AI software spending set to nearly double by 2025, reaching $ 64 bn @ Forrester

Global spending on the software category will reach $64 billion in the next three years, up from $33 billion in 2021, the analyst firm expects.

CIO Dive
Roberto Torres

Published Oct. 14, 2022

Site Editor:

Joaquim Cardoso MSc.
health transformation institute (HTI)

October 17, 2022

Dive Brief:

  • Global enterprise spending on custom and off-the-shelf AI software will reach $64 billion by 2025, a new Forrester report projects

  • The category is set to rise from $33 billion in 2021.

  • Growth in this category will outpace that of broader software spending, with compound annual growth rates of 18%, compared to software’s 12%. 
  • AI software spending will make up 6% of total spending on software by 2025.

  • Three key categories will drive spending in this subset of software: 
    (1) AI-infused software, 
    (2) AI maker tools, and 
    (3) AI-centric software.

Dive Insight:

Implementing AI has now become strategic for the majority of global enterprises, said Mike Gualtieri, VP and principal analyst at Forrester. 

Though companies can hire teams of data scientists to build bespoke applications, they are increasingly using AI that’s infused in business applications from software vendors.

“It is far easier to get AI in the next upgrade of your accounting system or supply chain planning system than to build a bespoke AI application,” Gualtieri said in an email.

Part of the challenge of baked-in AI is fragmentation

Businesses now have software solutions wrapped around each critical process, and with more AI capabilities comes the potential for a disjointed approach to the technology.

Aside from the on-board AI capabilities, companies will still need AI platforms to build AI applications that are differentiated for its customers and operations, said Gualtieri.

“It’s not unlike software,” he said. “Enterprises both build and buy software.”

The boom in AI software comes with another challenge: having enough prepared talent to manage it. 

Hiring alone won’t bridge that gap, calling businesses to create internal upskilling programs.

Hiring alone won’t bridge that gap, calling businesses to create internal upskilling programs.

With more dollars flowing to AI software, CIO and other IT executives need to have a clear strategy to execute — instead of haphazardly plugging AI into every company process.

“Tech leaders must get involved in any data science and/or AI platforms purchase decisions because they understand the full scope of tech operations,” Gualtieri said. 

“Data science teams’ scope is too narrow. They must invest in AI platforms.

Originally published at on October 14, 2022.

Names mentioned

Mike Gualtieri, VP and principal analyst at Forrester.

More insights from Forrester

by Michael O’Grady
Forecast Analyst
OCT 3 2022

Across eight forecasted countries — the US, China, Japan, and the Europe-5 countries (France, Germany, Italy, Spain, and the UK) — AI’s share of software spend will increase from 4.3% in 2021 to 6% in 2025. AI’s software growth is driven by:

  • AI-infused software that uses AI to increase its market attractiveness, although the software can still work without users activating its AI capabilities. 

  • By 2025, 31% of AI software spend will be AI-infused, up from 27% in 2021. 

  • AI maker tools that are used to develop AI applications. 

  • Examples include C3 AI and Palantir, which both saw more than 40% revenue growth in 2021.

  • AI-centric software that requires its AI components to run. 

  • Examples include SenseTime, China’s largest AI company, which grew revenues by 36% in 2021, and SentinelOne’s autonomous AI cybersecurity platform, which saw some of the fastest software revenue growth of 2021.

  • Country dynamics that the US and China dominate. 

  • They will capture 71% of AI software spend in 2022. 
  • The US leads AI enterprise adoption and is the leading destination for private AI investment. 
  • Although China lags the US’s AI investment, its AI software will see fast growth. 
  • In 2021, it published 63% more AI-related documents across conference journals and repository publications than the US.

AI has great potential across knowledge and data intelligence, security and cybersecurity, process optimization and automation, AI tools and database, health and drug discovery, customer and human capital management, and other categories. 

With AI’s success, new challenges emerge: 

As AI becomes mainstream, enterprises will need to 

  • manage its complexity across its tech infrastructure, 
  • AI practices and processes, 
  • business models, 
  • and across talent management, which includes the democratization of tools for the citizen data scientist.

In Forrester’s recently published Global AI Software Forecast, 2022, off-the-shelf and custom AI software spend will double from $33 billion in 2021 to $64 billion in 2025 and will grow 50% faster than the overall software market, with an annual growth rate of 18%.

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