AI Software Growing Faster Than Overall Software Market

Off-the-shelf and custom AI software will grow 50 percent faster than the overall software market over the next two years, says analyst firm Forrester in a new report.

According to the “Global AI Software Forecast, 2022” report by Forrester, spending on AI software is projected to experience an annual growth rate of 18 percent, doubling from USD33 billion in 2021 to USD64 billion in 2025.

The sharp growth is attributed to the accelerated adoption of AI during the pandemic, as well as an increase in the number of companies that offer AI software. 

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An interesting aspect of the report was how the analyst firm segmented the AI software into three types of AI software as part of its analysis.

Specifically, it delineated them into the following: AI-infused software, AI maker tools, and AI-centric software, which are projected to grow at a compound annual growth rate (CAGR) of 22 percent, 18 percent, and 14 percent respectively.

AI-infused software uses AI to increase its market attractiveness but can work without users activating its AI capabilities, according to Forrester. AI-enabled features are making their way into virtually every software we use, and the analyst firm predicts that one in three software (31%) will be AI-infused by 2025.

AI maker tools are the tools used to develop AI applications, including AI infrastructure, ML frameworks, and ML libraries, while AI-centric software uses AI as an intrinsic part of the software.

Other highlights from the report

The fastest-growing AI software category is cybersecurity, with significant investments being made in real-time monitoring and response to mitigate growing cybersecurity threats.

Here are some additional highlights from the report:

• Across eight forecasted countries (the US, China, Japan, France, Germany, Italy, Spain, and the UK), AI’s share of software spend will increase from 4.3 percent in 2021 to 6 percent in 2025.
• The US and China will dominate AI software spend with 72 percent of global AI spend. In addition, more than 80 percent of annual investments in AI and blockchain technologies will come from the two countries.
• China is a leading investor in AI software in APAC, with a quarter (24%) of AI spend totaling USD9.6 billion in 2022. China is also slated to outpace the rest of the world on AI software spend with USD16.6 billion, or 21 percent of its software spend, on AI by 2025.
• Japan is expected to spend USD4.1 billion on the AI software market in 2022, largely due to the country’s heavy investment in collaborative robots, also known as cobots. 

“AI has great potential across categories including cybersecurity, process optimization and automation, health, and human capital management,” said Michael O’Grady, a principal forecast analyst at Forrester.

“However, as AI adoption becomes mainstream, enterprises will need to manage its complexity, which includes adhering to responsible AI practices, nurturing the growing pool of AI talent, and the continued evolution of business models.”

The full report is only available to Forrester subscribers, but you can see a more detailed overview here.

Paul Mah is the editor of DSAITrends. A former system administrator, programmer, and IT lecturer, he enjoys writing both code and prose. You can reach him at [email protected].​

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