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The Star
a day ago
- Business
- The Star
Companies are pouring billions into AI. It has yet to pay off.
Nearly four decades ago, when the personal computer boom was in full swing, a phenomenon known as the 'productivity paradox' emerged. It was a reference to how, despite companies' huge investments in new technology, there was scant evidence of a corresponding gain in workers' efficiency. Today, the same paradox is appearing, but with generative artificial intelligence. According to recent research from McKinsey & Co, nearly eight in 10 companies have reported using generative AI, but just as many have reported 'no significant bottom-line impact'. AI technology has been racing ahead with chatbots such as ChatGPT, fuelled by a high-stakes arms race among tech giants and superrich startups and prompting an expectation that everything from back-office accounting to customer service will be revolutionised. But the payoff for businesses outside the tech sector is lagging behind, plagued by issues including an irritating tendency by chatbots to make stuff up. That means that businesses will have to continue to invest billions to avoid falling behind – but it could be years before the technology delivers an economywide payoff, as companies gradually figure out what works best. Call it the 'the gen. AI paradox', as McKinsey did in its research report. Investments in generative AI by businesses are expected to increase 94% this year to US$61.9bil (RM259.82bil), according to IDC, a technology research firm. But the percentage of companies abandoning most of their AI pilot projects soared to 42% by the end of 2024, up from 17% the previous year, according to a survey of more than 1,000 technology and business managers by S&P Global, a data and analytics firm. Projects failed not only because of technical hurdles, but often because of 'human factors' like employee and customer resistance or lack of skills, said Alexander Johnston, a senior analyst at S&P Global. Gartner, a research and advisory firm that charts technological 'hype cycles', predicts that AI is sliding toward a stage it calls 'the trough of disillusionment'. The low point is expected next year, before the technology eventually becomes a proven productivity tool, said John-David Lovelock, the chief forecaster at Gartner. That was the pattern with past technologies such as personal computers and the internet – early exuberance, the hard slog of mastering a technology, followed by a transformation of industries and work. The winners so far have been the suppliers of AI technology and advice. They include Microsoft, Amazon and Google, which offer AI software, while Nvidia is the runaway leader in AI chips. Executives at those companies have bragged how AI is reshaping their own workforces, eliminating the need for some entry-level coding work and making other workers more efficient. AI will eventually replace entire swaths of human employees, many predict, a perspective that is being widely embraced and echoed in the corporate mainstream. At the Aspen Ideas Festival in June, Jim Farley, the CEO of Ford Motor Co, said, 'Artificial intelligence is going to replace literally half of all white-collar workers in the US.' Whether that type of revolutionary change occurs, and how soon, depends on the real-world testing ground of many businesses. 'The raw technological horsepower is terrific, but it's not going to determine how quickly AI transforms the economy,' said Andrew McAfee, a principal research scientist and co-director of the Massachusetts Institute of Technology's Initiative on the Digital Economy. Still, some businesses are finding ways to incorporate AI – although in most cases the technology is still a long way from replacing workers. One company where AI's promise and flaws are playing out is USAA, which provides insurance and banking services to members of the military and their families. After several pilot projects, some of which it closed down, the company introduced an AI assistant to help its 16,000 customer service workers provide correct answers to specific questions. USAA is tracking its AI investments, but does not yet have a calculation of the financial payoff, if any, for the call centre software. But the response from its workers, the company said, has been overwhelmingly positive. While it has software apps for answering customer questions online, its call centres field an average of 200,000 calls a day. 'Those are moments that matter,' said Ramnik Bajaj, the company's chief data analytics and AI officer. 'They want a human voice at the other end of the phone.' That's similar to an AI app developed more than a year ago for fieldworkers at Johnson Controls, a large supplier of building equipment, software and services. The company fed its operating and service manuals for its machines into an AI program that has been trained to generate a problem summary, suggest repairs and deliver it all to the technician's tablet computer. In testing, the app has trimmed 10 to 15 minutes off a repair call of an hour or more – a useful efficiency gain, but hardly a workplace transformation on its own. Fewer than 2,000 of the company's 25,000 field service workers have access to the AI helper, although the company is planning an expansion. 'It's still pretty early days, but the idea is that over time everyone will use it,' said Vijay Sankaran, the chief digital and information officer at Johnson Controls. The long-term vision is that companies will use AI to improve multiple systems, including sales, procurement, manufacturing, customer service and finance, he said. 