How Many Firms Will See Payback on Generative AI, and How Soon?

Though some pioneers claim they already are seeing revenue gains from generative artificial intelligence, we are probably justified in some skepticism about those outcomes.

A Gartner survey of 822 business leaders, conducted between September and November 2023, suggests that various generative AI projects cost between $5 million to $20 million. But that might not be the biggest impact, as costs for inference operations (asking questions, getting answers) could run between $8,000 to $21,000 per user. 

For a 1,000-user firm, that might suggest $8 million to $21 million annually in inference operations. 

source: Gartner 

And there is a bit of a contradiction in the reported results. Gartner notes that GenAI requires a higher tolerance for indirect, future financial investment criteria versus immediate return on investment (ROI). 

That noted, survey respondents have reported 15.8 percent revenue increases, 15.2 percent cost savings and 22.6 percent productivity improvement, on average.

One suspects we should take those quantifiable results with a bit of skepticism, as most of the returns from GenAI are indirect and hard to measure. 

There’s a reason increasing use of generative and other forms of artificial intelligence is linked to data center capacity: model training is getting more compute intensive. So large language model training costs are growing. 

And model creation and training might not be the biggest cost. 

 

source: Epoch AI

Some of us would not be at all surprised if disappointment with GenAI outcomes becomes more pronounced as projects seem not to provide the anticipated financial outcomes, in the near term. 

To the extent AI is the next general-purpose technology, as was the internet, we could ask the same questions about near term return from internet investments. 

How many firms will see near-term and quantifiable revenue upside from their capital investments and operating expenses directly related to GenAI? 

Outside of graphics processing unit suppliers; cloud "AI as a service" providers and big system integrators such as Accenture--who should be able to point to quantifiable revenue gains--not many end user firms will be so lucky.

We are likely years away from a substantial number of firms being able to say they can quantify revenue gains from using GenAI.