AI is huge. According to an International Data Corporation (IDC) spending guide, worldwide spending on AI systems should clock $35.8 billion by yearend 2019. This is a 44% increase compared to the figure for 2018. As per IDC, the retail industry is the biggest beneficiary of the AI software. This article explores how firms will generate money from their venture in artificial intelligence.
Will AI companies generate money from the venture?
Experts have wondered for a long time whether companies in AI can make any money. Interestingly, critical AI solutions like cognitive software are available for free. These solutions require many hours to develop and the manpower is huge. But the growing tendency for AI firms to commoditize AI software raises questions on whether there is a revenue opportunity in the field.
The commoditization of AI software is one way through which AI companies will generate revenue. Although vendors have open-sourced the libraries for their AI software, users can only access the libraries via the vendors’ cloud platforms. To gain access to the libraries, users will have to part with some money and this way, the vendors get to earn money.
As more developers use a certain vendor’s software, it tends to become a standard in the AI industry. This presents another opportunity for the vendor to make money. Particularly, the vendor might opt to create extra solutions like chatbots which can be plugged into the open-sourced software.
Nonetheless, the reality is that AI companies are not going to generate the much-hyped revenue if they focus on selling cognitive software. As we have seen, cognitive software is highly open-sourced. Another revenue channel is creating chatbots. But the chatbot market is flooded by developers and that makes it less lucrative.
Other avenues for revenue generation for AI companies
AI as an industry is nascent and has a long way to go in terms of growth. The growth of AI will depend on how much value it creates for companies in different industries. According to estimates by McKinsey & Company, a consulting firm, AI is likely to generate close to $5.8 trillion annually across several business functions.
Particularly, sales and marketing are likely to benefit the most from AI solutions. Basically, the business functions which will benefit more from AI are those which rely on data to operate. Oftentimes, the more data is available the more profitable the business functions. But the data must be structured for AI solutions to make sense of it. As such, structuring data for AI solutions is a lucrative venture for AI companies.
Oftentimes, huge companies like Google, Amazon, etc have the financial muscle and manpower to structure data by themselves. However, small businesses might need to outsource such functions due to a lack of sophistication and adequate finances.
Another avenue for revenue for AI companies is through providing solutions like text and image recognition. Particularly, firms need to optimize their forecasting capabilities using AI. However, small firms might find the process of integrating AI in their businesses to be quite expensive. This is where AI companies come in to provide the solutions. For instance, solutions like AIDA, created by Boxx.ai, help marketers to improve engagement.
AI companies have a sterling opportunity to generate huge sums in revenue but that will depend on their ability to identify the most lucrative opportunities. While opportunities abound, some are less rewarding. For instance, selling cognitive software is undermined by the fact that most software is open-sourced. However, AI is still evolving and more use cases are coming up every day.