'That's the game changer,' said Sankaran, who predicts that shift will take at least five years. Two years ago, JPMorgan Chase, the nation's largest bank, blocked access to ChatGPT from its computers because of potential security risks. Only a few hundred data scientists and engineers were allowed to experiment with AI. Today, about 200,000 of the bank's employees have access to a general-purpose AI assistant – essentially a business chatbot – from their work computers for tasks such as retrieving data, answering business questions and writing reports. The assistant, tailored for JPMorgan's use, taps into ChatGPT and other AI tools, while ensuring data security for confidential bank and customer information. Roughly half of the workers use it regularly and report spending up to four hours less a week on basic office tasks, the company said. The bank's wealth advisers are also employing a more specialised AI assistant, which uses bank, market and customer data to provide wealthy clients with investment research and advice. The bank says it retrieves information and helps advisers make investment recommendations nearly twice as fast as they could before, increasing sales. Lori Beer, the global chief information officer at JPMorgan, oversees a worldwide technology staff of 60,000. Has she shut down AI projects? Probably hundreds in total, she said. But many of the shelved prototypes, she said, developed concepts and code that were folded into other, continuing projects. 'We're absolutely shutting things down,' Beer said. 'We're not afraid to shut things down. We don't think it's a bad thing. I think it's a smart thing.' McAfee, the MIT research scientist, agreed. 'It's not surprising that early AI efforts are falling short,' said McAfee, who is a founder of Workhelix, an AI-consulting firm. 'Innovation is a process of failing fairly regularly.' – ©2025 The New York Times Company This article originally appeared in The New York Times.
Boston Globe
2 days ago
- Business
- Boston Globe
Companies are pouring billions into AI. It has yet to pay off.
AI technology has been racing ahead with chatbots such as ChatGPT, fueled by a high-stakes arms race among tech giants and superrich startups and prompting an expectation that everything from back-office accounting to customer service will be revolutionized. But the payoff for businesses outside the tech sector is lagging behind, plagued by issues including an irritating tendency by chatbots to make stuff up. Advertisement That means that businesses will have to continue to invest billions to avoid falling behind — but it could be years before the technology delivers an economywide payoff, as companies gradually figure out what works best. Get Starting Point A guide through the most important stories of the morning, delivered Monday through Friday. Enter Email Sign Up Call it the 'the gen. AI paradox,' as McKinsey did in its research report. Investments in generative AI by businesses are expected to increase 94 percent this year to $61.9 billion, according to IDC, a technology research firm. But the percentage of companies abandoning most of their AI pilot projects soared to 42 percent by the end of 2024, up from 17 percent the previous year, according to a survey of more than 1,000 technology and business managers by S&P Global, a data and analytics firm. Advertisement Projects failed not only because of technical hurdles, but often because of 'human factors' like employee and customer resistance or lack of skills, said Alexander Johnston, a senior analyst at S&P Global. Gartner, a research and advisory firm that charts technological 'hype cycles,' predicts that AI is sliding toward a stage it calls 'the trough of disillusionment.' The low point is expected next year, before the technology eventually becomes a proven productivity tool, said John-David Lovelock, the chief forecaster at Gartner. That was the pattern with past technologies such as personal computers and the internet — early exuberance, the hard slog of mastering a technology, followed by a transformation of industries and work. The winners so far have been the suppliers of AI technology and advice. They include Microsoft, Amazon, and Google, which offer AI software, while Nvidia is the runaway leader in AI chips. Executives at those companies have bragged how AI is reshaping their own workforces, eliminating the need for some entry-level coding work, and making other workers more efficient. AI will eventually replace entire swaths of human employees, many predict, a perspective that is being widely embraced and echoed in the corporate mainstream. At the Aspen Ideas Festival in June, Jim Farley, the CEO of Ford Motor Co., said, 'Artificial intelligence is going to replace literally half of all white-collar workers in the US.' Whether that type of revolutionary change occurs, and how soon, depends on the real-world testing ground of many businesses. 'The raw technological horsepower is terrific, but it's not going to determine how quickly AI transforms the economy,' said Andrew McAfee, a principal research scientist and co-director of the Massachusetts Institute of Technology's Initiative on the Digital Economy. Advertisement Still, some businesses are finding ways to incorporate AI — although in most cases the technology is still a long way from replacing workers. One company where AI's promise and flaws are playing out is USAA, which provides insurance and banking services to members of the military and their families. After several pilot projects, some of which it closed down, the company introduced an AI assistant to help its 16,000 customer service workers provide correct answers to specific questions. USAA is tracking its AI investments, but does not yet have a calculation of the financial payoff, if any, for the call center software. But the response from its workers, the company said, has been overwhelmingly positive. While it has software apps for answering customer questions online, its call centers field an average of 200,000 calls a day. 