A recent forecast from International Data Corporation (IDC) shows that the global artificial intelligence (AI) software market will grow from $64 billion in 2022 to nearly $2.51 billion in 2027, at a compound annual growth rate (CAGR) of 31 .4%.
The forecast for AI-focused software includes artificial intelligence platforms, AI applications, AI System Infrastructure Software (SIS), and AI Application Development and Deployment (AD&D) software (excluding AI platforms). However, it does not include generative AI platforms and applications, which IDC recently predicted will generate $28.3 billion in revenue by 2027.
A recent IDC survey shows that in the next 12 months, roughly a third of respondents believe that organizations will prefer to buy AI software from a vendor or use internal support in addition to vendor-provided AI software for specific usage scenarios or application areas. This indicates a growing demand for AI solutions and highlights the need for tailored approaches based on individual business requirements.
“The momentum behind investments in AI and automation technologies remains steadfast despite economic uncertainty and changing market dynamics. Companies are realizing that the use of advanced technology is not only a strategic imperative, but also a crucial factor in achieving long-term success. Despite potential challenges and risks, organizations are confident that AI adoption will remain critical to future-proofing their operations and staying ahead of the competition,” said Raghunandhan Kuppuswamy, research manager, Artificial Intelligence and Automation Research at IDC.
AI applications are currently the largest category of AI software, accounting for roughly a third of the market’s total revenue by 2023. The category includes collaboration, content workflow and management, enterprise resource management (ERM), supply chain management, manufacturing and operations, engineering and customer relationship management (CRM) applications. Revenue growth in the AI applications category will lag the overall market with a five-year CAGR of 21.1%.
The second largest category in terms of revenue in 2023 will be artificial intelligence platforms. With the second fastest growth rate over the 2023-2027 forecast period (a CAGR of 35.8%), AI platforms will be the largest revenue category for most of the forecast. AI platforms facilitate the development of artificial intelligence models and applications, such as intelligent assistants that can mimic human cognitive skills.
The two smallest categories – AI Systems Infrastructure Software (AI SIS) and AI Application Development and Deployment (AI AD&D) software – will both grow revenue faster than the overall market, with five-year CAGRs of 32.6% and 38%, respectively .7%. The AI SIS category benefits from integration with existing software systems, allowing organizations to derive valuable insights from vast amounts of data to make informed decisions and optimize operations. The category includes analytics, business intelligence software, data management, integration, orchestration, application development, software quality, lifecycle software and application platforms.
The AI AD&D category includes analytics and business intelligence software, data management, integration and orchestration, application development, software quality and lifecycle software, and application platforms.
“The AI landscape is rapidly changing. The convergence of traditional AI with generative AI will lead to advanced solutions that combine decision efficiency with creative ingenuity,” said Ritu Jyoti, group vice president, Worldwide Artificial Intelligence and Automation market research and advisory services at IDC.
“As companies continue to invest in AI, they must be prepared to address challenges and prioritize ethical considerations to maximize long-term ROI.”
Remark: IDC defines artificial intelligence (AI) software as AI-focused software. AI-focused applications must have an AI component that is critical to the application – without this AI component the application will not function. IDC also recognizes a second type of AI software: AI non-centric software. In non-centric AI applications, the AI component is not critical or fundamental to the application. In other words, the application will function without the addition of the AI component. This allows the inclusion of applications that are enhanced by AI capabilities, but not used exclusively for AI functions.