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AI market could outstrip IaaS and PaaS combined within a few years

(Image credit: Image Credit: Geralt / Pixabay)

By 2025, businesses worldwide will be spending more money on artificial intelligence (AI) than on Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) combined.

This is according to a new semi-annual AI report from analyst firm IDC, which claims that the AI market will exceed $500 billion in 2025. 

At the same time, IDC expects businesses to spend approximately $400 billion on IaaS and PaaS by 2025, representing a 28.8 compound annual growth rate (CAGR). 

At the moment, 88 percent of all related spending is on AI software, and IDC doesn’t expect that to change before 2023, when AI services will take over. By 2025, the report further states, AI services will grow into a $50 billion market.

The analysts expect AI system infrastructure software to have a 14.4 percent five-year CAGR, accounting for more than a third (35 percent) of all AI software revenue. As for AI applications, IDC expects enterprise risk management to outperform CRM by 2025.

For this year, IDC expects global spending on AI to hit $341.8 billion, marking a 15.2 percent increase compared to 2020.

One of the reasons for the shift, IDC argues, is that many organizations already have migrated to the cloud and will be looking to modernize their apps going forward.