'Those are moments that matter,' said Ramnik Bajaj, the company's chief data analytics and AI officer. 'They want a human voice at the other end of the phone.' That's similar to an AI app developed more than a year ago for fieldworkers at Johnson Controls, a large supplier of building equipment, software, and services. The company fed its operating and service manuals for its machines into an AI program that has been trained to generate a problem summary, suggest repairs and deliver it all to the technician's tablet computer. In testing, the app has trimmed 10 to 15 minutes off a repair call of an hour or more — a useful efficiency gain, but hardly a workplace transformation on its own. Fewer than 2,000 of the company's 25,000 field service workers have access to the AI helper, although the company is planning an expansion. Advertisement 'It's still pretty early days, but the idea is that over time everyone will use it,' said Vijay Sankaran, the chief digital and information officer at Johnson Controls. The long-term vision is that companies will use AI to improve multiple systems, including sales, procurement, manufacturing, customer service, and finance, he said. 'That's the game changer,' said Sankaran, who predicts that shift will take at least five years. Two years ago, JPMorgan Chase, the nation's largest bank, blocked access to ChatGPT from its computers because of potential security risks. Only a few hundred data scientists and engineers were allowed to experiment with AI. Today, about 200,000 of the bank's employees have access to a general-purpose AI assistant — essentially a business chatbot — from their work computers for tasks such as retrieving data, answering business questions, and writing reports. The assistant, tailored for JPMorgan's use, taps into ChatGPT and other AI tools, while ensuring data security for confidential bank and customer information. Roughly half of the workers use it regularly and report spending up to four hours less a week on basic office tasks, the company said. The bank's wealth advisers are also employing a more specialized AI assistant, which uses bank, market, and customer data to provide wealthy clients with investment research and advice. The bank says it retrieves information and helps advisers make investment recommendations nearly twice as fast as they could before, increasing sales. Lori Beer, the global chief information officer at JPMorgan, oversees a worldwide technology staff of 60,000. Has she shut down AI projects? Probably hundreds in total, she said. Advertisement But many of the shelved prototypes, she said, developed concepts and code that were folded into other, continuing projects. 'We're absolutely shutting things down,' Beer said. 'We're not afraid to shut things down. We don't think it's a bad thing. I think it's a smart thing.' McAfee, the MIT research scientist, agreed. 'It's not surprising that early AI efforts are falling short,' said McAfee, who is a founder of Workhelix, an AI-consulting firm. 'Innovation is a process of failing fairly regularly.' This article originally appeared in
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Business Standard
2 days ago
- Business
- Business Standard
GenAI paradox: Companies pouring billions into AI; it has yet to pay off
Nearly four decades ago, when the personal computer boom was in full swing, a phenomenon known as the 'productivity paradox' emerged. It was a reference to how, despite companies' huge investments in new technology, there was scant evidence of a corresponding gain in workers' efficiency. Today, the same paradox is appearing, but with generative artificial intelligence. According to recent research from McKinsey & Company, nearly eight in 10 companies have reported using generative AI, but just as many have reported 'no significant bottom-line impact'. AI technology has been racing ahead with chatbots like ChatGPT, fueled by a high-stakes arms race among tech giants and superrich start-ups and prompting an expectation that everything from back-office accounting to customer service will be revolutionised. But the payoff for businesses outside the tech sector is lagging behind, plagued by issues including an irritating tendency by chatbots to make stuff up. That means that businesses will have to continue to invest billions to avoid falling behind — but it could be years before the technology delivers an economywide payoff, as companies gradually figure out what works best. Call it the 'the generative AI paradox,' as McKinsey did in its research report. Investments in generative AI by businesses are expected to increase 94 per cent this year to $61.9 billion, according to IDC, a technology research firm. But the percentage of companies abandoning most of their AI pilot projects soared to 42 per cent by the end of 2024, up from 17 per cent the previous year, according to a survey of more than 1,000 technology and business managers by S&P Global, a data and analytics firm. Projects failed not only because of technical hurdles, but often because of 'human factors' like employee and