Generative AI may spark IT spending turnaround in 2024

In 2024, a key focus for organizations increasing spending will be on generative AI as they look to achieve greater productivity and further customer experience enhancements at lower operational costs. While US tech spending intent is expected to remain negative for the fourth consecutive quarter, there is evidence that the pessimism over tech demand may have bottomed out, according to an analysis of S&P Global Inc.’s US Technology Demand Indicator, a survey-backed composite of US intent to spend on technology.

Amid expectations for an increase in IT spending in 2024, there is a significant focus on the role generative AI is likely to play in increasing the appetite for technology spending among businesses.

Nearly three in five organizations (53%) increasing IT budgets in 2024 are looking to spend on generative AI, which is 1.6 times the overall intent to spend on GenAI (33%) during the year, indicating material interest in the technology, according to our Macroeconomic Outlook, SME Tech Trends survey in August 2023.

Nearly all organizations (87%) currently using the technology are likely to spend on GenAI in 2024, suggesting that current users are already seeing returns that justify further willingness to pay for the technology.

Among industries, so far, we are only seeing significant spending intent on the technology from software and IT service providers and finance companies. About 53% of finance and 51% of software and IT services industry respondents are likely to spend on generative AI over the next 12 months. The intent to spend from other industries is relatively lukewarm.

Organizations currently using GenAI see most likely benefits in customer-facing business areas such marketing (53%), sales (45%), and customer service and support (42%). While GenAI’s content-generation capabilities are an advantage for marketing and sales, its ability to enhance customer service agent assist and chatbots is likely to benefit customer service and support. Product development, which includes product design and digital prototypes, is also popular among current GenAI users. We expect organizations currently using GenAI to be willing spenders on the technology in 2024 despite a subpar IT spending intent outlook.

S&P Global’s Tech Demand Indicator is a recently launched resource that offers a high-level signal of intent to spend on technology, based on surveys of US businesses and consumers. The resource includes an interactive visual dashboard that, along with high-level composite views, enables users to view various segmented views of the signal, as well as more detailed views of which areas of technology are seeing stronger spending intent, and which external factors are influencing spending decisions. Visit the Tech Demand Indicator landing page to view the interactive dashboard and recent reports.

Generative AI Software Market Forecast

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