Hello. This is Alex Bakker with what’s important in the IT and business services industry this week.  

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Enterprise GenAI Projects

In late 2023, enterprises indicated that AI projects were a top priority for them, limited mostly by a serious shortage in AI skills. Almost a year later, what we find in our latest study on generative AI use cases is that about two-thirds of enterprises are using managed service providers (MSPs) to help them build their AI projects. That means 35% are going it alone.

Data Watch

Expertise, Capacity and Cost

How are enterprises making the decision to use an MSP on their GenAI projects? They are applying their own version of the engineer’s triangle concept – trying to find a balance between expertise, cost and capacity.

When we look at the 65% of companies in our State of the GenAI Market Report that are using MSPs, we see that they are doing so to access the expertise in technology tools and capacity. These companies say they need speed to market in the face of limited in-house skill and expertise. And they say they expect provider teams will help them gain skills internally. While organizations often view outsourcing as a transfer of expertise to a provider, it is clear in these cases that outsourcing is perceived as a two-way street, gaining access to skills they don’t yet have from the provider and building them internally at the same time.

For the businesses that are not using MSPs for GenAI projects, the priorities are also expertise and cost. These organizations are focused on avoiding cost and building on expertise internally. Many of the enterprises in this group believe they have unique business requirements and need to build their AI solutions on top of their specialized knowledge. Because of this, they are foregoing the opportunity to learn from MSPs.

Both groups are prioritizing spending on essentially the same use cases – but those that are choosing to engage MSPs are a bit more focused on the IT testing. Those that are going it alone are focused a bit more on Contact Center and CX.

What’s Next?

About half of the enterprises we spoke to expect ROI on their GenAI initiatives by the end of 2025. The problem is that the average business is only spending an average $2.6 million on each use case. Enterprises are hoping for big productivity, efficiency and cost gains, but, at this pace, it appears they will need more scaled projects to hit their goals. For the foreseeable future, we believe the growth of GenAI and the associated talent shortage will continue to drive growth in MSP contract activity.

Have a great weekend!

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