customer resistance or lack of skills, said Alexander Johnston, a senior analyst at S&P Global. Gartner, a research and advisory firm that charts technological 'hype cycles,' predicts that AI is sliding toward a stage it calls 'the trough of disillusionment.' The low point is expected next year, before the technology eventually becomes a proven productivity tool, said John-David Lovelock, the chief forecaster at Gartner. That was the pattern with past technologies like personal computers and the internet — early exuberance, the hard slog of mastering a technology, followed by a transformation of industries and work. The winners so far have been the suppliers of AI technology and advice. They include Microsoft, Amazon, and Google, which offer AI software, while Nvidia is the runaway leader in AI chips. Executives at those companies have bragged how AI is reshaping their own work forces, eliminating the need for some entry-level coding work and making other workers more efficient. AI will eventually replace entire swaths of human employees, many predict, a perspective that is being widely embraced and echoed in the corporate mainstream. At the Aspen Ideas Festival in June, Jim Farley, the chief executive of Ford Motor, said, 'Artificial intelligence is going to replace literally half of all white-collar workers in the US' Whether that type of revolutionary change occurs, and how soon, depends on the real-world testing ground of many businesses. 'The raw technological horsepower is terrific, but it's not going to determine how quickly AI transforms the economy,' said Andrew McAfee, a principal research scientist and co-director of the Massachusetts Institute of Technology's Initiative on the Digital Economy. Still, some businesses are finding ways to incorporate AI — although in most cases the technology is still a long way from replacing workers. One company where AI's promise and flaws are playing out is USAA, which provides insurance and banking services to members of the military and their families. After several pilot projects, some of which it closed down, the company introduced an AI assistant to help its 16,000 customer service workers provide correct answers to specific questions. USAA is tracking its AI investments, but does not yet have a calculation of the financial payoff, if any, for the call center software. But the response from its workers, the company said, has been overwhelmingly positive. While it has software apps for answering customer questions online, its call centers field an average of 200,000 calls a day. 'Those are moments that matter,' said Ramnik Bajaj, the company's chief data analytics and AI officer. 'They want a human voice at the other end of the phone.' That's similar to an AI app developed more than a year ago for fieldworkers at Johnson Controls, a large supplier of building equipment, software and services. The company fed its operating and service manuals for its machines into an AI program that has been trained to generate a problem summary, suggest repairs and deliver it all to the technician's tablet computer. In testing, the app has trimmed 10 to 15 minutes off a repair call of an hour or more — a useful efficiency gain, but hardly a workplace transformation on its own. Fewer than 2,000 of the company's 25,000 field service workers have access to the AI helper, although the company is planning an expansion. 'It's still pretty early days, but the idea is that over time everyone will use it,' said Vijay Sankaran, the chief digital and information officer at Johnson Controls. The long-term vision is that companies will use AI to improve multiple systems, including sales, procurement, manufacturing, customer service and finance, he said. 'That's the game changer,' said Sankaran, who predicts that shift will take at least five years. Two years ago, JPMorgan Chase, the nation's largest bank, blocked access to ChatGPT from its computers because of potential security risks. Only a few hundred data scientists and engineers were allowed to experiment with AI Today, about 200,000 of the bank's employees have access to a general-purpose AI assistant — essentially a business chatbot — from their work computers for tasks like retrieving data, answering business questions and writing reports. The assistant, tailored for JPMorgan's use, taps into ChatGPT and other AI tools, while ensuring data security for confidential bank and customer information. Roughly half of the workers use it regularly and report spending up to four hours less a week on basic office tasks, the company said. The bank's wealth advisers are also employing a more specialized AI assistant, which uses bank, market and customer data to provide wealthy clients with investment research and advice. The bank says it retrieves information and helps advisers make investment recommendations nearly twice as fast as they could before, increasing sales. Lori Beer, the global chief information officer at JPMorgan, oversees a worldwide technology staff of 60,000. Has she shut down AI projects? Probably hundreds in total, she said. But many of the shelved prototypes, she said, developed concepts and code that were folded into other, continuing projects. 'We're absolutely shutting things down,' Ms. Beer said. 'We're not afraid to shut things down. We don't think it's a bad thing. I think it's a smart thing.' McAfee, the M.I.T. research scientist, agreed. 'It's not surprising that early AI efforts are falling short,' said McAfee, who is a founder of Workhelix, an AI-consulting firm. 'Innovation is a process of failing fairly regularly.'
