Artificial intelligence and machine learning are still new technologies, but 2017 will likely be the year when they take a huge leap forward. Enterprise spending in these areas is expected to be rather low next year, but it doesn’t mean that companies won’t be preparing for the future. Names such as Microsoft, Amazon and International Business Machines are racing to be the first major player in artificial intelligence.
Will enterprises start adopting artificial intelligence in 2017?
Morgan Stanley analyst Katy Huberty, Brian Nowak and Keith Weiss contributed the Technology portion of their firm’s sizable research report entitled “Key Investor Debates Likely to Drive Stocks in the Coming Year.” They chose to focus on artificial intelligence and machine learning and considered whether the inflection point for machine learning will be in 2017 or if it is several years away.
In their view, about half of chief information officers are either currently using or planning to use artificial intelligence or machine learning technologies.
They say this is in line with where adoption of the public cloud stood two years ago, but CIOs don’t list artificial technology as one of their top priorities yet. As a result, they expect total spend in this area of technology to be rather low.
What could boost artificial intelligence spending?
However, the Morgan Stanley team also thinks that factors such as acquisitions could increase spending on AI and machine learning technologies. They explain that Microsoft’s acquisition of LinkedIn, IBM’s purchase of The Weather Company, and other deals within the space should boost the value proposition of artificial intelligence platforms.
Additionally, they note that consumers are becoming more aware of AI through digital assistants such as Amazon Echo, Google Home and Apple’s Siri. They expect this consumer awareness to spill over into enterprises, just as smartphone adoption among consumers spurred businesses into adopting “a more mobile-friendly IT approach.”
Further, they see this year as having been “a year of investigation into AI use cases,” and as a result, they have observed multiple deals moving forward. IBM has struck a business relationship with Pfizer, for example, and Amazon has rolled out Amazon GO, a grocery store that employs machine learning, sensors and computer vision.
Platforms over applications in artificial intelligence
Huberty and team believe platforms will win the day in artificial intelligence and see Microsoft, Amazon and IBM as the early but “underappreciated” leaders in this area. These three companies’ AI platforms each have a market share of 20% to 30%.
They also distinguish AI platforms from AI functions within applications, which they now see as standard rather than as a differentiator for providers. Because of this, they believe Workday, Adobe Systems, and other companies that provide artificial intelligence features within existing solutions as having less value.
The Morgan Stanley team pegs the total addressable market of artificial intelligence and machine learning at $2 trillion, as they believe these technologies give companies access to the 80% of data they are unable to access otherwise, such as pictures, sensors, videos or heartbeats. The technologies remove inefficiencies and create new opportunities for revenue.
They also view data as the “holy grail of AI” because they believe algorithms will one day be relegated to commodity status. One reason they like Microsoft, Amazon and IBM in the artificial intelligence is because they either have large data sets already or have been boosting acquisitions in the area of data.
