Revenue from AI to Exceed $300 Billion this Year, IDC Analysts Predict
- By John K. Waters
Worldwide revenues generated by the sales of hardware, software, and services related to artificial intelligence (AI) could reach $327.5 billion this year, according to the latest release of the International Data Corporation (IDC) Worldwide Semiannual Artificial Intelligence Tracker. That's an uptick of 16.4% year over year in 2021. By 2024, the report concludes, this market is likely to pass the $500 billion mark, with a five-year compound annual growth rate (CAGR) of 17.5%, and total revenues reaching a whopping $554.3 billion.
A surprising driver of this growth, says Ritu Jyoti, program vice president for AI Research at IDC, is the global pandemic.
"The global pandemic has pushed AI to the top of the corporate agenda," Jyoti said in a statement, "empowering business resilience and relevance. AI is becoming ubiquitous across all the functional areas of a business. Advancements in Machine Learning, Conversational AI, and Computer Vision AI are at the forefront of AI software innovations, architecting converged business and IT process optimizations, predictions and recommendations, and enabling transformative customer and employee experiences."
AI-related software accounted for 88% of the total growth of these market revenues in 2020, according to the report, even though it was found to be the slowest growing category, with a five-year CAGR of 17.3%. Within that category, AI applications accounted for 50% of the 2020 revenue. The AI Software Platforms market is forecast to be the strongest in this category, with an expected five-year CAGR of 32.7%. The slowest will be AI System Infrastructure Software, the report states, with a five-year CAGR of 13.7%, while accounting for roughly 36% of AI software revenues. Within the AI Applications market, AI enterprise risk management (ERM) is expected to grow slightly stronger than AI customer relationship management (CRM) over the next five years.
The AI Services category grew slower than the overall AI market, the analysts found, with 13% annual revenue growth in 2020. But they expect that market to grow 17.4% year over year in 2021, outperforming the overall AI market by approximately 1%. Its five-year CAGR is expected to be 18.4%, with revenues reaching $37.9 billion by 2024, the report states.
The report divides this technology category into two market segments: IT Services and Business Services. IT Services is the larger of the two, accounting for nearly 80% of all AI Services revenues. IT Services for AI tends to grow faster than Business Services for AI, but Business Services for AI are expected to to perform slightly higher than both IT Services for AI and the overall AI Services market in 2024.
The latest release of the AI Tracker report covers a total of 160 vendor companies in the AI Services market. Under IT Services for AI, the top three companies in the first half of 2020 were IBM, Accenture, and Infosys. These were the only companies to bring in more than $500 million in IT Services for AI revenues, the report found, and their combined share of the market was 28%. Thirteen other companies generated more than $100 million each during the same period, the report states.
Only four companies in the Business Services for AI market generated revenues of more than $100 million in the first half of 2020: Ernst & Young, PwC, Deloitte, and Booz Allen Hamilton.
"Though the pandemic interrupted the momentum of worldwide AI services market growth, enterprise demand for AI capabilities to support business resiliency and augment human productivity sustained double-digit expansion in 2020, even as other discretionary projects experienced delays," said Jennifer Hamel, research manager in IDC's Analytics and Intelligent Automation Services group. "Client demand for technical expertise to develop, implement, and manage AI applications drives IT services expansion, while increasing adoption of AI-enabled automation within business processes boosts spending on business services."
Overall, the competitive landscape in both services markets for AI is a highly fragmented right now, the report found, "one where players from across the services value chain continue to invest in technology assets, innovation resources, and expertise in applying AI to solve industry- and domain-specific problems for clients."
John K. Waters is the editor in chief of a number of Converge360.com sites, with a focus on high-end development, AI and future tech. He's been writing about cutting-edge technologies and culture of Silicon Valley for more than two decades, and he's written more than a dozen books. He also co-scripted the documentary film Silicon Valley: A 100 Year Renaissance, which aired on PBS. He can be reached at email@example.com.