Artificial intelligence (AI) market, like all markets, may have suffered a step back due to the economic impact of COVID-19. However, the market is expected to make a quick recovery in 2020. According to the International Data Corporation (IDC), the AI industry, including software, hardware, and services, is expected to clock in $ 156.6 billion in this year. While 2019 recorded a faster growth as compared to 2020, this year still records a 12.3% increase. 

The Tracker developed by IDC, Worldwide Semiannual Artificial Intelligence Tracker, shows worldwide revenues surpassing $300 billion in 2024 with a five-year compound annual growth rate (CAGR) of 17.1%. 

Under the AI umbrella, software, which is the largest group, makes up for almost 80% of all AI revenue. Under software, over $ 120.4 billion comes from AI Applications, while other $ 4.3 billion comes from AI Software Platforms. CRM AI Applications and ERM AI Applications are the two largest segments with 20% and 17% share of the AI Applications market. 

Making up the market share for the AI segment are Content Workflow and Management Applications, Production Applications, and Collaborative Applications. While we see some growth, the growth is significantly slower than the five-year CAGR of 16.7%.

"The role of AI Applications in enterprises is rapidly evolving. It is transforming how your customers buy, your suppliers deliver, and your competitors compete. AI applications continue to be at the forefront of digital transformation (DX) initiatives, driving both innovation and improvement to business operations," said Ritu Jyoti, program vice president, Artificial Intelligence Research at IDC.

Going forth, CRM AI applications are predicted to be the focus of the industry in terms of size and growth opportunities. "Customer Experience (CX) is the new brand. Leading CRM vendors are driving the intersection of CRM and CX, that help build strategies that improve both your customers' and your employees' experience with your business," added Ritu. In terms of vendor share, Adobe leads the race for AI-centric CRM Applications; for the non-CRM applications, Microsoft was the leader. For the ERM AI application sector, Ceridian and Intuit take the top spots in AI-centric and AI non-centric types, respectively. IBM takes the lead in the rest of the AI-centric applications while Microsoft occupies the top spot under AI non-centric type.

Right behind the CRM AI applications in the market size, are AI services, which IDC forecasts will reach $18.4 billion this year, which is an increase of 13%. In the AI services, AI IT Services makes up for 80% in the category and AI Business Services making up for the rest.

"The pandemic has interrupted the momentum of AI services market growth in nearly all regions," said Jennifer Hamel, research manager, Analytics and Intelligent Automation Services. "However, enterprise demand for AI capabilities to support business resiliency and augment human productivity will sustain double-digit expansion in 2020 even as other discretionary projects experience delays."

There is an increased demand for expertise in embedding AI-enabling technologies into business analytics, and intelligent automation programs have led to a highly competitive and fragmented AI services vendor landscape. The Tracker has gathered information and featured more than 150 companies that provide AI services. According to the Tracker, the top companies with the market share tare IBM, Accenture, Deloitte, Infosys, and Cognizant. Together, these companies made up for roughly one-third of the worldwide AI services market in 2019.

While AI hardware (server and storage combined) growth rate year-over-year is slower this year at 10.3% as compared to 33.4% in 2019, it will still gather revenues of approximately $13.4 billion. The overall hardware segment is predicted to make a strong recovery with 35.5% year-on-year growth next year. AI storage is the second strongest area in the industry which is expected to grow 43.1% year over year. AI Storage is forecast to grow 11.4% this year, slightly ahead of AI Server, which is expected to grow 10.1%. 

Amita Potnis, research director in IDC's Enterprise Infrastructure Practice, explains further, "While the overall market has seen a slowdown due to the COVID-19 pandemic, investments for AI and analytics infrastructure will continue, and perhaps increase, in specific industries such as life sciences, healthcare and Media & Entertainment. Storage will see stronger growth than servers owing to new data generation along with existing datasets that will be curated to support AI models with increased adoption of high-performance parallel file systems and all-flash object stores."

"The AI server market is expected to return to its previous growth trajectory in 2021, but with the US not having the pandemic under control, 2021 growth in the US will be lower than in China and Western Europe," said Peter Rutten, research director in IDC's Enterprise Infrastructure Practice.

The IDC Worldwide Semiannual Artificial Intelligence Tracker publishes details about AI vendor share and market forecast data on a semi-annual basis. The Tracker lists companies over key technology areas such as server, storage, software, and services. The Tracker lists over 400 companies.

In the next release scheduled for January 2021, IDC plans for the Tracker to expand with more details, including a country-level breakdown and introducing System Infrastructure Software and Application Development & Deployment in the primary markets.