AI-based Software Growth set to Plunge despite the Rapid Market Growth

With the tech vendors merging AI into the existing software products, the market size will increase to $37 billion by 2025, claims Forrester.

Many technology companies are infusing artificial intelligence in the current solutions, and thus, the market is booming. According to the latest Forrester study, the AI-based software market will touch $37 billion by 2025 – excluding the hardware and consulting services.

Basically, the growth of AI applications will be constrained by vendors – primarily due to the embed AI functionality with greater frequency. Despite this, the overall artificial intelligence software market will drop below the recent investor estimation of $150 to $200 billion.

While the world sees increasing demand for AI as technology, applications, and platforms – its ubiquity will eventually make this technology conventional for software development. Some of the principal findings from the study are –

• After 2023, AI software revenues will be no more than 3% of the total application market. With time, AI in business solutions will be the standard, prompting AI-infused and AI-centric apps to dip further in the global application market.
• Nearly 60% of software buyers would expect AI functionalities from their existing vendors – instead of custom-creating their applications. And clearly, this figure is likely to grow more over time.
• The AI-infused applications will not be able to put up with premium-product status. Today, only 10% of software vendors are offering AI-infused solutions at differentiated prices.

It is no secret that with more vendors adding such AI functions, the capability to charge a premium for advanced technology would be lost in the competition. Furthermore, the AI maker platforms that are used for designing highly customized solutions have the most substantial growth potential.

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This is also valid for AI facilitator platforms as well – which are used for applications including natural language virtual assistants, computer vision, and more. Some more AI market segments that are likely to mature are the AI-infused apps that create differentiated products via added AI functionality and AI-centric apps for specialized medical tasks.

As Andrew Bartels, VP and Principal Analyst at Forrester mentioned in the company blog post – “We believe investors are defining the AI market too hyperbolically. They are mistakenly including categories that are loosely influenced by or distantly adjacent to AI software.”

Lately, more business leaders are increasingly depending on AI and advanced tech as the principle of their digital transformation plan. As a result, they are most likely to expect their dealers to include AI functionality and no additional cost to the business.