- Boston Consulting Group's Seventh IT Spending Pulse Survey
Reveals Steady Modest Increase in Global IT Budgets, Rising to 3.3%
in 2024 from 3.2% the Previous Year
- Leaders Will Focus Spending in High-Growth Areas, Including
Artificial Intelligence and Machine Learning, Security
Infrastructure, Cloud Services, and Analytics
- The Primary Barrier to GenAI Adoption is the Technology's
Immaturity, Cited by 43% of High-Maturity Companies, 36% of
Mid-Maturity Companies, and 50% of Low-Maturity Companies
- GenAI Allocation is Expected to Rise From 4.7% to 7.6% by 2027,
with a 60% Growth Forecast Over the Next Three Years
BOSTON, July 16,
2024 /PRNewswire/ -- With modest GDP growth and
stagnant budgets, organizations around the world are finding it
necessary to reallocate funds from mature areas to support IT
investments. While cloud and security continue to be key
priorities, generative AI (GenAI) is increasingly taking the
spotlight as companies strive for significant productivity
improvements. GenAI investment is expected to grow 30%, with
leaders from companies with high GenAI maturity anticipating 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 Boston Consulting Group
(BCG) released today.
The report, titled IT Spending Pulse: As GenAI Investment
Grows, Other IT Projects Get Squeezed, is based on a joint
survey with GLG, conducted in Q1 2024. It captures insights from
330 IT buyers at the director level or higher, across various
industries. Of the respondents, 66% are from North America and 34% from Europe. The focus is on large and midsize
companies, with 60% of respondents from large enterprises and 40%
from midsize firms.
"The emergence of GenAI has made it imperative for many
companies to adapt," Clark O'Niell,
a managing director and partner at BCG and a coauthor of the
report. "Successful companies will be those that manage a difficult
balancing act: allocating IT budgets to keep pace with GenAI while
maintaining adequate funding for essential day-to-day
operations."
IT budgets are experiencing steady, modest growth, increasing by
3.2% in 2023 from the previous year and further rising to 3.3% in
2024. Survey respondents gave equal importance to cost control and
enabling growth, with 54% indicating that each is a top-three
priority. Since the previous IT Spending Pulse survey
in the third quarter of 2023, growth increased in importance
by 5% while cost as a priority decreased 2%. Also top of mind for
leaders was security and digital transformation, with 61% and 60%
respectively rating these as top-three priorities.
Leaders are intent on directing their spending toward growth
areas deemed high-impact and high-necessity, including artificial
intelligence (AI) and machine learning (ML) (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%).
GenAI Maturity by Industry and Geography
The report's authors developed a GenAI maturity index to assess
where companies currently land in their development. Based on the
level of implementation across ten 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 GenAI adoption, down from about 24% in
Q3 2023. Although the percentage of companies with high maturity
adoption has stayed constant (~12%), the percentage of mid maturity
companies jumped from ~18% to ~27%.
Tech companies are at the forefront, with 62% qualifying as mid
or high maturity, followed by the banking, retail, industrial
goods, and health care 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 GenAI.
Geographic location plays a lesser role in GenAI adoption.
Adoption rates are consistent in North
America and Europe, with
around 40% of companies achieving mid to high maturity levels. In
Asia, adoption is slightly higher,
with 45% of companies reaching these maturity stages. Additionally,
the percentage of companies with minimal or no GenAI adoption is
lower in Asia at 16%, compared
with 18% in North America and 23%
in Europe, despite recent
regulatory developments around GenAI in Europe.
Although this was BCG's seventh IT Spending Pulse Survey, it was
the first to include findings from the Asia-Pacific (APAC) region. The APAC findings
were highlighted separately since there was no 2023 data available
for comparison. IT buyers in APAC project a 6% to 7% increase in IT
spending for 2024, compared with 3.3% in North America and Europe, focusing on digital transformation.
APAC companies also see significant value in GenAI, with 25%
qualifying as high maturity and only 16% with little to no
adoption, compared with 13% and 11%, and 18% and 23% in
North America and Europe, respectively.
Companies with Higher GenAI Maturity Poised for Future
Returns
According to the data, companies with high GenAI maturity
estimate ROI three times higher over the next three years, compared
with companies with little to no GenAI adoption. 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 as
many companies with low to mid-level GenAI maturity anticipate
returns of 20% to 30%, yet twice as many expect more than 30%
returns.
Another indication that GenAI investments are yielding positive
outcomes is the willingness of companies to spend beyond their
allocated budgets. In 2023, companies initially projected that
approximately 4% of their IT budgets would be allocated to GenAI,
but actual spending reached about 4.5%. Looking ahead to 2024, the
average allocation for GenAI 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
say they will increase their budgets 15% more than cost-focused
companies (7.9% versus 7.1% of overall IT budgets).
Friction Points Inhibiting IT Investment and
Implementation
Among survey respondents, the leading barrier to GenAI adoption
is the immaturity of GenAI 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.
Furthermore, about 30% of this last group have no plans to
implement GenAI technology over the next three years.
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.
"Despite the justifiable excitement surrounding GenAI, IT
leaders must articulate a clear, strategic plan to garner CIO
support, as mere hype won't suffice in today's tough budgetary
environment," said Federico Fabbri,
a managing director and partner at BCG and a coauthor of the
report. "CIOs should adopt a systemic approach to IT investment
request, including planning adequate resources for success, asking
for a clear business case and how leaders plan to measure outcomes,
and ensuring vendor support."
Download the publication here:
https://www.bcg.com/publications/2024/it-spending-pulse-as-genai-investment-grows-other-it-projects-get-squeezed
Media Contact:
Eric
Gregoire
+1 617 850 3783
gregoire.eric@bcg.com
About Boston Consulting Group
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SOURCE Boston Consulting Group (BCG)