by Poojitha Jayadevan

Indian AI market to reach soaring heights by 2025

News Analysis
Nov 07, 2021
Artificial Intelligence

CIOs looking to keep pace with their competitors will need to up their spending on AI in the coming years. IDC forecasts that businesses will adopt it to address organizational needs such as real-time analysis, sophisticated modelling, innovation, and automation.

abstract artificial intelligence brain
Credit: Thinkstock

Indian enterprises are investing in AI in search of business resilience, improved customer retention, and enhanced operational efficiencies, research by International Data Corporation (IDC) reveals. 46% of the Indian enterprises surveyed also cited innovation as a key driver of AI investment.

IDC forecasts that the Indian market for AI software, hardware and services, worth $3.1 billion in 2020, will grow to $7.8 billion by 2025, a compound annual growth rate (CAGR) of 20.2%. Globally, IDC expects the AI market will be worth $500 billion by 2024.

India was the third-largest AI market in the Asia-Pacific region excluding Japan in 2020, behind China and Australia, says Swapnil Shende, senior market analyst for artificial intelligence at IDC India. “IDC forecasts that India will be amongst the fastest growing countries in the region in terms of overall AI adoption for 2020-2025,” he says.

Sales of AI software will contribute the largest share of Indian AI revenue. This segment is expected to grow at a CAGR of 18.1% from $2.8 billion in 2020 to $6.43 billion in 2025. Last year, 52% of that revenue came from sales of AI applications (as opposed to AI platforms, infrastructure software or development and deployment tools). That share is likely to rise to 59% share by 2025, according to Shende.

“Organizations are leveraging multiple AI applications such as CRM, ERM and others to manage operations, scale supply chains in response to real-time or predicted demands and many more to provide benefits for their customers, improve ROI and achieve cost savings,” he says.

The proportion of India’s AI spend on applications is only slightly above the global average. Worldwide, applications account for nearly 50% of AI spending.

“Within the AI applications market, AI ERM is expected to grow slightly stronger than AI CRM over the next five years,” IDC says in its report. It expects AI software to account for 88% of the AI market globally — although it forecasts that the AI hardware segment will have the fastest growth for now, with AI services overtaking it to become the fastest-growing category from 2023 onwards.

Rishu Sharma, associate research director for cloud and AI at IDC India, says Indian organizations are planning to use AI to address current business scenarios across functions, such as customer service, human resources, IT automation, security, recommendations, and many more.

IDC’s research also finds that Indian enterprises have their AI initiatives in production, citing business resilience, improved customer retention, and enhanced operational efficiencies as the top three drivers for their AI investments.

Data is one of the most important components for any AI/ML project, and businesses today use a variety of databases to make real-time business decisions. Shende says, “Organizations must focus on getting high-quality training data for AI/ML models, as this would define the success of their AI initiatives.”

Indian industries and AI

The Indian AI market has shown a significant adoption across verticals, with BFSI, manufacturing, and government being the highest-spending verticals. Healthcare, education, and retail are also emerging as fast adopters, says Shende.

He also shares a few more statistics: “The overall AI India market will grow over 1.3 times by end of 2021 as compared to its market size in 2019. The AI platforms market in India will grow over 1.5 times by end of 2021 as compared to 2019.”

The rapid development of business intelligence and analytics tools, and increased digitization in general, generates huge amounts of data, demanding advanced solutions to extract valuable information. This further supplements the AI market growth in the country.

Indian organizations surveyed by IDC cited cloud as the preferred deployment location for their AI/ML solutions. Enterprises across verticals are driven by business needs for AI investments. Sharma explains that AI is being used across industries in India to deliver customer-enhancing solutions: “We are seeing conversational platforms being extensively leveraged by financial services to cater to customer needs. Verticals like retail are leveraging AI for revamping supply chains, managing the contact centres, forecasting demands, personalized offers, and so on. For healthcare organizations, the use cases vary, and include triage, diagnosis, virtual healthcare consultations, and vaccine R&D, among others. AI is also being leveraged for traffic monitoring and crowd surveillance.”

“Indian organizations cite skills as critical,” Sharma explains. IDC’s Future Enterprise Resiliency Survey reveals that 76% of respondents believe a lack of skills in employees impacts customer experience, customer satisfaction, and profit growth. Reskilling workforces would help enterprises stay ahead of the technology adoption curve, meet changing business and industrial expectations, and provide a better customer experience, she says.

“In the same survey, when asked about the most critical technology skills for organizations to acquire or develop in the next six months, Indian enterprises cited AI/ML as the top priority for them. The accelerated AI adoption would result in demand for data-associated skills as well,” she says.

That provides some clear clues for career orientation, Sharma says: Job profiles like data scientists, data engineering, business intelligence, algorithm developers, data modelers, design, and software engineers will see a demand boost in the coming years.