The rapid adoption of generative AI (gen AI) is significantly transforming the enterprise software industry. In 2023, global enterprises invested around $15 billion in gen AI solutions, marking a swift rise to 2% of the global enterprise software market. This pace of adoption outstrips previous technological shifts, such as Software-as-a-Service (SaaS). By 2027, spending on gen AI is expected to soar to between $175 billion and $250 billion, contributing an additional two to six percentage points of growth to the sector. However, this growth also brings challenges, including a potential increase in vendor switching, which could rise by five to 10 percentage points, driven by lower costs of data migration, integration development, and user training.
Gen AI's impact extends across nearly all software categories, from customer relationship management to enterprise resource management. The technology's capabilities enable new use cases, such as natural language interfaces and automated workflows, which are poised to enhance productivity and drive revenue growth. This shift is likely to result in a reimagining of current software categories, with significant implications for user segments, value pools, and industry dynamics. As enterprises increasingly consider building in-house solutions, gen AI could spur a realignment in software spending, further intensifying competitive pressures within the industry.
