Why will the AI ​​software sector be the main driver of technology development?

In 2024, the scope of disruption that artificial intelligence (AI) will cause in businesses around the world will be unparalleled. Artificial intelligence is expected to have the same impact on sectors, industries and people as the Internet had in the 1990s, when it revolutionized the way information was shared and accessed.

Looking at India, the country is strategically positioned to leverage its robust support systems, which include an unrivaled startup ecosystem and vast talent pool, to climb the AI ​​maturity ladder. According to a recent IDC study conducted in collaboration with Intel, India is now an AI specialist (Stage 2), reflecting active but still evolving AI adoption across sectors.

Recognizing the potential, Santhosh Viswanathan, vice president and managing director, India, Intel, says, “The extent to which India has changed over the last few years has been phenomenal. By having a strong digital foundation at this population scale, everything else will be built on top of it.”

As recognition of the benefits of AI increases among Indian businesses, enterprise spending on AI is expected to increase, representing the highest growth rate among the markets surveyed. The main driver of this growth will be the AI ​​software sector, which is projected to reach $2.6 billion by 2027, while spending on AI infrastructure will reach $733 million in the same period.

AI spending in India will grow the fastest among eight key markets, including Australia, Indonesia, Japan, Korea, Malaysia, Singapore and Taiwan. At a compound annual growth rate (CAGR) of 31.5% from 2023, AI spending in India is expected to reach $5.1 billion by 2027. India, hosting 20% ​​of the world’s AI data and talent intelligence, holds a strong strategic position as the world leader in artificial intelligence and could potentially surpass even the United States.

However, while 80% of large organizations surveyed are using AI/ML to improve business performance, only 6% believe their AI implementations are critical to their competitive advantage. “This significant gap highlights the challenges of implementing AI and the critical role of change management,” the report says.

Viswanathan expresses the opinion that although access to digitalization in India has occurred on a large scale, in material terms it is still small. For example, although AI spending is expected to reach $5 billion, it will still be 1% of the approximately $500 billion expected to be spent overall.

“20% of the world’s data is generated in India, but the country hosts only 2-3% of the server infrastructure. It is a small fraction,” he says, adding that just as India is building its roads, it needs to build additional (digital) infrastructure.

Despite strong interest and rapid growth in the use of AI, IDC research on eight economies in the Asia-Pacific region (Australia, India, Indonesia, Japan, Korea, Malaysia, Singapore and Taiwan) shows that they are midway through overall AI maturity.

AI spending in the Asia-Pacific region is forecast to grow at a compound annual growth rate (CAGR) of 28.9% from 2022 and reach USD 90.7 billion by 2027.

As Intel delivers on its AI promises domestically, the CEO notes that AI is a fundamental technology shift and the challenge with companies adopting AI is that everyone has focused on use cases first and then they were trying to figure out how to apply it.

“We look at use cases as a reflection of usability and value, where the key aspect is to build that foundation first so that use cases can evolve and innovation can thrive,” he adds.

In particular, the report highlights that the BFSI (banking, financial services and insurance) and manufacturing sectors are emerging as the top publishers in India. The manufacturing industry in particular is expected to play a key role in driving the country’s economic growth, especially in sectors such as electronics and consumer goods.