The interest in artificial intelligence (AI) remains growing with the International Data Corp. (IDC) projecting the AI software market to grow by almost $251 billion in 2027 from $64 billion in 2022 or a compound annual growth rate (CAGR) of 31.4%.

IDC found that organizations’ appetite for AI software is driven by the goal of developing their own applications.

“Businesses are realizing that utilizing cutting-edge technology is not only a strategic necessity but also a crucial factor in achieving long-term success,” said  Raghunandhan Kuppuswamy, research manager, Artificial Intelligence and Automation Research at IDC.

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The forecast for AI-centric software (or those that have an AI component that is crucial to the application) includes Artificial Intelligence Platforms, AI Applications, AI System Infrastructure Software (SIS), and AI Application Development and Deployment (AD&D) software (excluding AI platforms). However, it does not include Generative AI platforms and applications, which IDC recently forecast will generate revenues of $28.3 billion in 2027.

IDC also noted that a third of the respondents are leaning towards leveraging AI software from a vendor or using in-house support alongside vendor-supplied AI software for specific use cases or application areas. ents.

“The momentum behind investments in AI and automation technologies remains unwavering despite economic uncertainty and shifting market dynamics,” said Kuppuswamy.

Largest AI software category

According to IDC, AI Applications is currently the largest category of AI software, accounting for roughly one-third of the market’s overall revenue in 2023. The category includes collaborative, content workflow and management, enterprise resource management (ERM), supply chain management, production and operations, engineering, and customer relationship management (CRM) applications. Revenue growth in the AI Applications category will trail the overall market with a five-year CAGR of 21.1%.

The second largest category in terms of 2023 revenue is Artificial Intelligence Platforms. With the second fastest growth rate over the 2023-2027 forecast period (a 35.8% CAGR), AI Platforms will be the largest revenue category for most of the forecast. AI Platforms facilitate the development of artificial intelligence models and applications, such as intelligent assistants that mimic human cognitive abilities.

The two smallest categories, AI Systems Infrastructure Software (AI SIS) and AI Application Development and Deployment (AI AD&D) software, will both grow revenues faster than the overall market with five-year CAGRs of 32.6% and 38.7%, respectively.