Already a burgeoning tool in the kitbag of many cloud specialists, artificial intelligence (AI) is set to become increasingly important for enterprises in the next few years, with the market segment expected to top half a trillion dollars in revenue by 2024.
Worldwide revenues for the AI market, including software, hardware and services, are forecast to grow by 16.4 per cent, year-on-year in 2021, to US$327.5 billion, according to the latest data by industry research and analyst firm IDC.
By 2024, the market is expected to break the US$500 billion mark with a five-year compound annual growth rate (CAGR) of 17.5 per cent and total revenues reaching as far as US$554.3 billion.
According to IDC AI research program vice president Ritu Jyoti, the anticipated surge in AI spending is being helped along to some degree by the business impacts of COVID-19.
"The global pandemic has pushed AI to the top of the corporate agenda, empowering business resilience and relevance," Jyoti said. "AI is becoming ubiquitous across all the functional areas of a business.
“Advancements in machine learning, conversational AI, and computer vision AI are at the forefront of AI software innovations, architecting converged business and IT process optimisations, predictions and recommendations, and enabling transformative customer and employee experiences,” she added.
At present, the biggest earner in the broader AI market is the software segment, which pulled in 88 per cent of the total AI market revenues in 2020, according to IDC.
It should be noted, however, that the AI software segment is in fact the slowest growing category within the broader AI market, claiming a five-year CAGR of 17.3 per cent – possibly reflecting the maturity of this particular segment.
Regardless, within the AI software category, AI applications took the largest share of revenue, with 50 per cent of the software total in 2020.
In terms of growth, meanwhile, the AI software platforms market is forecast to be the fastest mover and is expected to enjoy a five-year CAGR of 32.7 per cent.
At the same time, the slowest mover is likely to be the AI system infrastructure software segment, with a five-year CAGR of 13.7 per cent. It is expected that this segment will accounting for roughly 36 per cent of AI software revenues.
Within the AI applications market, AI enterprise risk management (ERM) is expected to grow at a slightly stronger pace than the AI customer relationship management (CRM) software segment over the next five years.
Beyond the AI software segment, the AI services category, which can be further split into the IT services and business service sub-categories, grew slower than the overall AI market, seeing 13 per cent annual revenue growth in 2020.
But the segment’s growth rate is expected to pick up and is forecast to grow 17.4 per cent, year-on-year, in 2021, outperforming the overall AI market by about 1 per cent. AI services’ five-year CAGR is expected to be 18.4 per cent, with revenues reaching US$37.9 billion by 2024.
Of the two sub-categories within AI services, IT services is currently the larger of the two, IDC’s data suggests, accounting for nearly 80 per cent of all AI services revenues. Moreover, IT services for AI tends to grow faster than business services for AI. However, IDC said it expects this to shift in 2024, with business services for AI forecast to perform better than both IT services for AI and the overall AI services market.
According to IDC analytics and intelligent automation services research manager Jennifer Hamel, the AI segment has done well despite the disruptions caused by the global pandemic.
"Though the pandemic interrupted the momentum of worldwide AI services market growth, enterprise demand for AI capabilities to support business resiliency and augment human productivity sustained double-digit expansion in 2020, even as other discretionary projects experienced delays," Hamel said.
"Client demand for technical expertise to develop, implement and manage AI applications drives IT services expansion, while increasing adoption of AI-enabled automation within business processes boosts spending on business services,” she added.
Of the broader AI market, the hardware segment is the smallest category, making up around 5 per cent share of total AI revenues in 2020.
However, AI hardware’s share is forecast to increase in 2021, if only slightly, at the expense of the AI software category, according to IDC.
Within the hardware segment, the AI server market grew faster than the AI storage market last year, but these ratios are expected to reverse in 2021, with AI storage anticipated to grow by 31.8 per cent, year-on-year, compared to 26.4 per cent for the AI server market.
IDC predicts that the AI hardware category will be a US$30.5 billion market by 2024, with the AI server sub-category representing 82 per cent revenue share.
"The AI server and storage markets continue to see rapid growth, providing an increasingly specialised and innovative infrastructure foundation under the entire AI landscape," IDC infrastructure systems, platforms and technologies research director Peter Rutten said.