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AI and Cognitive Technologies Will Transform the Enterprise

The AI-ification of the enterprise has begun. This trend is expected to accelerate over the next few years, with spending on AI increasing to a staggering $47 billion in 2020.

The AI-ification of the enterprise has begun.

According to market watcher International Data Corp. (IDC), enterprises are already embedding artificial intelligence (AI) capabilities into apps and business processes.

This trend should accelerate over the next few years, says IDC. It projects that spending on AI and cognitive systems will increase from $8 billion this year to a staggering $47 billion in 2020.

Start Planning Your AI Strategy

Again, the game is already afoot. "Software developers and end-user organizations have already begun the process of embedding and deploying cognitive/artificial intelligence into almost every kind of enterprise application or process," said David Schubmehl, IDC's research director for cognitive systems and content analytics, in a prepared statement.

Schubmehl and IDC urge enterprises to start thinking about how they're going to make use of AI.

The simple truth is that even if you aren't developing an AI strategy, your competitors probably are.

"Organizations [need] to be planning and undertaking strategies that incorporate these wide-ranging technologies," he said. "Identifying, understanding, and acting on the use cases, technologies, and growth opportunities for cognitive/AI systems will be a differentiating factor for most enterprises and the digital disruption caused by these technologies will be significant."

Today's Uses for AI

Right now, enterprises are using AI-like technologies to automate customer service interactions, diagnosis and treatment systems, fraud analysis, and quality management investigation and recommendation systems, according to IDC.

With respect to industry penetration, AI use tends to be disproportionately concentrated in banking, securities, retail, healthcare, and manufacturing. This will change, however, with the result that the use of AI in several vertical industries will become both more common and more conspicuous. "Near-term opportunities for cognitive systems are in industries such as banking, securities and investments, and manufacturing," said Jessica Goepfert, program director for customer insights and analysis with IDC, in a statement.

"In these segments, we find a wealth of unstructured data, a desire to harness insights from this information, and an openness to innovative technologies. Furthermore, the value proposition of cognitive systems aligns well with industry executives' chief priorities," she said.

Goepfert and IDC note that banking, retail, healthcare, and manufacturing collectively account for more than half of all spending on AI and cognitive systems. (Banking and retail together comprise nearly18 percent of spending.) "For instance, cognitive technologies are being used in the banking industry to detect and combat fraud -- consistently a top industry pain point," she said.

"Meanwhile, in manufacturing, executives cite improving product quality as a top initiative," Goepfert continued. "In this case, cognitive systems recognize and know how to respond to dynamic fluctuations in product specs by adapting the production to stay within quality targets."

Expected Industry Trends

From 2016 to 2020, IDC projects that healthcare and discrete manufacturing will spend the most on AI. Over that same period, IDC expects the use of AI for applications in public safety and emergency response to increase dramatically. Other popular use cases for AI-ification will include optimization and automation of supply chains, logistics, and fleet management.

Research and discovery in pharmaceuticals should see explosive use of AI, as will some applications in which AI is already common, including diagnosis and treatment systems and quality management systems.

According to IDC, software accounts for and will continue to account for the bulk of AI-related spending. This includes spending on "cognitive applications," which IDC describes as "text and rich media analytics, tagging, searching, machine learning, categorization, clustering, hypothesis generation, question answering, visualization, filtering, alerting, and navigation" and "cognitive software platforms." The latter "facilitate the development of intelligent, advisory, and cognitively enabled solutions."

Cognitive apps comprise the largest and the fastest-growing category, with projected spending of more than $18 billion by 2020.

AI or cognitive software must be matched with powerful hardware. For this reason, IDC anticipates that hardware revenues will grow nearly as fast as software -- at a compound annual growth rate of 60 percent over the forecast period.

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