Artificial Intelligence Software Market to Skyrocket to $251 Billion

The artificial intelligence (AI) software market is set to undergo exponential growth in the coming years, reflecting the increasing reliance on AI across various industry sectors. According to the latest report from IDC, this market’s expansion is forecasted to surge from $64 billion in 2022 to an impressive $251 billion by 2027, following a compound annual growth rate (CAGR) of 31.4%. These figures underscore the integral role that AI technologies play in modern business strategies and their potential for shaping a technologically driven future.

The forecast includes a range of key segments within the AI software market, such as AI Applications, AI System Infrastructure Software (SIS), and AI Application Development and Deployment (AD&D) software, barring AI platforms. Notably, Generative AI platforms and applications—which IDC projects to generate $55.7 billion by 2027—are poised for significant growth but are analyzed separately from the broader AI software projections.

As organizations seek to stay agile and competitive in a dynamic business environment, IDC’s survey reveals a trend towards a blend of vendor-supplied AI software and in-house support to address distinct use cases. This approach caters to the unique needs of businesses, offering more tailored AI solutions.

Raghunandhan Kuppuswamy, IDC’s research manager for Artificial Intelligence and Automation Research, is optimistic. Despite economic headwinds and uncertainties, Kuppuswamy believes that organizations are steadfast in their commitment to AI as a key component of their strategic planning and operational resilience.

Currently, AI Applications is the most significant segment, making up about one-third of the market’s revenue in 2023. This category encompasses various applications, from customer relationship management (CRM) to supply chain management, that are transforming the way businesses operate. Despite its dominance, AI Applications is set to grow at a CAGR of 21.1%—slower than the market’s overall growth.

AI Platforms come in second in terms of revenue, projected to witness rapid growth at a 35.8% CAGR from 2023 to 2027. This segment is crucial for developing AI models and applications, such as intelligent assistants that mimic human cognitive functions. Talking about innovation, segments such as the AI images generator, artificial intelligence generated images, and AI video generator exemplify the groundbreaking advancements in the world of AI.

The AI SIS and AI AD&D software categories, albeit the smaller kin among the forecasted segments, are anticipated to burgeon at a faster rate than the overall market, with CAGRs of 32.6% and 38.7%, respectively. The AI SIS category thrives thanks to its ability to integrate with existing software systems, parsing through vast data troves to enhance decision-making and operational efficiency. The AI AD&D, similar in content, enables the seamless orchestration and development of applications layered with AI capabilities.

Ritu Jyoti, group vice president at IDC, highlights an intriguing shift as traditional and Generative AI begin to converge, pointing to novel solutions that marry practical decision-making with creative flair. With such technologies becoming increasingly central to business strategy, Jyoti notes that businesses should prepare to navigate challenges and uphold ethical standards to optimize the return on investment in AI.

IDC defines AI-centric software as applications that cannot function without an AI component, setting it apart from AI non-centric software, which can operate even without its AI elements. Such distinctions are critical for understanding the AI software landscape, as firms seek tools complemented by, rather than entirely reliant on, AI.

The IDC report, “Worldwide Artificial Intelligence Software Forecast, 2023–2027,” doesn’t just delve into AI-centric and AI non-centric software forecasts but also segments the market by technology category. The forecasted revenue also delineates geographic regions and deployment types, providing a multifaceted view of the AI software domain.

As the appetite for the latest AI news & AI tools grows, businesses are adapting to a landscape where leveraging AI is becoming an indispensable part of securing a competitive edge. With continuous advancements, particularly in AI-centric software, the potential for AI to revolutionize business operations and catalyze innovation is clear. The global AI software market’s forecasted growth is not just a number but a narrative of technological evolution and its pervasive impact across sectors.