Gen AI Investment To Grow 30%, Higher ROI For Mature Companies Over Next 3 Years: BCG

As GDP growth slows and budgets turn stagnant, organisations are finding it necessary to reallocate funds from mature areas to support IT investments. While cloud and security continue to be key priorities, generative artificial intelligence is increasingly in focus as companies strive for productivity improvements.

Gen AI investment is expected to grow 30%, with leaders from companies with high gen AI maturity anticipating that their return on investment will be three times higher over the next three years than that of companies with little or no adoption of the technology, according to a new report by the Boston Consulting Group.

IT budgets are experiencing modest growth, increasing by 3.2% in 2023 from the previous year and rising to 3.3% in 2024. Respondents of the BCG survey gave equal importance to cost control and enabling growth, with 54% indicating that each is a top three priority. Since the third quarter of 2023, growth increased in importance by 5%, while cost as a priority decreased 2%. Also, 61% and 60% of leaders, respectively, rated security and digital transformation among top three priorities.

Leaders are aiming to direct their spending towards growth areas considered high-impact and high-necessity, including AI and machine learning (with a 30% net spend increase), security infrastructure (27%), cloud services (30%) and analytics (18%). Respondents expect the largest net spend decreases to occur in server infrastructure (24%) and devices (16%).

Gen AI Maturity By Industry

Based on the level of gen AI implementation across different business functions, companies were grouped into four categories—little to no adoption, low maturity, mid maturity and high maturity. Only about 20% of companies have little or no gen AI adoption, down from about 24% in Q3 2023. The percentage of companies with high maturity adoption stayed the same, around 12%, while that of mid maturity companies rose from 18% to 27%.

Tech companies are at the forefront, with 62% qualifying as mid or high maturity, followed by banking, retail, industrial goods and healthcare industries, where 32% to 39% of companies have reached similar levels of maturity. Among the industries lagging are energy, travel and tourism, and insurance, each with at least 40% of companies showing little to no adoption of gen AI.

Companies With Higher Gen AI Maturity Poised For Future ROI

Thirty-eight percent of high maturity companies expect an ROI of 20% to 30%, and 3% expect more than that. By comparison, only about one-third of as many companies with low to mid-level gen AI maturity anticipate returns of 20% to 30%, yet twice as many expect more than 30% returns.

In 2023, companies initially projected that approximately 4% of their IT budgets would be allocated to gen AI, but actual spending reached about 4.5%. In 2024, the average allocation for gen AI is set to increase to 4.7%, with forecasts predicting a substantial 60% growth in the next three years, raising the share to 7.6% by 2027. Growth-focused companies said they will increase their budgets 15% more than cost-focused companies (7.9% versus 7.1% of overall IT budgets).

Barriers To Investment And Implementation

The leading barrier to gen AI adoption is the immaturity of the technology, which was cited as a challenge by 43% of high maturity, 36% of mid maturity, 38% of low maturity and 50% of companies with little or no maturity.

Among high maturity companies, other areas causing implementation challenges include data risks, legal risks and inadequate training, which have increased 8%, 10% and 21%, respectively, since the Q3 2023 survey.