GenAI: Market researchers and experts assume that 30% of generative AI projects will be abandoned by the end of 2025

The challenges and potential of generative AI projects (GenAI) from an entrepreneurial perspective. The key message is that around 30% of GenAI projects could be canceled by the end of 2025, mainly due to poor data quality, inadequate risk controls, rising costs and unclear business value.

🚀🌐 Expectations and hurdles in GenAI projects

Market researchers and experts assume that at least 30% of generative AI projects will fail by the end of 2025. These projects are under immense pressure to deliver measurable results as executives who responded to last year's hype become increasingly impatient. However, despite the enthusiasm for GenAI, many organizations struggle with the challenge of realizing the expected value of this technology. As Gartner’s Rita Sallam notes, “After last year’s hype, executives are impatient to see returns on GenAI investments, but organizations are struggling to prove and realize the value. As the scope of initiatives expands, the financial burden of developing and implementing GenAI models is increasingly felt.”

💰⚖️ The cost-benefit question

One of the biggest challenges in implementing GenAI is justifying the significant investment required. These investments are often difficult to translate directly into financial benefits, making it difficult for organizations to clearly determine return on investment (ROI). Many companies are using GenAI to fundamentally transform their business models and open up new business opportunities. However, these transformation processes are costly, ranging from $5 to $20 million.

The cost structure of GenAI projects varies significantly depending on the use case and strategic approach. Rita Sallam emphasizes: “Unfortunately, there is no one size fits all with GenAI, and the costs are not as predictable as with other technologies.” Companies have to decide whether they want to rely on disruptive market innovations or rather conservatively improve existing processes. Both approaches have different impacts on costs, risk, variability and strategic outcomes.

🛡️📊 Investment strategy and risk assessment

Regardless of the strategy chosen, research shows that GenAI requires a long-term mindset. Organizations investing in GenAI often need to be more patient as the financial returns are not immediately visible. Historically, many CFOs are reluctant to make investments today to create indirect value in the future. This reluctance can lead to prioritizing short-term tactical results over long-term strategic goals, which could undermine an organization's long-term innovative ability.

❓💡 Is investing in GenAI even worth it?

This question is asked by many companies who are cautious given the high costs and risks. Still, there are encouraging reports from early adopters across various industries. According to a survey conducted among 822 business leaders between September and November 2023, respondents reported an average increase in revenue of 15.8%, cost savings of 15.2% and a productivity increase of 22.6% through the use of GenAI. However, these results are highly dependent on specific use cases, employee skills and organizational structure.

Survey results on the effects of AI in companies – Image: Xpert.Digital

“This data serves as a valuable reference point for assessing the business value resulting from GenAI business model innovation,” explains Sallam. However, estimating exact business value remains a challenge as benefits are often company, role and application specific and do not manifest immediately. This time lag may reduce perceived benefits, although the potential remains long-term.

📈📝 Business impact and ROI calculation

A key aspect for companies integrating GenAI into their business models is accurately calculating the business impact and future value potential. Analyzing the total cost and expected ROI is crucial to making informed decisions about further investments. “If business results meet or exceed expectations, this provides an opportunity to expand investments by scaling GenAI innovation and usage to a broader user base or implementing in additional business areas,” explains Sallam.

However, if results fall short of expectations, organizations may need to consider alternative innovation scenarios. This requires strategic realignment and careful allocation of resources to determine the best path forward.

⚖️🎯 The balance between opportunities and risks

Investing in generative AI presents both great opportunities and significant risks. Success depends heavily on an organization's ability to recognize long-term business value and balance this with the initial investment costs. While technological development advances rapidly, the challenge remains to translate this progress into sustainable financial success. Organizations that are willing to invest in the future while developing flexible and adaptable strategies have the best chance of benefiting from GenAI.

📣 Similar topics

• 📣 GenAI: Challenge and potential for companies
• 📊 Investment costs and ROI: Is GenAI worth it?
• 📉 The reality behind the GenAI hype: data quality as a stumbling block
• 📈 Strategic planning for long-term GenAI success
• 🛡️ Risk management in GenAI projects: A must
• 💡 Insights and lessons learned from early GenAI adopters
• ⚠️ Data quality and cost control: GenAI pitfalls
• 🚀 GenAI innovation strategies: maximize opportunities, minimize risks
• 🔍 Business Value of GenAI: A complicated calculation
• 🏆 GenAI Projects: From initial investments to long-term success

