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Gartner predicts that nearly a third of generative AI projects won’t make it past the proof-of-concept stage.
It seems that every business is finding a way to leverage generative AI (GenAI) to boost productivity in some way, but consulting firm Gartner is predicting that 30 per cent of such projects will be abandoned by the end of 2025.
The issue, according to Rita Sallam, distinguished VP analyst at Gartner, is a mix of the costs incurred by GenAI projects and a lack of adequate risk controls.
“After last year’s hype, executives are impatient to see returns on GenAI investments, yet organisations are struggling to prove and realise value,” Sallam said at the Gartner Data & Analytics Summit in Sydney this week.
“As the scope of initiatives widens, the financial burden of developing and deploying GenAI models is increasingly felt.”
Gartner’s research shows that companies are investing between US$5 million and US$20 million in GenAI projects to create new business models and opportunities, but that many are finding no immediate material benefit from integrating the technology into their processes.
“Unfortunately, there is no one size fits all with GenAI, and costs aren’t as predictable as other technologies,” Sallam said.
“What you spend, the use cases you invest in, and the deployment approaches you take all determine the costs. Whether you’re a market disruptor and want to infuse AI everywhere, or you have a more conservative focus on productivity gains or extending existing processes, each has different levels of cost, risk, variability and strategic impact.”
That said, early adopters are finding the benefits. A 2023 Gartner survey found that 15.8 per cent of companies had experienced revenue growth, while 15.2 per cent had managed to save on business costs. Additionally, 22.6 per cent reported a boost in productivity.
“This data serves as a valuable reference point for assessing the business value derived from GenAI business model innovation,” Sallam said.
“But it’s important to acknowledge the challenges in estimating that value, as benefits are very company-, use case-, role- and workforce-specific. Often, the impact may not be immediately evident and may materialise over time. However, this delay doesn’t diminish the potential benefits.”
“If the business outcomes meet or exceed expectations, it presents an opportunity to expand investments by scaling GenAI innovation and usage across a broader user base or implementing it in additional business divisions.
“However, if they fall short, it may be necessary to explore alternative innovation scenarios. These insights help organisations strategically allocate resources and determine the most effective path forward.”
David Hollingworth has been writing about technology for over 20 years, and has worked for a range of print and online titles in his career. He is enjoying getting to grips with cyber security, especially when it lets him talk about Lego.
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