At least 30% of generative AI (genAI) projects will be abandoned after proof of concept by the end of 2025, Gartner predicts, due to poor data quality, inadequate risk controls, escalating costs, or unclear business value.

“After last year’s hype, executives are impatient to see returns on GenAI investments, yet organisations are struggling to prove and realise value,” Rita Sallam, distinguished VP analyst at Gartner said.

“As the scope of initiatives widen, the financial burden of developing and deploying genAI models is increasingly felt.”

A major challenge for organisations arises in justifying the substantial investment in genAI for productivity enhancement, which can be difficult to directly translate into financial benefit, according to Gartner.

Many organisations are leveraging genAI to transform their business models and create new opportunities. However, these deployment approaches come with significant costs, ranging from $5 million (£3.9m) to $20 million (£15.6m), according to Gartner.

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

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.”

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

Historically, many CFOs have not been comfortable with investing today for indirect value in the future, a reluctance that can skew investment allocation to tactical versus strategic outcomes

Realising Business Value 

Earlier adopters across industries and business processes are reporting a range of business improvements that vary by use case, job type, and skill level of the worker.

According to a recent Gartner survey in 2023, business leader respondents reported 15.8% revenue increase, 15.2% cost savings and 22.6% productivity improvement on average.

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“This data serves as a valuable reference point for assessing the business value derived from GenAI business model innovation,” said Sallam.

“But it’s important to acknowledge the challenges in estimating that value, as benefits are very company, use case, role and workforce specific. Often, the impact may not be immediately evident and may materialize over time. However, this delay doesn’t diminish the potential benefits.”

Calculating Business Impact 

By analysing the business value and total cost of genAI business model innovation, organisations can establish the direct ROI and future value impact, according to Gartner. This serves as a crucial tool for making informed investment decisions about genAI business model innovation.

“If the business outcomes meet or exceed expectations, it presents an opportunity to expand investments by scaling genAI innovation and usage across a broader user base, or implementing it in additional business divisions,” said Sallam.

“However, if they fall short, it may be necessary to explore alternative innovation scenarios. These insights help organisations strategically allocate resources and determine the most effective path forward.”