of those, the majority expect increases of between 1% and 10% (31%) and between 11% and 25% (28%). 

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This article originally appeared in the Omdia blog.