IT investment will rebalance toward AI-powered value

In this installment of Your Generative Enterprise™ playbook for the future, early innovators share their plans for investment across the generative AI ecosystem.

If our superstar respondents are pointing correctly to the way ahead, we can be bullish about the future of every ecosystem partner needed to bring generative AI (GenAI) to life where most of us work.

Respondents told us that for every category we asked about, they expect spending to increase in the near term—from chips to software to services.

Exhibit 1: It will take a wide range of ecosystem partners to unbox the benefits of GenAI

Source: The authors and DALL-E, 2023

Expect GenAI to start hoovering up investment cash across the enterprise

We don’t expect overall IT spending to bloat overnight. Still, we interpret Exhibit 2 to mean that firms will aggressively allocate their available budget to provide the fuel needed to move toward the future. Some money will come from new allocations transferred from other parts of the business (or operating margin). Some will undoubtedly come from productivity improvements, partner consolidation, and cuts from discretionary investment pools. If your science project won’t deliver real impact in the near term, expect to see your budget move on down the generative AI road.

Exhibit 2: GenAI will rebalance technology investments to focus on the future

Sample: 104 enterprise leaders actively exploring and deploying GenAI
Source: HFS Research in partnership with Ascendion, 2023

IT buyers are hunting for something new

Investment is likely to shift toward generative AI overall, but some ecosystem participants will grow faster than others because even though GenAI tools are technically impressive game changers, they don’t work out of the box. Companies will invest more in those tools directly, but we expect that partners who can help with software engineering, data, productivity tools, and new GenAI ideas will see that table tilt their way more dramatically over the coming quarters.

Clients are focused on the foundational elements of an AI-powered organization: data readiness, privacy, security, and making responsible AI and functional-grade AI. They want to build their own tech muscle because technology is so core.

– Ravi Kumar S, CEO, Cognizant

Of course, traditional powerhouses will continue to play a critical role. Oracle and Cognizant aren’t going anywhere. However, our data suggests that growth could slow for global system integrators and enterprise platforms such as Salesforce, Oracle, and SAP in favor of transformation dollars going elsewhere.

The Bottom Line: GenAI will reshape the IT partner investment landscape.

GenAI is the kind of technology with the potential to impact knowledge work, which today comprises most of the modern economy. We should not treat it like a data center, chip, app, or platform. Our respondents told us that GenAI could have a bigger impact than any other technology.

In that context, it’s perhaps not surprising that our early adopter cohort told us they expect investment dollars to shift across the IT partner ecosystem. IT leaders can—and should—expect GenAI to deliver productivity improvements, so return on investment is the new name of the game. The net is that the rise of GenAI impact will require rebalancing investment toward partners who can help solve issues around data, software, and business processes to deliver business impact.

Your Generative Enterprise™ playbook for the future is an HFS Research and Ascendion research program based on 20+ in-depth interviews and a survey with more than 100 C-suite leaders and practitioners with first-hand experience implementing GenAI in organizations.
Watch out for more, and join us on the journey at HFS Research and Ascendion to access all our research findings.