Why are organizations struggling to justify investment in new tech?
Gartner is forecasting that at least 30% of generative AI projects will be abandoned by the end of 2025 amid financial burden in developing and deploying them.
Rita Sallam, VP Analyst at Gartner, said organisations are struggling to prove and realise the value of GenAI amid impatience from executives.
"As the scope of initiatives widen, the financial burden of developing and deploying GenAI models is increasingly felt," Sallam said at the Garner Data and Analytics Summit.
According to Sallam, organisations struggle in justifying the substantial investment in GenAI for productivity enhancement, which can be difficult to directly translate into financial benefit.
This struggle comes amid surging costs for GenAI, where projects involving GenAI-powered virtual assistants could cost between $5 million and $6.5 million.
Source: Gartner
"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."
Analysing GenAI's benefits
Gartner said organisations can establish the direct ROI and future value impact of GenAI by analysing the business value and total costs of the GenAI business model innovation.
A Gartner survey revealed that early adopters of GenAI are already reporting an average of:
- 15.8% increase in revenue
- 15.2% in cost savings
- 22.6% productivity improvement.
Sallam said if the business outcomes meet or exceed expectations, there is an opportunity for employers to expand investments by scaling GenAI innovation and usage across 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," Sallam said.
But she also pointed out that it's important that organisations acknowledge the challenges in estimating the benefits from GenAI, as they vary on company, usage, case, as well as role.
"Often, the impact may not be immediately evident and may materialise over time. However, this delay doesn't diminish the potential benefits," Sallam said.