GenAI adoption in Asia leads with 45% uptake

GenAI adoption in Asia leads with 45% uptake | Insurance Business Asia

Technology

GenAI adoption in Asia leads with 45% uptake

Higher maturity yields greater ROI, report said

Technology

By
Roxanne Libatique

Generative AI (GenAI) investment is projected to rise by 30%, with highly mature companies anticipating a return on investment three times higher over the next three years compared to those with lower adoption, according to a recent Boston Consulting Group (BCG) report.

This shift comes as organisations globally reallocate funds from established areas to support IT investments amid modest GDP growth and stagnant budgets.

Rise of Generative AI

Clark O’Niell, managing director and partner at BCG and coauthor of the report, said the rise of GenAI has made adaptation crucial for many businesses.

“The emergence of GenAI has made it imperative for many companies to adapt,” he said. “Successful companies will be those that manage a difficult balancing act: allocating IT budgets to keep pace with GenAI while maintaining adequate funding for essential day-to-day operations.”

IT budgets are showing modest growth, increasing by 3.2% in 2023 and 3.3% in 2024. Survey participants equally prioritised cost control and growth, with 54% citing each as a top-three priority.

Since the previous survey in Q3 2023, the emphasis on growth has increased by 5%, while the focus on cost has decreased by 2%. Security and digital transformation also remain top priorities, with 61% and 60%, respectively.

Leaders are directing investments towards high-impact areas such as AI and machine learning (30% net spend increase), security infrastructure (27%), cloud services (30%), and analytics (18%). Conversely, the largest net spend decreases are expected in server infrastructure (24%) and devices (16%).

GenAI maturity by industry and region

The report includes a GenAI maturity index to evaluate companies’ development stages. Companies were categorised into four levels:

little to no adoption
low maturity
mid maturity
high maturity

About 20% of companies have little or no GenAI adoption, down from 24% in Q3 2023. The percentage of high maturity companies remains constant at 12%, while mid maturity companies increased from 18% to 27%.

Tech companies lead in GenAI adoption, with 62% achieving mid or high maturity, followed by banking, retail, industrial goods, and healthcare, where 32% to 39% of companies reached similar levels. Industries lagging include energy, travel and tourism, and insurance, with at least 40% of companies showing little to no adoption of GenAI.

Geographically, In Asia, adoption is slightly higher at 45%. Additionally, only 16% of companies in Asia have minimal or no GenAI adoption, compared to 18% in North America and 23% in Europe, despite recent regulatory developments in Europe.

Although this was BCG’s seventh IT Spending Pulse Survey, it was the first to include findings from the Asia-Pacific (APAC) region.

APAC IT buyers project a 6% to 7% increase in IT spending for 2024, focusing on digital transformation.

APAC companies also see significant value in GenAI, with 25% qualifying as high maturity and only 16% with little to no adoption, compared to 13% and 11%, and 18% and 23% in North America and Europe, respectively.

Higher GenAI maturity yields greater ROI

High GenAI maturity companies estimate ROI three times higher over the next three years compared to those with little to no GenAI adoption.

Thirty-eight percent of high maturity companies expect an ROI of 20% to 30%, and 3% expect more. In contrast, only about one-third of low to mid-level GenAI maturity companies anticipate returns of 20% to 30%, yet twice as many expect returns over 30%.

Another indication of positive outcomes from GenAI investments is the willingness of companies to exceed allocated budgets.

In 2023, companies initially projected that 4% of their IT budgets would go to GenAI, but actual spending reached about 4.5%. For 2024, the average GenAI allocation is set to increase to 4.7%, with a forecasted 60% growth in the next three years, raising the share to 7.6% by 2027.

Growth-focused companies plan to increase their budgets by 15% more than cost-focused companies (7.9% versus 7.1% of overall IT budgets).

Challenges in IT investment and implementation

Survey respondents identified the immaturity of GenAI technology as the leading barrier to adoption, cited by 43% of high maturity, 36% of mid maturity, 38% of low maturity, and 50% of companies with little or no maturity. About 30% of the latter group have no plans to implement GenAI technology over the next three years.

Other challenges for high maturity companies include data risks, legal risks, and inadequate training, which have increased by 8%, 10%, and 21%, respectively, since the Q3 2023 survey.

“Despite the justifiable excitement surrounding GenAI, IT leaders must articulate a clear, strategic plan to garner CIO support, as mere hype won’t suffice in today’s tough budgetary environment,” said Federico Fabbri, managing director and partner at BCG and coauthor of the report. “CIOs should adopt a systemic approach to IT investment request, including planning adequate resources for success, asking for a clear business case and how leaders plan to measure outcomes, and ensuring vendor support.”

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