30% of GenAI projects will be abandoned after proof of concept by end of 2025, predicts Gartner

Rita Sallam, Distinguished VP Analyst at Gartner said, while speaking at the Gartner Data and Analytics Summit in Sydney this week, “After last year's hype, executives are impatient to see returns on GenAI investments, yet organizations are struggling to prove and realize value."

"As the scope of initiatives widens, the financial burden of developing and deploying GenAI models is increasingly felt,” Rita Sallam said.

According to Gartner, a major challenge for organizations arises in justifying the substantial investment in GenAI for productivity enhancement, which can be difficult to directly translate into financial benefit.

Many organizations are leveraging GenAI to transform their business models and create new business opportunities, as per the Connecticut-based research firm.

However, these deployment approaches come with significant costs, ranging from $5 million to $20 million.

“Unfortunately, there is no one size fits all with GenAI, and costs aren’t as predictable as other technologies,” Sallam said.

“What you spend, the use cases you invest in and the deployment approaches you take, all determine the costs. Whether you’re a market disruptor and want to infuse AI everywhere, or you have a more conservative focus on productivity gains or extending existing processes, each has different levels of cost, risk, variability and strategic impact,” she added.

Regardless of AI ambition, Gartner research indicates GenAI requires a higher tolerance for indirect, future financial investment criteria versus immediate return on investment (ROI).

Historically, many CFOs have not been comfortable with investing today for indirect value in the future, and this reluctance can skew investment allocation to tactical versus strategic outcomes, according to Gartner.