Understanding AI and Cloud Spending Trends

🤔 As we are nearing end of 2024, it is that time when everyone looks for comparing “what really happened with enterprise AI adoption”. I read through this fascinating report from Menlo Ventures that validates many trends. The numbers are staggering - enterprise AI spending surged to $13.8B in 2024, a 6x jump from 2023! But what really caught my attention is a validation that how we have moved from experimentation to execution. Three trends particularly stand out to me: 1. The rise of AI agents is real - while most current implementations focus on augmenting human workflows, seeing early examples of autonomous AI systems managing complex end-to-end processes. - bottomline, this isn't just automation - it's transformation. 2. Technical departments still lead adoption (49% of spend), but what is exciting is seeing AI budgets flowing to every department - from Sales to HR to Legal. - this widespread adoption signals AI's transition from a tech tool to a fundamental business capability. 3. The multi-model approach is winning- organizations typically deploy 3+ foundation models in their AI stacks, choosing different models for different use cases. - interestingly, while OpenAI's share has decreased to 34%, Anthropic doubled its presence to 24% in the enterprise space. 4. RAG (retrieval-augmented generation) is dominating at 51% adoption, up from 31% last year. - but here's a surprise - only 9% of production models are fine-tuned. Real-world implementation looks different from the hype. 5. Implementation costs are the hidden gotcha- while only 1% worry about purchase price, implementation costs derailed 26% of failed pilots. 6. The incumbent advantage is cracking- while ~60% still prefer established vendors, 40% question if current solutions truly meet their needs. - that's a massive opportunity for innovative startups. 7. Vertical AI is having its moment- no surprise, this provides maximum value for highly regulated industries - healthcare is leading, followed by Financial Services. - I advocate for AI solutions tackling industry-specific workflows in regulated industries rather than just generic use cases. So, what fascinates me most? The pragmatism, really, - companies aren't fixated on price (only 1% cited it as a concern!) - they're focused on ROI and industry-specific customization. This is not just tech evolution, it is business-centric and high time for incumbents to hone in on domain strengths in solving for AI-powered transformation - get reading for 2025 🚀 And, well to me, that is a clear sign of a maturing market. 🔍 Source: "2024: The State of Generative AI in the Enterprise" by Menlo Ventures (November 2024) - https://lnkd.in/g6j-nPVp What trends are you seeing in enterprise AI adoption? Would love to hear your perspectives! #artificialintelligence #innovation #technology #reflectingonAIin2024

🤔 Just ran the numbers, and I'm seeing a fascinating shift coming in the #AI and #Cloud landscape... The conventional wisdom that agentic AI would naturally gravitate to hyperscaler platforms is proving to be more myth than reality. Here's what's really happening: Processor Evolution • Most agentic AI systems are leveraging commodity processors • The dependency on specialized GPUs is diminishing • Simple CPU clusters are handling many AI workloads effectively Cost Reality Check • Hyperscaler margins (40-60%) are becoming harder to justify • Private clouds delivering 50-70% cost savings for AI workloads • MSPs and colos offering more flexible, cost-effective solutions Market Adaptation • Sovereign clouds gaining traction with regionalized AI solutions • Enterprise IT becoming more sophisticated about true TCO • Multi-cloud strategies focusing on cost optimization over brand names 🎯 The Reality: By end of 2025, we'll see that AWS, Azure, and GCP missed their AI growth targets significantly. The market is speaking - agentic AI doesn't need hyperscaler infrastructure to thrive. 💡 My Prediction: Watch for a massive shift toward hybrid architectures, with agentic AI workloads running primarily on optimized private infrastructure and smaller, specialized providers. #CloudComputing #ArtificialIntelligence #TechTrends #CloudStrategy #Enterprise #Innovation Thoughts? Would love to hear your perspectives on this shift.

Last week Morgan Stanley Research shared its 2Q 2024 #CIO survey. In the survey, they asked 100 CIOs (73 from US and 27 from Europe) a set of questions. These CIOs represented companies between $500M to $20B+ of annual revenue across almost every major industry. Here were nine of the most interesting findings (with accompanying charts): 1) CIOs estimate that 40% of application workloads are in the public cloud today and this will grow to 56% by the end of 2026 2) Microsoft Azure (42%) and Amazon Web Services (AWS) (24%) remain the dominant public cloud providers with Google Cloud (7%) a distant second. It's amazing to see how much market share Azure has gained among enterprises! 3) CIOs indicate a net tendency to consolidate in data storage (-15%) and a bias towards best of breed in security (20%). Positive news for cyber startups! 4) Despite the focus on best-of-breed, there is growing interest in Microsoft's comprehensive E5 license; growing from 28% to 46% of CIOs expected to switch in 2 years. 5) A whopping 94% of CIOs also expect to use Microsoft GenAI products over the next 12 months! 6) Speaking of AI, 75% of CIOs say that recent innovations in GenAI and LLMs are having a direct impact on their 2024 IT investment priorities. 7) 30% of CIOs plan to fund AI ventures through net new IT budget. 20% plan to reallocate existing software IT budget. Collaboration software, digital transformation, and analytics projects will be most negatively impacted by this budget reallocation. 8) The top objectives of AI initiatives are primarily focused on internal employee productivity (e.g. CoPilot) and specialized worker labor savings (e.g. Contact Center, financial processes simplification) over customer-facing initiatives. 9) CIOs expect security spending growth to continue to accelerate with this quarter showing a faster pace of acceleration than what was observed over the last 4 surveys! This is an exciting time to invest in #IT infrastructure and cybersecurity software. If you're a #founder working on something new, please reach out. I'm actively looking for the next great IT Ops, DevOps, data infra and cyber startup! Thanks Hamza Fodderwala, Keith Weiss, Brian Nowak, and the rest of the team for putting this together.