#️⃣ Hashtags: #GenAI #Data Quality #ROI #Investment #Business Value

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🔍 Analysis and growth numbers from Microsoft 365 Copilot

Microsoft has established itself as the biggest beneficiary of investments in enterprise AI. In particular, the product Microsoft 365 Copilot, an AI-supported tool to support Office applications, is enjoying growing popularity and distribution. Compared to the previous quarter, Microsoft saw an impressive increase of over 60% in Microsoft 365 Copilot customers, while the number of daily active users even doubled. These remarkable growth rates are a strong indication of the reliability and added value that the tool offers its users. Further evidence of its success is the fact that the majority of companies that have introduced Microsoft 365 Copilot are expanding their license agreements and purchasing additional seats for their employees. This not only illustrates companies' trust in the technology, but also the increasing dependence on AI-supported solutions in the modern working world.

📉 Influences on market and budget distribution

Interestingly, current market observations suggest that growing AI budgets are partly coming at the expense of investments in hardware and, to a lesser extent, software. Nevertheless, a significant portion of AI spending should be viewed as an additional investment, highlighting the potential for further growth in this sector.

🌍 Future prospects of global AI investments

The outlook for the future development of global spending on AI is promising. S&P Global predicts that global investment in AI will increase at a compound annual growth rate of over 20% through 2028. This would mean AI spending would account for 14% of total global IT spending by 2028, compared to just 6% in 2023. This expected growth is a clear indicator of the increasing importance of AI technologies in business strategy and IT -Infrastructure.

However, it should be noted that the growth rates will not be uniform. Much of the investment is focused on a relatively small number of companies, particularly hyperscale data center operators, which are able to implement AI solutions at scale due to their enormous computing capabilities and global footprint. However, this concentration of spending also poses risks, particularly for small and medium-sized businesses that may struggle to compete in this fast-paced market.

🔄 Dynamics and challenges of new AI models

Another interesting aspect is the dynamics that arise from the rapid development of new AI models and products. Companies often face the challenge of making decisions in a rapidly changing landscape, which in many cases leads to a certain “paralysis”. This uncertainty is reinforced by the lack of proven reference architectures and the lack of clear applications, which means that many companies delay their AI projects. However, S&P Global assumes that this phase of uncertainty will not be permanent. From 2025, a significant number of AI projects will actually be put into practice, which could mean another boost for the market.

🏢 Impact on company decisions

The concerns many companies have about implementing AI projects are understandable. Technology is evolving so quickly that it is difficult to keep up with the latest developments. There is also the risk of investing in a solution that may quickly become outdated. This uncertainty may cause companies to hesitate to make major investments in AI until they are sure that their chosen technology is viable in the long term.

Nevertheless, the current trend shows that companies that invest in AI at an early stage and implement corresponding projects can gain a significant competitive advantage. The ability to increase operational efficiencies, automate processes and open up new business opportunities through the use of AI is a strong argument for early adoption of the technology.

⚙️ Influences of AI on the world of work

Another point that cannot be ignored is the influence of AI on the world of work. While some industries have already been heavily impacted by automation and AI, many other sectors are still at the beginning of this development. Companies need to prepare for AI to not only change the way they work, but also what skills and competencies will be in demand in the future. Building AI competencies and integrating AI into corporate strategy will be crucial to remaining competitive in the changing world of work.

💼 Microsoft's pioneering role

Microsoft has taken an important step towards the future with its Microsoft 365 Copilot product and has established itself as a pioneer in the field of enterprise AI. The increasing number of users and the high level of customer loyalty speak for the quality and benefits of the product. At the same time, S&P Global's forecast shows that global spending on AI will continue to rise sharply, although the road ahead is fraught with challenges. Companies that jump on the AI ​​bandwagon early could benefit significantly in the long term, while others may fall behind. It remains exciting to see how the market will develop in the coming years and what new innovations the future has in store.

📣 Similar topics

• 🔍 Microsoft's breakthrough in enterprise AI
• 🚀 Microsoft 365 Copilot: The new office hero
• 📊 Success figures for Microsoft 365 Copilot
• 🔧 Companies are expanding AI licenses
• 💰 Growing budgets for AI investments
• 🌍 Global forecasts for AI growth
• ⚖️ Challenges for small and medium-sized businesses through AI
• 🧠 New AI models demand quick decisions
• 📅 S&P Global: AI projects from 2025
• 🤖 AI and the future of the world of work

#️⃣ Hashtags: #AI #Microsoft #Microsoft365Copilot #CorporateStrategy #FutureOfWork

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