Patience is the buzzword as GenAI ecosystem will take time to mature

Global consultancy firm Gartner has pointed out in a recent report that around 30 per cent of all generative AI projects are likely to be abandoned after their PoCs (proof of concepts) by the end of 2025. According to the report, poor data quality, inadequate risk controls and escalating costs or unclear business value are some of the reasons that will lead to such decisions by enterprises. It says that while substantial investment is going on in GenAI space, organisations are yet to see financial benefit coming out of such investments. It further said that deployment of GenAI solutions involve significant costs, ranging from $ five million to $20 million.

“After last year’s hype, executives are impatient to see returns on GenAI investments, yet organizations are struggling to prove and realize value. As the scope of initiatives widens, the financial burden of developing and deploying GenAI models is being increasingly felt,” Rita Sallam, VP Analyst at Gartner said. Such studies indicate that enterprises are now facing real-world challenges in implementing GenAI solutions. After the initial hype about GenAI solutions, organisations are now dealing with the cost, benefit implications of implementing such projects. Experts are of the opinion that while GenAI solutions have come up with respect to consumer-side of solutions, enterprise-level solutions are still a far cry.

For instance, GenAI tools like ChatGPT can create content or generate codes, which can solve some of the problems faced by individuals or organisations but its ability to provide a solution specific to a business is yet to be evaluated. Moreover, the cost side of project implementation is of prime importance when implemented on an enterprise level. “Unfortunately, there is no ‘one size fits all’ with GenAI, and costs aren’t as predictable as other technologies. What you spend, the use cases you invest in and the deployment approaches you take, all determine the costs. Whether you’re a market disruptor and want to infuse AI everywhere, or you have a more conservative focus on productivity gains or extending existing processes, each has different levels of cost, risk, variability and strategic impact,” Gartner pointed out.

These findings carry critical importance for Indian IT industry given that companies like TCS, Infosys, Wipro, HCLTech and several mid-tier IT firms are betting big on GenAI as a technology solution. Many companies have started highlighting their engagements which has raised hopes of revenue translation in the coming quarters. In this context, such study reveals that GenAI may not be a great revenue contributor in the coming days. Rather, like any new technology, it will follow a cycle. Also, this technology will take years to mature as like other novel technology domains. Hence, all the talk about GenAI not having made much impact on P&L. Therefore, investors should look at revenue contribution from traditional technology domains more than GenAI to take exposure. Though GenAI holds the potential of transforming businesses in several ways, it is wise to be cautious about its financial implications before taking a final call on this matter.