Across eight forecasted countries — the US, China, Japan, and the Europe-5 countries (France, Germany, Italy, Spain, and the UK) — AI’s share of software spend will increase from 4.3% in 2021 to 6% in 2025. AI’s software growth is driven by:
- AI-infused software that uses AI to increase its market attractiveness, although the software can still work without users activating its AI capabilities. By 2025, 31% of AI software spend will be AI-infused, up from 27% in 2021. Examples include Oracle’s acquisition of Cerner and Salesforce’s adoption of AI through its Einstein Prediction Builder.
- AI maker tools that are used to develop AI applications. Forrester’s recent Forrester Wave™ evaluation on AI and machine-learning platforms looked at 15 of the most significant platform providers. Examples include C3 AI and Palantir, which both saw more than 40% revenue growth in 2021.
- AI-centric software that requires its AI components to run. Examples include SenseTime, China’s largest AI company, which grew revenues by 36% in 2021, and SentinelOne’s autonomous AI cybersecurity platform, which saw some of the fastest software revenue growth of 2021.
- Country dynamics that the US and China dominate. They will capture 71% of AI software spend in 2022. The US leads AI enterprise adoption and is the leading destination for private AI investment. Although China lags the US’s AI investment, its AI software will see fast growth. In 2021, it published 63% more AI-related documents across conference journals and repository publications than the US.
AI has great potential across knowledge and data intelligence, security and cybersecurity, process optimization and automation, AI tools and database, health and drug discovery, customer and human capital management, and other categories. With AI’s success, new challenges emerge: As AI becomes mainstream, enterprises will need to manage its complexity across its tech infrastructure, AI practices and processes, business models, and across talent management, which includes the democratization of tools for the citizen data scientist.
In Forrester’s recently published Global AI Software Forecast, 2022, off-the-shelf and custom AI software spend will double from $33 billion in 2021 to $64 billion in 2025 and will grow 50% faster than the overall software market, with an annual growth rate of 18%.