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AI is finally delivering bang for its buck, according to Microsoft

November 18, 2024

2 minutes read

Generative AI offers a return on investment (ROI) of $3.70 for every dollar invested, according to a report commissioned by Microsoft from IDC.

The tech giant says that 85% of the Fortune 500 are using its own AI tools amid a wider boom in the technology.

But high costs for access to software and tools has raised concerns that this industry trend might pay for those developing the technology, rather than those using it, with previous research from Gartner suggesting it has become a “tax” on companies.

IDC surveyed 4,000 employees of enterprise organizations from around the world to unpick how people are using AI, how much it’s paying, and what’s next.

“IDC predicts that business spending to adopt AI, use AI in existing business operations, and to deliver better products/services to business and consumer customers will have a cumulative global economic impact of $19.9 trillion through 2030 and drive 3.5% of global GDP in 2030,” the company said.

Use of generative AI increased from 55% of those surveyed in 2023 to 75% this year, IDC says, marking a steep rise in adoption rates.

“Enterprises worldwide are expected to invest $44 billion in GenAI solutions in 2024, significantly more than the $19 billion spent in 2023,” the report says.

And AI is finally starting to pay, the study noted. AI deployments take less than eight months to roll out, with a return on investment within 13 months.

The average return on investment for every dollar is $3.70, though it varies — the top tier users of AI are seeing a ROI of $10. The biggest ROI is productivity use cases for 43% of respondents.

The results echo those from Google Cloud earlier this year, which suggested generative AI should offer a return on investment within a year — however, other research from Logicalis has suggested many companies haven’t seen ROI at all as yet.

Indeed, the boost to the bottom line depends greatly on how AI is used and the company itself, and ROI can be difficult to track, especially when it comes to employee productivity.

What’s next?

While boosting productivity is the main way generative AI is being used to boost bottom lines at the moment, though IDC predicts it will shift to functional purposes and industry use cases such as product development and manufacturing in the next two years.

“Organizations are transitioning to a more strategic AI approach, aligning investments across applications, platforms, data, and infrastructure,” IDC says in the report.

“The aim is to enhance the value of AI initiatives through advanced automation, greater model and data reuse, and efficient, cost-effective inference delivery from network to edge to the individual device.”

IDC also found that while pre-build AI solutions dominate at the moment, with 43% of respondents saying it was their primary approach for taking advantage of AI, that looks to shift towards custom-built AI solutions within the next two years.

Given the gains, why are companies still concerned about generative AI? The report said data security, data governance, privacy issues and regulatory compliance remained top concerns for organizations.

But another challenge holding back generative AI uptake is a lack of skilled workers, though that concern fell from 52% of respondents in 2023 to 45% this year.

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