Presented by Appen
This article is the third in a 5-part series on predictions in AI in 2021 — catch up on the first and second in the series.
Artificial intelligence (AI) has reached the top: Two-thirds of senior executives across industries cite AI as vitally important to the future of their businesses and plan to increase their investments in the space after the pandemic. However, that hasn’t stopped many businesses from accelerating their AI programs during the pandemic. The Driving ROI Through AI Report shares that companies increased investments by 4.6% on average over the last year with a plan to invest 8.3% per year over the next three years.
Keeping in mind that budgetary concerns from the pandemic may alter these predictions, so far organizations have continued to maximize budgets to stay agile in a fast-evolving space. Pressures from COVID-19 have motivated many businesses to look for new efficiencies and revenue sources, with many turning to AI as the solution.
As part three of our five part series on 2021 predictions, we focus on the future of AI budgets. Interestingly, the 2020 State of AI and Machine Learning Report highlights that over two-thirds of companies surveyed expect the pandemic to have no impact, or even to accelerate, their AI projects. We see this reflected in AI spend: experts predict that the market will reach $191 billion by the year 2025, quite a jump from the approximately $40 billion it’s valued at currently.
AI leaders invest heavily
Precisely who is investing in AI? When we break down investments by company size, we see a key theme: AI leadership is costly. Organizations invested on average more than $38 million each in AI in 2019, which amounted to about 0.75% of revenue. Breaking this down further, about one-third of companies invested more than $50 million in 2019. The leaders — that is, those that invested the most — invested 2.6 times the average, reaching over $99 million in investments.
As firms advance in their AI journey, they typically invest exponentially more on the whole. Note that when it comes to data management (a critical step in building effective AI), newcomers to the AI space do tend to spend more than the average, devoting about 44% of their AI budget on data versus the 35% that the average company spends.
The research also discovered that the automotive, health care, manufacturing, and technology industries invested the most in AI projects. In automotive, we see the promise of AI-powered self-driving cars and enhanced safety features; in health care, AI helps with diagnoses and patient care; in manufacturing, it streamlines complex processes; and in technology, it contributes to a variety of ventures across social media and beyond. Alternatively, media, investment, and consumer industries invested the least in AI.
Interestingly, these orders are disrupted when we look at revenue. In terms of share of revenue in AI-based products, tech firms take the lead, followed by banks, life science firms, and then auto manufacturers.
Where’s the money going?
The failure rate of AI projects is still very high, with Gartner reporting that in 2019, about 80% of projects never made it to production. It’s no surprise, then, that executives must be selective about where they devote their AI budgets. Over the next several years, expect to see increased investment in the following spending areas.
Data and analytics
Data continues to be the critical piece of the AI puzzle, serving as a make-or-break component in successful ML models. It will still be a top initiative for executives in the coming years, as data-heavy insights produce greater ROI.
AI strategy
Many organizations will focus on redesigning team structures to create efficient AI pipelines. Currently, there’s a sizeable skill gap in areas needed for AI, prompting companies to strategize on reskilling employees, hiring new teams, or leveraging third parties. They’ll also devote time and money to analyzing where to invest in AI, how much, and when.
Security and compliance
Pressure to protect user privacy will prompt organizations to develop tighter security controls and data governance frameworks. Transparency around where data comes from and how it was sourced will be paramount.
With an increased commitment to AI as a core objective, companies will likely produce more AI solutions at scale in the next three to four years. Investing in the above segments will help drive success across industries, and for companies at various stages of their AI journeys.
Investing in AI beyond COVID-19
COVID-19 has pressured companies large and small to lower costs and find new sources of revenue, both of which are potentially realized through the promise of AI. It’s true that many AI projects aren’t yet profitable, explained by the fact that developing AI takes time, money, the right skill sets, and a lot of data. But with the pandemic pushing companies to be smarter about how they spend their money, AI is clearly ripe for exploring.
Expect the exponential rise in AI investments to continue during and post-pandemic, as companies work to discover the best processes and requirements for achieving profitable AI solutions.
At Appen, we have spent over 20 years annotating and collecting data using the best of breed technology platform and leveraging our diverse crowd to help ensure you can confidently deploy your AI models. To learn more about AI investments and other critical metrics, specific to an industry, check out our AI Industry Insights Explorer.
Wilson Pang is CTO at Appen.
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