For Microsoft and OpenAI, after a year in the ‘hype cycle,’ the Copilot
corporate spending boom is just getting started
If 2023 was the year of the buzz surrounding generative AI,
then 2024 will be the year when the majority of businesses start to invest
seriously in technology to integrate artificial intelligence into the daily
lives of their employees and clients.
Across all economic sectors, over half (55%) of chief
technology officers say they want to buy enterprise-level gen AI software, like
Microsoft Copilot, in the next six months. Only 13% of respondents said they
would not be obtaining similar-gen AI capabilities, but another third (32%)
stated they had not made the financial choice.
The CNBC Technology Executive Council Survey for the second
half of 2023, which was completed by a sample of 22 senior tech executives in
late November and early December, supports this. Chief technology officers,
chief information officers, and chief cybersecurity officers make up the
majority of respondents (59%) who state that their organization is making more
new investments in artificial intelligence capabilities. While they are
becoming more circumspect, the remaining CEOs are nonetheless assessing fresh
investments in AI. In 2024, not a single responder said they will not be
investing in AI further.
The expenditure ambitions should be good news for Microsoft,
which has taken an early lead in the generative AI sector while competitors
like Alphabet try to catch up with its Google Bard. The company's shares have
increased by 55% this year, more than twice the S&P 500 return year to
date, indicating that Wall Street has clearly factored in some significant
gains.
According to Dan Ives, an analyst at Wedbush Securities,
"this is a clear positive as Microsoft has the only game in town around a
full AI platform right now." "Businesses are moving quickly in this
direction, and Copilot is leading the way for the larger AI market."
Over the next three years, analysts have set price
expectations for Microsoft as high as $600, and they anticipate that gen AI
revenue might reach as high as $10 billion yearly. Microsoft has invested
billions in OpenAI, and since the launch of ChatGPT in late November 2022,
Microsoft shares have risen from around $240 to over $370. That's because
Microsoft is now putting itself in a more direct position to watch the
startup's activities, even in light of the recent boardroom crisis that put the
startup's survival in jeopardy.
"It is not surprising that it tops the list with all
the hype around generative AI, coupled with Microsoft's heavy marketing push on
Microsoft 365 Copilot," Gartner analyst Jason Wong said.
The speaker referenced a recent poll conducted by Gartner,
which revealed that 82% of IT buyers ranked Microsoft 365 Copilot among the top
three new 365 capabilities that would provide the most value to their
enterprises.
The broad release of Copilot for 365 by Microsoft in
November is expected to boost corporate investment. Many Gartner clients,
according to Wong, passed by an early trial program that began in May of last
year and reached 600 customers, according to Microsoft. The reasons for the
pass-through were mostly financial issues, but there were also possible data
and legal concerns.
The $300-seat minimum requirement for the program, which
costs $30 per user each month, continues to irk some corporate purchasers,
according to Wong. However, because Copilot is now widely accessible, many
businesses who passed on the early pilot are starting to implement gen AI. Duet
AI, which costs $30 per month for business customers using Google work
applications, was introduced by Alphabet in August.
Microsoft has listed clients who use Copilot, such as Visa,
BP, Honda, and Pfizer, as well as partners in the professional services
industry that use Copilot AI, such as Accenture, EY, KPMG, and PwC. Many
companies are already using AI extensively; PwC, for instance, will be
introducing ChatPwC to 75,000 employees by the end of this year.
"AI is surrounded by more hyperbole than I have seen in
thirty years, yet it is justified. Joe Atkinson, chief products and technology
officer at PwC and a member of the CNBC Technology Executive Council, told CNBC
recently that "it will change everything."
The $30 per user price tag would translate into tens of
millions of dollars in yearly investment at that level of implementation.
However, according to Gartner's study, the initial investment may not always
benefit the whole workforce in large firms. According to anecdotal evidence
gleaned from the hundreds of queries received on the subject, businesses are
seldom eager to jump right in and start working on a project.
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