At least 30% of generative AI (GenAI) projects will be abandoned after proof of concept by the end of 2025, due to poor data quality, inadequate risk controls, escalating costs or unclear business value, according to Gartner.
► Costs not as predictable with AI as other technologies
► Desire for visible ROI can skew strategic investment decisions
Justifying the substantial investment in GenAI for productivity enhancement, which can be difficult to directly translate into financial benefit, is a major challenge for organisations, said the analyst. While many are leveraging GenAI to transform their business models and create new business opportunities, this comes with significant costs.
Rita Sallam, distinguished VP analyst at Gartner said: ‘Executives are impatient to see returns, yet organisations are struggling to prove and realise value. Unfortunately, there is no one size fits all with GenAI, and costs aren’t as predictable as other technologies. 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 research indicates that GenAI requires a higher tolerance for indirect, future financial investment criteria versus immediate return on investment (ROI). Historically, it noted, many CFOs have not been comfortable with investing today for indirect value in the future. This reluctance can skew investment allocation to tactical versus strategic outcomes.
Despite all of this, it says that earlier adopters are seeing improvements, with respondents to a recent Gartner survey reporting, on average, revenue increases of 15.8%, cost savings of 15.2%, and productivity improvements of 22.6%.
‘This data serves as a valuable reference point for assessing the business value derived from GenAI business model innovation’, said Sallam. ‘But it’s important to acknowledge the challenges in estimating that value, as benefits are very company, use case, role and workforce specific. Often, the impact may not be immediately evident and may materialize over time. However, this delay doesn’t diminish the potential benefits.’
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