News

Research Firm Doubles Down on AI Disillusionment

• By David Ramel
• 07/29/2024

After recently placing AI in the "trough of disillusionment" on its Hype Cycle report, research firm Gartner has doubled down on its negativity, predicting massive abandonment of AI projects.

"At least 30 percent of generative AI (GenAI) projects will be abandoned after proof of concept by the end of 2025, due to poor data quality, inadequate risk controls, escalating costs or unclear business value," Gartner said today (July 29) in a news release from an event in Australia.

AI hit rock bottom earlier this month in the company's Hype Cycle, with Gartner saying: "Cloud AI services have regressed on the Hype Cycle since last year, due to the number of GenAI-based cloud AI services that have come to market. Vendors and end users of these services have experienced problems with service capacity, reliability, model update frequency and cost fluctuation, which may, however, be considered growing pains."

Now, the firm is piling on the AI negativity.

"After last year's hype, executives are impatient to see returns on GenAI investments, yet organizations are struggling to prove and realize value. As the scope of initiatives widen, the financial burden of developing and deploying GenAI models is increasingly felt," said analyst Rita Sallam at the Sydney event.

One major challenge, she said, is justifying the big investment in GenAI to enhance productivity, which can be hard to relate to financial benefit.

While she said organizations are trying to transform their business models with GenAI, that takes a lot of money, with the graphic below showing costs can range from $5 million to $20 million.

Gartner used the news release to point to "Calculating the ROI on GenAI Business Model Innovation" (requires account) report for help, along with the webinar, "What Mature Organizations Do Differently for AI Success."

"If the business outcomes meet or exceed expectations, it presents an opportunity to expand investments by scaling GenAI innovation and usage across a broader user base, or implementing it in additional business divisions," Sallam said. "However, if they fall short, it may be necessary to explore alternative innovation scenarios. These insights help organizations strategically allocate resources and determine the most effective path forward."