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

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Governance and Change Management Are Critical to AI Success

At our recent ISG AI Impact Summit, the presentations and discussions focused not just on the business and technology opportunities of generative AI, but the need for effective governance and change management, particularly given the current focus on human-in-the-loop initiatives.

Data Watch

Background

In our recent GenAI use case study conducted in August 2024, we investigated the largest GenAI investments across G2000 enterprises and the lessons learned to date.

What’s Happening?

Even though most GenAI initiatives are not yet in full production mode, we found that, for each initiative, roughly 3,000 employees across five different functional areas were feeling the impact. With this degree of employee impact, enterprises are already realizing the change management and governance implications:

In our study, change management was listed as the fourth biggest inhibitor to GenAI success behind skills, security and legacy infrastructure (see Data Watch). When asked what they would do differently with their next GenAI initiatives, 29% of companies mentioned aspects relating to governance and change management.

Most enterprises are currently handling AI governance and change management internally. And, while 65% have engaged a managed service provider for support on their largest GenAI initiatives, only a third of those have outsourced any kind of governance to these providers.

What’s Next?

The challenge around governance and change management will persist in 2025 as current initiatives move to full production and enterprises move into Wave 2 initiatives that will involve different functions in their business.

Spending on GenAI is expected to increase by 50% – and with more AI initiatives in play and more employees impacted – the change management and governance challenges will become ever more complex. Service providers are quickly learning the governance and change management needs of organizations and the challenges presented through their current AI engagements.

This presents an opportunity for providers to position themselves as industry experts on the human aspects of GenAI and bundle governance and change management programs as part of their GenAI offerings.

We’ll be diving into more detail on GenAI at our annual Sourcing Industry Conference next week in Dallas. Hope you can join us.

Have a great weekend!

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