Time of India
17-07-2025
- Business
- Time of India
Worldwide IT spending to reach $5.43 trillion this year, driven by AI infra
New Delhi, Worldwide IT spending is expected to total $5.43 trillion in 2025, an increase of 7.9 per cent compared to 2024, a report said on Thursday. While there is a slowdown in business due to the ongoing geopolitical scenario, the spending on AI-oriented infrastructure would lead to spending in the IT sector, Gartner, an IT consultancy firm, forecasted in its recent report. "While there is a business pause on net-new spending due to a spike in global uncertainty, the effect is subsumed by ongoing AI and generative AI (GenAI) digitisation initiatives," said John-David Lovelock, Distinguished VP Analyst at Gartner. For instance, both software and services spending growth in 2025 is expected to slow down due to this 'uncertainty pause,' but spending in AI-related infrastructure, such as data centre systems , continues to surge, the report stated. "Data centres are experiencing a surge driven by GenAI, with spending on AI-optimised servers, which was virtually non-existent in 2021, expected to triple that of traditional servers by 2027," said Lovelock. This aligns with a Gartner survey of 252 senior leaders across various industries in North America and Western Europe with enterprise-wide revenue of $500 million or more from March to May of 2025, where 62 per cent of respondents identified AI as defining the future of competition for the next 10 years. According to the report, competitiveness is a primary reason why enterprises will invest in technology and business change in an eroding environment. "With GenAI sliding towards the trough of disillusionment, more time and spending is being focused on delivered functionality from incumbent software providers," Lovelock added. Starting early in the second quarter of 2025, there has been an "uncertainty pause," encompassing a strategic suspension of net-new initiatives across a breadth of departments, including IT. This pause is driven by heightened uncertainty and geopolitical risks. In response, the global corporate sector is exercising increased caution, as organisations seek to mitigate adverse impacts from these multifaceted challenges, the report noted. The Gartner survey claimed that 61 per cent of enterprises started 2025 in a better position than at the same time last year, but only 24 per cent expect to end the year ahead of their 2025 plans.
Trade Arabia
03-04-2025
- Business
- Trade Arabia
Global GenAI spending to hit $644bn in 2025, says report
Worldwide generative AI (GenAI) spending is expected to hit $644 billion in 2025, thus recording a 76.4% increase from 2024, according to a report by Gartner. "Expectations for GenAI's capabilities are declining due to high failure rates in initial proof-of-concept (POC) work and dissatisfaction with current GenAI results," remarked John-David Lovelock, VP Analyst at Gartner. "Despite this, foundational model providers are investing billions annually to enhance GenAI models' size, performance, and reliability. This paradox will persist through 2025 and 2026," he stated. According to him, GenAI spending is poised for significant growth across all core markets and submarkets in 2025. It will have a transformative impact across all aspects of IT spending markets, suggesting a future where AI technologies become increasingly integral to business operations and consumer products. "Ambitious internal projects from 2024 will face scrutiny in 2025, as CIOs opt for commercial off-the-shelf solutions for more predictable implementation and business value," remarked Lovelock. "Despite model improvements, CIOs will reduce POC and self-development efforts, focusing instead on GenAI features from existing software providers," he added. According to Lovelock, this spend will be driven largely by the integration of AI capabilities into hardware, such as servers, smartphones and PCs, with 80% of GenAI spending going towards hardware. "The market's growth trajectory is heavily influenced by the increasing prevalence of AI-enabled devices, which are expected to comprise almost the entire consumer device market by 2028," he noted.
