Ballooning AI budgets expected to face ROI pressure

Dive Brief:

Calculating how much value has resulted from an organization’s artificial intelligence spending could be viewed as a key part of the CFO’s job in the future, although it’s currently a tricky exercise, a Gartner analyst said Monday.
With corporate AI budgets expected to swell rapidly in coming years, finance chiefs will find themselves under rising pressure to demonstrate the return on investment for such expenditures, according to Frances Karamouzis, a senior analyst in Gartner's Research and Advisory Group focused on AI and other emerging technology issues.
“It is incumbent upon the C-suite, and specifically the CFO, to implement several different and newer approaches… [for] tracking cost, risk and ROI” around their organization’s AI investments, Karamouzis said during a presentation at Gartner’s 2024 CFO and Finance Executive Conference in National Harbor, Maryland.

Dive Insight:

Gartner predicts that AI software spending will surge to $297.9 billion by 2027, up from $124 billion in 2022. Generative AI in particular is expected to see its share of the market spike to 35% by 2027 from 8% in 2023.

In a survey unveiled by KPMG in March, nearly all (97%) of business leaders said they planned to invest in GenAI over the next 12 months, with 43% expecting an allocation of $100 million or more.

When considering their organization’s near-term GenAI investment strategy, 39% of CEOs say they will be scaling efforts, moving from pilots to industrialization across multiple functions or business units, according to the results of a separate KPMG survey, released last month. About four out of 10 companies plan to increase their investment in GenAI next year, while 56% anticipate flat spending, the research found.

As corporate AI expenditures grow, they will likely come under increased scrutiny in earnings calls, according to Karamouzis.

“Some of the biggest demands that are going to impact CFOs is that they’re going to be asked essentially to… highlight on earnings calls: ‘What is your strategic articulation of your AI investments?’” she said. “Once you present that, then a couple of earnings calls later, you’re going to be asked to present: ‘Well, what was the ROI?’”

Gartner is in the process of developing a tool for calculating the ROI of AI investments, but the project is proving to be more complex than originally anticipated, Karamouzis told CFO Dive after her presentation.

“We realized that the ease of calculating ROI varies,” she said. “When you have incredible ubiquity in terms of who’s using the tool and not much specificity in terms of workflows, it makes it harder to calculate.”