Publication date: 21 Mar 2024
Spending on GenAI Solutions in Europe Will Exceed $30 Billion in 2027, Driving the Overall European AI Market
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For more information, contact:- Carla La Croce Email: clacroce@idc.com Phone number: +39 02 28457347
MILAN, March 21, 2024 — According to the latest release of the Worldwide AI and Generative AI Spending Guide (v1 2024) published by International Data Corporation (IDC), the European AI and generative AI (GenAI) market will reach almost $47.6 billion in 2024 and record a compound annual growth rate (CAGR) of 33.7% over the 2022-2027 forecast period. Europe represents around one-fifth of the global AI market.
While the share of GenAI reached only 9.6% of the total European AI market in 2023, it is increasing rapidly. Spending on GenAI will grow more than three times as fast as spending on the rest of the artificial intelligence market, and as a result, GenAI will represent more than a quarter of the total European AI market in 2027.
Software will be the largest technology segment in 2024, with a market value higher than hardware and services combined. Furthermore, it is expected to present the fastest growth in the 2022-2027 period, driven by demand for AI applications and platforms. The share of hardware technologies will decrease during the period in favor of software technologies, with the exception of the software and information services industry, in which the hardware component remains the largest, due to specific AI infrastructure provisioning use cases that characterize this industry.
AI adoption is already widespread, and companies are demonstrating their willingness to expand that adoption to GenAI. According to the IDC EMEA Cross-Industry Acceleration Survey run in December 2023, one out of three companies are already using or are planning to use AI solutions in the following 24 months. The maturity of adoption is the result of a need to optimize business processes with a clear focus on customers and employees. Indeed, AI solutions proved to be successful in boosting customer experience as well as improving employee productivity. On the other hand, adoption is facing challenges primarily related to the broad integration of AI into the organization and their ethical use.
“Artificial Intelligence, as well as generative AI applications, should become fully integrated into the business, accompanied by responsible use,” says Carla La Croce, research manager, Customer Insights and Analysis, IDC. “Realizing the full potential of AI and generative AI requires time. Although it is clear what benefits AI and GenAI solutions potential bring to companies’ internal organization and processes, effectively realizing these benefits requires long-term planning. This requires companies to have a flexible and adaptable business plan to integrate AI and GenAI in a broader forward-looking and responsible strategy.”.
Banking, retail, and software and information services are the top 3 industries in terms of spending, representing nearly a third of the European AI market. In the financial sector, notable uses of AI solutions span the cybersecurity risk areas, including augmented fraud analysis and investigation and threat intelligence and prevention systems, while customer support use cases include program advisors and recommendation systems. Moreover, financial institutions are increasingly integrating GenAI into their banking services; for example, for fraud detection or to generate accurate predictions and scenarios.
Evolving customer expectations and needs, fierce competition, and the quest for enhanced online customer experience are all factors driving retailers to experiment with emerging technologies. The retail industry in particular is taking advantage of the opportunities created by AI. With uses such as augmented customer service agents or expert shopping advisors and product recommendations, customer experience and satisfaction are always at the center of retail objectives, where AI can become a transformative force. Moreover, GenAI is gaining traction as many retailers expect to explore large language models (LLMs) and foundation models (FMs) applications in marketing, sales and customer engagement.
Finally, the software and information services industry, which represents software vendors and information and data services companies, is characterized by spending on AI by providing AI infrastructure. These companies grant users access to this infrastructure, providing resources needed for computing and for storage for AI systems development or the provision of AI services to end customers. AI spending in this industry will be driven by hardware components, which represents the largest tech component of the overall AI market. Nevertheless, software's market share will increase in the long term, growing fastest than any other technology component, as software providers will allow end users also to leverage their platform as a service (PaaS) and software as a service (SaaS) solutions. In addition, technology leaders can use GenAI to accelerate software development.
About IDC's Worldwide AI and Generative AI Spending Guide
The Worldwide AI and Generative AI Spending Guide examines the artificial intelligence (AI) and generative AI (GenAI) systems opportunity from the use case, technology, industry, and geography perspectives. This comprehensive database, delivered via the IDC Customer Insights Query Tool, allows the user to easily extract meaningful information about the AI/GenAI technology market by viewing data trends and relationships and making data comparisons.
About IDC
International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. With more than 1,300 analysts worldwide, IDC offers global, regional, and local expertise on technology, IT benchmarking and sourcing, and industry opportunities and trends in over 110 countries. IDC's analysis and insight helps IT professionals, business executives, and the investment community to make fact-based technology decisions and to achieve their key business objectives. Founded in 1964, IDC is a wholly owned subsidiary of International Data Group (IDG), the world's leading tech media, data, and marketing services company. To learn more about IDC, please visit www.idc.com/eu. Follow IDC on LinkedIn or subscribe to the IDC Blog for industry news and insights.