According to a report by Gartner, more than 30% of ongoing projects in Generative Artificial Intelligence (GenAI) are expected to be abandoned by the end of 2025. Issues such as poor data quality, inadequate risk controls, escalating costs, and unclear business value contribute to this high attrition rate.
Executives, eager to see returns on their GenAI investments, are becoming increasingly impatient. However, organizations are struggling to prove and realize the value of these investments. Developing and deploying GenAI models comes with a significant financial burden, as highlighted by Rita Sallam, a distinguished VP analyst at Gartner.
The report emphasizes the challenge organizations face in justifying the substantial investment in GenAI for productivity enhancement, as it is not always directly translated into financial benefit. The deployment of GenAI to transform business models and create new opportunities incurs costs ranging from $5 million to $20 million. Sallam emphasizes that GenAI does not have a one-size-fits-all approach, and costs are not as predictable as with other technologies.
Gartner’s research suggests that regardless of an organization’s AI ambition, GenAI requires a higher tolerance for indirect, future financial investment criteria rather than immediate return on investment (ROI). The use cases, deployment approaches, and market focus all contribute to varying levels of cost, risk, variability, and strategic impact.
In the past, many CFOs have been hesitant to invest in future indirect value, preferring to focus on immediate gains. This cautious approach can lead to a disproportionate allocation of investments towards short-term tactical outcomes rather than long-term strategic goals, as stated in the report.
Additionally, the research highlights that early adopters of GenAI, across various industries and business processes, have experienced a wide range of improvements. These improvements vary depending on the specific use case, job type, and skill level of the workers involved.
A recent survey conducted by Gartner revealed that respondents reported an average revenue increase of 15.8%, cost savings of 15.2%, and a productivity improvement of 22.6%. These figures serve as valuable benchmarks for assessing the business value generated through GenAI’s innovative business model.
However, it’s crucial to recognize the challenges associated with estimating this value, as the benefits are highly specific to each company, use case, role, and workforce. Sometimes, the impact of GenAI may not be immediately apparent and may take time to materialize. Nevertheless, this delay should not diminish the potential benefits that GenAI can bring, as emphasized by Sallam.
In summary, organizations investing in GenAI face the challenge of justifying the substantial financial investment required for productivity enhancement. The report highlights that around 30% of ongoing GenAI projects are expected to be dropped due to various issues. Despite the potential for transforming business models and creating new opportunities, the costs associated with deploying GenAI are significant and vary depending on the organization’s goals and approach. Gartner’s research indicates that GenAI requires a higher tolerance for future financial investment rather than immediate ROI.
Discussion about this post