AI software market to hit $307 billion by 2027

The AI-centric software landscape encompasses various components, including Artificial Intelligence Platforms, AI Applications, AI System Infrastructure Software (SIS), and AI Application Development and Deployment (AD&D) software, excluding Generative AI platforms and applications. IDC projects that Generative AI is set to generate $55.7 billion in revenues by 2027, although it’s not part of the primary forecast.

AI Software Market

According to a recent IDC survey, around a third of respondents anticipate organizations opting to procure AI software from vendors or utilizing in-house support alongside vendor-supplied AI software for specific use cases. This signals a rising demand for AI solutions, emphasizing the necessity for tailored approaches aligned with individual business needs.

Despite economic uncertainties, the momentum behind AI and automation investments remains steadfast. Businesses recognize that adopting cutting-edge technology is not just a strategic necessity but also pivotal for long-term success. Raghunandhan Kuppuswamy, research manager at IDC, emphasizes the confidence organizations have in AI adoption for future-proofing their operations and staying ahead in the competitive landscape.

In terms of revenue distribution, AI Applications currently lead, constituting approximately one third of the market’s overall revenue in 2023. This category spans collaborative, content workflow and management, enterprise resource management, supply chain management, production and operations, engineering, and customer relationship management applications. However, the five-year CAGR for AI Applications is projected at 21.1%, trailing the overall market.

Artificial Intelligence Platforms claim the second-largest category in 2023 revenue, showcasing a 35.8% CAGR over the 2023-2027 forecast period. These platforms play a pivotal role in developing AI models and applications, including intelligent assistants mimicking human cognitive abilities.

The smaller categories, AI Systems Infrastructure Software (AI SIS) and AI Application Development and Deployment (AI AD&D) software, are both anticipated to outpace the overall market growth. AI SIS benefits from integration with existing software systems, enabling organizations to extract valuable insights from vast data for informed decision-making. AI AD&D, on the other hand, is poised for rapid growth with a 38.7% CAGR, encompassing analytics, business intelligence software, data management, integration, orchestration, application development, software quality, life-cycle software, and application platforms.

As the AI landscape evolves swiftly, the convergence of traditional AI with Generative AI is expected to yield cutting-edge solutions, combining decision efficacy with creative ingenuity. Ritu Jyoti, group VP at IDC, advises businesses to be prepared for challenges and prioritize ethical considerations for maximizing long-term ROI as they continue to invest in AI.


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